<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K
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(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 1-11392
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CLARK REFINING & MARKETING, INC.
(Exact name of registrant as specified in its charter)
----------------
<TABLE>
<S> <C>
Delaware 43-1491230
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8182 Maryland Avenue
St. Louis, Missouri 63105-3721
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, Including Area Code: (314) 854-9696
Securities registered pursuant to Section 12(b) of the Act:
9 1/2% Senior Notes, due 2004
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Number of shares of registrant's common stock, $.01 par value, outstanding
as of March 31, 2000: 100, all of which are owned by Clark USA, Inc.
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CLARK REFINING & MARKETING, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I
<C> <S> <C>
Items 1 and 2. Business; Properties..................................... 2
Item 3. Legal Proceedings........................................ 15
Item 4. Submission of Matters to a Vote of Security Holders...... 16
PART II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters...................................... 16
Item 6. Selected Financial Data.................................. 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 18
Item 8. Financial Statements and Supplementary Data.............. 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 26
PART III
Item 10. Directors and Executive Officers of the Registrant....... 26
Item 11. Executive Compensation................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................... 33
Item 13. Certain Relationships and Related Transactions........... 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K................................................. 34
Signatures............................................................... 58
</TABLE>
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements in this document are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. These statements are subject to the safe
harbor provisions of this legislation. Words such as "expects," "intends,"
"plans," "projects," "believes," "estimates" and similar expressions typically
identify such forward-looking statements.
Even though the Company believes its expectations regarding future events
are based on reasonable assumptions, forward-looking statements are not
guarantees of future performance. There are many reasons why actual results
could, and probably will, differ from those contemplated in the Company's
forward-looking statements. These include, among others, changes in:
. industry-wide refining margins;
. crude oil and other raw material costs, embargoes, industry expenditures
for the discovery and production of crude oil, military conflicts
between, or internal instability in, one or more oil-producing countries,
and governmental actions;
. market volatility due to world and regional events;
. availability and cost of debt and equity financing;
. labor relations;
. U.S. and world economic conditions;
. supply and demand for refined petroleum products;
. reliability and efficiency of the Company's operating facilities. There
are many hazards common to operating oil refining and distribution
facilities. Such hazards include equipment malfunctions, plant
construction/repair delays, explosions, fires, oil spills and the impact
of severe weather;
. actions taken by competitors which may include both pricing and expansion
or retirement of refinery capacity;
. civil, criminal, regulatory or administrative actions, claims or
proceedings, and regulations dealing with protection of the environment,
including refined petroleum product composition and characteristics;
. other unpredictable or unknown factors not discussed.
Because of all of these uncertainties and others, you should not place
undue reliance on the Company's forward-looking statements.
1
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PART I
Item 1 and 2. Business; Properties
General
Clark Refining & Marketing, Inc. and subsidiaries ("Clark R&M" or the
"Company") is currently one of the five largest independent refiners of
petroleum products in the United States based on rated crude oil throughput
capacity. The Company has over 547,000 barrels per day of rated crude oil
throughput capacity at its two Illinois, one Texas and one Ohio refineries. In
July 1999, Clark R&M sold its 672 company-operated retail outlets to a company
controlled by Apollo Management L.C. ("Apollo"), and in November 1999, Clark
R&M sold 15 distribution terminals to Equilon Enterprises, L.L.C. and its
subsidiary ("Equilon"). Both transactions are part of a strategy to focus on
refining operations, which the Company believes will offer higher potential
future returns.
Clark R&M was incorporated in Delaware in 1988 as Clark Oil & Refining
Corporation. Its principal executive offices are at 8182 Maryland Avenue, St.
Louis, Missouri, 63105 and its telephone number is (314) 854-9696. As part of
the transaction with Apollo, the Clark trade name was sold. As a result, the
Company will change its name in 2000.
Clark R&M is a wholly-owned subsidiary of Clark USA, Inc. ("Clark USA"),
which is a wholly-owned subsidiary of Clark Refining Holdings Inc. ("Clark
Holdings"). Much of the debt of Clark USA and Clark R&M is publicly traded.
Clark Holdings' equity is privately-held and controlled by Blackstone Capital
Partners III Merchant Banking Fund L.P. and its affiliates ("Blackstone")
through a 78.7% voting interest (75.3% economic interest) as of December 31,
1999. Originally, Blackstone acquired an interest in Clark USA from Trizec
Hahn Corporation (formerly The Horsham Corporation, "TrizecHahn") in November
1997. Clark Holdings' other principal shareholder is an affiliate of
Occidental Petroleum Corporation ("Oxy") with a 19.9% voting interest (23.4%
economic interest) as of December 31, 1999. Oxy acquired an interest in Clark
USA in November 1995 in exchange for rights to future crude oil deliveries
that the Company subsequently sold. Blackstone and Oxy exchanged their Clark
USA shares for Clark Holdings shares in May 1999 to facilitate, among other
things, the construction and financing of a project initiated by the Company
to upgrade its Port Arthur, Texas refinery to be able to process more lower-
cost, heavy sour crude oil. The Company sold a substantial portion of this
project in August 1999 to Port Arthur Coker Company L.P., a subsidiary of
Clark Holdings.
Business Strategy
Clark R&M is focused on becoming a world class refiner to capture the
manufacturing value created in refining crude oil into gasoline, diesel fuel,
jet fuel, and other petroleum products. Demand for these products has grown at
consistent rates since the mid-1980's and the Company believes that the excess
capacity resulting from the oil crises of the 1970's and early 1980's have now
been almost fully absorbed. Clark R&M has a disciplined business approach with
a strategy that has been consistently focused towards the following:
. Improving Productivity with Minimum Capital
The Company continues to implement relatively no or low-cost initiatives
designed to increase production, sales volumes and production yields and to
improve its sales mix while reducing input costs and operating expenses.
Examples of these types of initiatives include improvements at the Port Arthur
refinery, other than the heavy oil upgrade project, increased yields and crude
oil throughput capability at its Illinois refineries and the creation of value
within the retail marketing business and subsequent harvesting of that value
to be deployed into expected higher return uses.
. Adding Scale Through Acquisitions at Fractions of Replacement Costs
The Company intends to continue to seek to add scale to its refining
operations through the selective acquisition of low-cost, quality assets.
Since 1994, the Company has almost quadrupled its refining capacity with
2
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the acquisition of the Port Arthur refinery in 1995 and the Lima refinery in
1998. The Company believes there may be additional acquisition opportunities
in the future due to continued consolidation in the industry.
. Optimizing Capital Investment through a Rigorous Project Review and
Implementation Process
The Company emphasizes an entrepreneurial approach to perceived mandatory
expenditures, such as those required to comply with reformulated and low-
sulfur fuel regulations. For example, the Company may seek to comply with such
regulations through the access of alternative markets for existing products if
adequate returns on capital investment needed to comply with such regulations
are not assured. Discretionary capital expenditures are managed by linking
capital investment to internally generated cash flow. The Company seeks to
minimize investment risk, while maximizing project returns and most projects
approved in the past three years have indicated paybacks of less than four
years.
. Maintaining Strong Liquidity and Financial Flexibility
Earnings in the Company's industry have been volatile. As a result of this
volatility the Company has historically maintained significant liquidity and
utilized long-term financing when possible while retaining some prepayment
flexibility. As of December 31, 1999, the Company had cash and short-term
investments of approximately $286 million and no material long-term debt
maturities prior to 2003.
. Promoting Entrepreneurial Culture
An overall approach in optimizing the above strategies and enhancing
financial performance and safety is to promote an entrepreneurial culture
where employee incentives are aligned with performance objectives. All of the
Company's employees participate in its performance management, profit sharing
or other incentive plans, and the Company has a stock incentive plan for
certain key employees.
Overview
In addition to four refineries, the Company owns a product terminal, two
crude oil terminals, an LPG terminal and crude oil pipeline interests. The
following table shows the rated crude oil throughput capacities of the
Company's four refineries in barrels per day as of December 31, 1999:
<TABLE>
<S> <C>
Port Arthur, Texas................................................ 232,000
Lima, Ohio........................................................ 170,000
Blue Island, Illinois............................................. 80,000
Hartford, Illinois................................................ 65,000
-------
Total......................................................... 547,000
=======
</TABLE>
The Company's principal refined products are gasoline, on and off-road
diesel fuel, jet fuel, residual oil and petroleum coke. Gasoline, on-road (low
sulfur) diesel fuel and jet fuel are principally used for transportation
purposes. Off-road (high sulfur) diesel fuel is principally used as a fuel for
agriculture and trains. Residual oil (slurry oil and vacuum tower bottoms) is
used mainly for heavy industrial fuel (e.g., power generation) and in the
manufacturing of roofing flux or for asphalt used in highway paving. Petroleum
coke is a by-product of the coking process and is a coal-like substance that
can be burned for power generation. The Company also produces many unfinished
petrochemical products that are sold to neighboring chemical plants at the
Port Arthur and Lima refineries. Most of the Company's products are sold in
the eastern half of the U.S.
The Company currently sells gasoline and diesel fuel on an unbranded basis
to approximately 525 distributors and chain retailers through third-party
facilities. The Company believes these sales offer higher profitability than
spot market alternatives. Wholesale sales are also made to the transportation,
agricultural and commercial sectors, including airlines, railroads, barge
lines and other industrial end-users. Fuel sales to all channels of trade
focus on maximizing netback realizations (revenue less all distribution and
working capital investment costs).
3
<PAGE>
Port Arthur Refinery
The Port Arthur refinery is located in Port Arthur, Texas, approximately 90
miles east of Houston, on a 4,000-acre site. The Port Arthur refinery was
acquired from Chevron U.S.A. Inc. in February 1995. The Port Arthur refinery
has the ability to process 100% sour crude oil, including up to 20% heavy
crude oil, and has coking capabilities. Heavy sour crude oil has historically
been available at substantially lower cost when compared to light sweet crude
oil such as West Texas Intermediate ("WTI"). The Port Arthur refinery's Texas
Gulf Coast location provides access to numerous cost-effective domestic and
international crude oil sources that can be accessed by waterborne delivery or
through Sun Pipe Line. The Port Arthur refinery can produce conventional
gasoline, 100% low-sulfur diesel fuel and jet fuel. The refinery's products
can be sold in the Mid-continent and Eastern U.S. as well as in export
markets. These markets can be accessed through the Explorer, Texas Eastern and
Colonial pipelines or by ship or barge.
The Company has an agreement to exchange certain refined products and
chemicals at market prices with Chevron Chemical Company, which exchanged
amounts averaged approximately 24,000 bpd from 1996 through 1999. This
contract is cancelable upon 18 months notice by either party or by mutual
agreement.
Since acquiring the Port Arthur refinery, the Company increased crude oil
throughput capability from approximately 178,000 bpd to its current 232,000
bpd and immediately lowered operating expenses by approximately 50c per
barrel.
4
<PAGE>
The average daily feedstocks and production of the Port Arthur refinery for
the years ended December 31, 1997, 1998 and 1999 were as follows:
Port Arthur Refinery Feedstocks and Production
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 (a) 1998 1999 (a)
----------- ----------- -----------
Bpd % Bpd % Bpd %
----- ----- ----- ----- ----- -----
(barrels per day in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Feedstocks
Light Sweet Crude Oil(b).......... 32.3 15.6% 17.0 7.6% 10.4 5.0%
Light and Medium Sour Crude
Oil(b)........................... 138.6 66.8 176.5 79.3 154.7 75.1
Heavy Sweet Crude Oil(b).......... 2.0 1.0 -- -- 0.8 0.4
Heavy Sour Crude Oil(b)........... 33.6 16.2 25.7 11.6 34.1 16.6
Unfinished & Blendstocks.......... 0.8 0.4 3.4 1.5 6.1 2.9
----- ----- ----- ----- ----- -----
Total........................... 207.3 100.0% 222.6 100.0% 206.0 100.0%
===== ===== ===== ===== ===== =====
Production
Gasoline
Unleaded.......................... 54.6 26.2 78.5 35.6 75.9 36.4
Premium Unleaded.................. 30.5 14.7 20.4 9.2 15.6 7.5
----- ----- ----- ----- ----- -----
85.1 40.9 98.9 44.8 91.5 43.9
Other Products
Low-Sulfur Diesel Fuel............ 58.2 27.9 58.4 26.4 60.4 29.0
Jet Fuel.......................... 22.3 10.7 19.4 8.8 18.1 8.7
Petrochemical Products............ 26.0 12.5 24.7 11.2 21.0 10.0
Others............................ 16.5 8.0 19.3 8.8 17.5 8.4
----- ----- ----- ----- ----- -----
123.0 59.1 121.8 55.2 117.0 56.1
----- ----- ----- ----- ----- -----
Total........................... 208.1 100.0% 220.7 100.0% 208.5 100.0%
===== ===== ===== ===== ===== =====
</TABLE>
- --------
(a) Feedstocks and production in 1997 reflect maintenance turnaround downtime
of approximately one month on selected units and in 1999 reflect unplanned
maintenance downtime.
(b) Light crude oil has an API gravity of greater than 35.0 degrees, medium
crude oil ranges from 25.9 to 35.0 degrees API and heavy crude oil has an
API gravity of less than 25.9 degrees. Sweet crude oil has a sulfur
content of less than 0.5% by weight while sour crude oil's sulfur content
exceeds 0.5% by weight.
Port Arthur Upgrade Project
In March 1998, the Company entered into a long-term crude oil supply
agreement with PMI Comercio Internacional, S.A. de C.V. ("PMI"), an affiliate
of Petroleos Mexicanos, the Mexican state oil company. As a result of this
contract, the Company began developing a project to upgrade the Port Arthur
refinery to process primarily lower-cost, heavy sour crude oil of the type to
be purchased from PMI. The heavy oil upgrade project includes the construction
of new coking, hydrocracking and sulfur removal capability, and the expansion
of the existing crude unit to approximately 250,000 barrels per day. In August
1999, the Company sold for $157.1 million the construction work-in-progress on
the new processing units to Port Arthur Coker Company L.P., an affiliate that
is not controlled by the Company or its subsidiaries. The Company also sold
for $2.2 million the oil supply agreement with PMI and environmental permits
which had already been obtained by the Company to Port Arthur Coker Company
L.P. The assets were sold at cost, which approximated fair market value. As
part of
5
<PAGE>
the project the Company is undertaking the upgrading of existing units at the
Port Arthur refinery, including the expansion of the crude unit. The Company's
portion of the project is expected to cost approximately $120 million, of
which $50.7 million was expended through December 31, 1999. As of December 31,
1999, the Company had a letter of credit to the benefit of Foster Wheeler USA
for $86.9 million to collateralize its obligations related to the Port Arthur
heavy oil upgrade project.
The heavy oil upgrade project is expected to be mechanically complete by
November 2000 with start-up of the project in the first quarter of 2001. The
Company entered into agreements with Port Arthur Coker Company L.P. pursuant
to which the Company will provide certain operating, maintenance and other
services and purchase the output from the new coking and hydrocracking
equipment for further processing into finished products. The Company will
receive compensation under these agreements at fair market value that is
expected to be, in the aggregate, favorable to the Company.
Lima Refinery
The Lima refinery is located in Lima, Ohio, approximately halfway between
Toledo and Dayton, on a 650-acre site. Most of the processing units in the
Lima refinery have been rebuilt since 1970, making the Lima refinery
relatively young among Midwest refineries.
In 1996, British Petroleum ("BP") unsuccessfully attempted to sell the Lima
refinery and announced they would close the refinery in two years. Despite
such announcement, BP continued to invest at near historical levels for
maintenance operating expenses and mandatory capital expenditures during 1997.
The Company acquired the Lima refinery, related terminal facilities and non-
hydrocarbon inventory from affiliates of BP in August 1998 for $175 million
plus approximately $35 million for hydrocarbon inventory and $7 million in
assumed liabilities, principally related to employee benefits (the "Lima
Acquisition").
The Lima refinery is highly automated and modern with a Nelson complexity
rating of 8.7 and an estimated replacement cost of $1.2 billion. The Lima
refinery is large enough to realize economies of scale and other efficiencies.
The Midwest location of the refinery has historically provided it with a
transportation cost advantage and less gross margin volatility than refineries
in other regions since demand for refined products has exceeded supply in the
region.
The Lima refinery was designed to process light, sweet crude oil, but the
refinery does have coking capability allowing it to upgrade lower-valued
products. The Lima refinery obtains 100% of its crude oil supply by pipeline
from a variety of domestic and foreign sources. The Mid-Valley, Salem-Stoy-
Lima (SSL) and Marathon pipeline systems provide final delivery capability to
the refinery. These pipelines allow ultimate connection to the Capline,
Louisiana Offshore Oil Port, Mobil, Ozark, Interprovincial, West Texas Gulf
and other pipeline systems. The Lima refinery can produce conventional
gasoline, high sulfur diesel fuel, jet fuel and certain specialty chemical
products. Products can be distributed through the Buckeye and Inland Pipeline
systems and by rail, truck or non-owned terminal. The Buckeye system allows
access to markets in Northern/Central Ohio, Indiana, Michigan and Western
Pennsylvania. The Inland Pipeline System is a private intra-state system
jointly owned by BP, Shell, Unocal and Sun and available solely for their use.
Clark has access to this private system through BP.
6
<PAGE>
The average daily feedstocks and production of the Lima refinery from the
acquisition date of August 10, 1998 through December 31, 1998 and for the full
year ended December 31, 1999 were as follows:
Lima Refinery Feedstocks and Production
<TABLE>
<CAPTION>
August 10, to Year Ended
December 31, 1998 December 31, 1999(a)
-------------------- ----------------------
Bpd % Bpd %
---------- --------- ----------- ----------
(barrels per day in (barrels per day in
thousands) thousands)
<S> <C> <C> <C> <C>
Feedstocks
Light Sweet Crude Oil........... 136.0 105.3% 120.7 103.6%
Other........................... (6.9) (5.3) (4.2) (3.6)
--------- --------- ---------- ----------
Total......................... 129.1 100.0% 116.5 100.0%
========= ========= ========== ==========
Production
Gasoline
Unleaded........................ 61.3 47.0 55.2 46.8
Premium Unleaded................ 14.3 10.9 14.3 12.1
--------- --------- ---------- ----------
75.6 57.9 69.5 58.9
Other Products
Diesel Fuel..................... 27.3 21.0 19.9 16.8
Jet Fuel........................ 13.4 10.3 17.7 15.0
Others.......................... 14.0 10.8 11.0 9.3
--------- --------- ---------- ----------
54.7 42.1 48.6 41.1
--------- --------- ---------- ----------
Total......................... 130.3 100.0% 118.1 100.0%
========= ========= ========== ==========
</TABLE>
- --------
(a) Feedstocks and production in 1999 reflect maintenance turnaround downtime
and unplanned downtime.
Illinois Refineries
Product pipelines connect the Illinois refineries, increasing their
flexibility relative to stand-alone operations. Both refineries are situated
on major water transportation routes that provide flexibility to receive crude
oil or intermediate feedstocks by barge when economical. The Company believes
that the Midwest location of these refineries has provided relatively high
refining margins with less volatility than comparable operations located in
other regions of the U.S., principally because demand for refined products has
exceeded production in the region. This excess demand has been satisfied by
imports from other regions, providing Midwest refineries with a transportation
advantage.
Blue Island Refinery
The Blue Island refinery is located on the Cal-Sag canal in Blue Island,
Illinois, approximately 17 miles south of Chicago on a 170-acre site. The Blue
Island refinery was designed to process light, sweet crude oil, but can
process up to 25% light sour crude oil. The Blue Island refinery can receive
Canadian crude oil through the Lakehead pipeline from Canada, foreign and
domestic crude oil through the Capline pipeline system originating in the
Louisiana Gulf Coast region, and domestic crude oil originating in West Texas,
Oklahoma and the Rocky Mountains through the Arco pipeline system. The Blue
Island refinery has among the highest capabilities to produce gasoline
relative to the other refineries in its market area. During most of the year,
gasoline is the most profitable refinery product. The Blue Island refinery can
produce conventional gasoline, up to 60% RFG, high sulfur diesel fuel and
residual fuel. It can also produce 30% low-sulfur diesel fuel when market
prices warrant and based on the clean fuels attainment of the Company's total
refining system. Products can be distributed through the Wolverine, West
Shore, Badger, Transmontaigne and Marathon pipeline systems or by barge.
7
<PAGE>
Since 1992, the Company has increased the crude oil throughput capability
at the Blue Island refinery by approximately 10,000 bpd, introduced light sour
crude oil as a lower-cost feedstock, improved the fluid catalytic cracking
("FCC") unit operation and introduced the capability to produce RFG.
The average daily feedstocks and production of the Blue Island refinery for
the years ended December 31, 1997, 1998 and 1999 were as follows:
Blue Island Refinery Feedstocks and Production
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1998 (a) 1999
---------- ---------- ----------
Bpd % Bpd % Bpd %
---- ----- ---- ----- ---- -----
(barrels per day in thousands)
<S> <C> <C> <C> <C> <C> <C>
Feedstocks
Light Sweet Crude Oil..................... 51.7 70.1% 48.5 74.9% 53.4 72.9%
Light Sour Crude Oil...................... 18.1 24.6 14.8 22.8 18.1 24.7
Unfinished & Blendstocks.................. 3.9 5.3 1.5 2.3 1.7 2.4
---- ----- ---- ----- ---- -----
Total................................... 73.7 100.0% 64.8 100.0% 73.2 100.0%
==== ===== ==== ===== ==== =====
Production
Gasoline
Unleaded.................................. 39.9 54.0 36.7 56.8 40.0 54.7
Premium Unleaded.......................... 8.4 11.3 6.5 10.1 7.6 10.4
---- ----- ---- ----- ---- -----
48.3 65.3 43.2 66.9 47.6 65.1
Other Products
Diesel Fuel............................... 14.9 20.1 13.1 20.3 16.5 22.6
Others.................................... 10.7 14.6 8.2 12.8 9.0 12.3
---- ----- ---- ----- ---- -----
25.6 34.7 21.3 33.1 25.5 34.9
---- ----- ---- ----- ---- -----
Total................................... 73.9 100.0% 64.5 100.0% 73.1 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
- --------
(a) Feedstocks and production during 1998 were reduced by significant planned
and unplanned downtime.
Hartford Refinery
The Hartford refinery is located on the Mississippi River in Hartford,
Illinois, approximately 17 miles northeast of St. Louis, on a 400-acre site.
The Hartford refinery includes a coker unit and, consequently, has the ability
to process a variety of crude oil including lower-cost, heavy sour crude oil
into higher-value products such as gasoline and diesel fuel. The Hartford
refinery has the capability to process approximately 60% heavy sour crude oil
and 25% medium sour crude oil. This upgrading capability allows the refinery
to benefit from higher margins if heavy sour crude oil is priced at a
significant discount to light sweet crude oil. The Hartford refinery has
access to foreign and domestic crude oil supplies through the Capline/Capwood
pipeline systems and access to Canadian crude oil through the Express pipeline
and the Mobil/IPL pipeline system. The Hartford refinery can produce
conventional gasoline, high sulfur diesel fuel, residual fuel and petroleum
coke. Products can be distributed through the Marathon/Wabash and Explorer
pipeline systems or by barge.
Since 1992, the Company has increased the crude oil throughput capability
at the Hartford refinery by approximately 10,000 bpd, improved overall liquid
recovery by approximately 3%, improved FCC unit yields by approximately 3%,
increased higher-valued crude unit yields by approximately 2,000 bpd and
dramatically reduced combined "recordable" and "days away from work" rates
from 27 in 1990 to an average of less than three during 1999.
8
<PAGE>
The average daily feedstocks and production of the Hartford refinery for
the years ended December 31, 1997, 1998 and 1999 were as follows:
Hartford Refinery Feedstocks and Production
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 (a) 1998 1999
---------- ----------- ----------
Bpd % Bpd % Bpd %
---- ----- ---- ----- ---- -----
(barrels per day in thousands)
<S> <C> <C> <C> <C> <C> <C>
Feedstocks
Light Sweet Crude Oil.................... 4.2 6.8% 8.2 12.9% 10.8 17.9%
Light Sour Crude Oil..................... 24.9 40.8 35.1 55.0 44.0 72.6
Heavy Sour Crude Oil..................... 29.5 48.3 21.7 34.0 4.6 7.6
Unfinished & Blendstocks................. 2.5 4.1 (1.2) (1.9) 1.1 1.9
---- ----- ---- ----- ---- -----
Total.................................. 61.1 100.0% 63.8 100.0% 60.5 100.0%
==== ===== ==== ===== ==== =====
Production
Gasoline
Unleaded................................. 28.7 47.4 29.5 46.7 30.7 50.4
Premium Unleaded......................... 2.5 4.1 2.8 4.4 2.4 4.0
---- ----- ---- ----- ---- -----
31.2 51.5 32.3 51.1 33.1 54.4
Other Products
High-Sulfur Diesel Fuel.................. 19.3 32.0 20.9 32.9 21.6 35.6
Others................................... 10.0 16.5 10.1 16.0 6.1 10.0
---- ----- ---- ----- ---- -----
29.3 48.5 31.0 48.9 27.7 45.6
---- ----- ---- ----- ---- -----
Total.................................. 60.5 100.0% 63.3 100.0% 60.8 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
- --------
(a) Feedstocks and production in 1997 reflect maintenance turnaround downtime
of approximately one month on selected units and in 1999 reflect unplanned
maintenance downtime.
Terminals and Pipelines
In December 1999, the Company sold 15 refined product terminals to Equilon.
The Company owns one refined product terminal associated with the Blue Island
refinery and a 1.1 million-barrel crude oil terminal associated with the Lima
refinery. The Company also owns a crude oil terminal and an LPG terminal with
a combined capacity of approximately 7.2 million barrels associated with the
Port Arthur refinery in Texas. The Company enters into refined product
exchange agreements with unaffiliated companies to broaden its geographical
distribution capabilities in the Midwest, and through the transaction with
Equilon can potentially expand its distribution points nationally through
Equilon's terminal network.
The Company owns and operates a common carrier pipeline system that
connects its Port Arthur refinery with three terminals. It also owns
proprietary refined products pipelines from the Port Arthur refinery to its
LPG terminal in Fannett, Texas.
9
<PAGE>
Crude Oil Supply
The majority of the Company's crude oil supply requirements are acquired on
the spot market from unaffiliated foreign and domestic sources. The Company
has several crude oil supply contracts that total approximately 220,000 bpd
with third-party suppliers, including PMI, Bayoil Supply and Trading Limited,
Husky Oil Operations Limited, and Koch Petroleum Group, L.P. These contracts
are generally cancelable upon one to three months' notice by either party, but
are intended to remain in place for the foreseeable future. The following
table shows the Company's average daily sources of crude oil in 1999:
Sources of Crude Oil Supply
<TABLE>
<CAPTION>
1999
--------------------
Bpd %
-------------- -----
(in thousands)
<S> <C> <C>
United States....................................... 106.7 23.6%
Latin America....................................... 150.0 33.2
Canada.............................................. 21.9 4.9
West Africa......................................... 93.6 20.7
Middle East......................................... 66.5 14.7
North Sea........................................... 2.6 0.6
Other............................................... 10.3 2.3
----- -----
Total........................................... 451.6 100.0%
===== =====
</TABLE>
Clean Air Act/Reformulated Fuels
In December 1999, the United States Environmental Protection Agency
("USEPA") published the Tier II Motor Vehicle Emission Standards Final Rule
for all passenger vehicles, establishing standards for sulfur content in
gasoline. The ruling mandates that the sulfur content of gasoline produced at
any refinery not exceed 30 parts per million after January 1, 2006. Starting
in 2004, the USEPA will begin a program to phase in the new low sulfur
gasoline requirements. Currently the sulfur content in the Company's gasoline
pool averages approximately 385 parts per million. These regulations will
likely require the Company to make some level of capital investments at its
refineries to reduce the sulfur levels in its gasoline. The Company is
evaluating its options under the new regulations and does not currently have
an estimate of how much of a capital outlay will be required for compliance.
Under the Clean Air Act, the USEPA promulgated regulations mandating low-
sulfur diesel fuel for all on-road consumers and RFG for ozone non-attainment
areas, including Chicago, Milwaukee and Houston in the Company's direct market
area.
The USEPA has drafted a proposed regulation which, it is believed, would
require a significant reduction in the sulfur content of diesel fuel by the
year 2006. The proposed regulation has not yet been released to the public and
is currently under the review of the White House Office of Management and
Budget. The USEPA anticipates that the regulation will be formally proposed
later this spring and formally promulgated as a final rule before the end of
the year 2000. Until the regulation is formally proposed and promulgated, and
the exact nature of the USEPA's proposal becomes known, the Company cannot
assess the impact, if any, of the regulation on its operations.
The Clean Air Act requires the USEPA to review national ambient air quality
standards for certain pollutants every five years. In July 1997, after such a
review, the USEPA adopted more stringent national standards for ground level
ozone (smog) and particulate matter (soot). These standards, when implemented,
are likely to increase significantly the number of non-attainment areas and
thus require additional pollution controls, more extensive use of RFG, and
possibly new diesel fuel standards. Efforts are being made to influence the
legislative branch to repeal the new standards under the Congressional Review
Act. A lawsuit filed by the U.S. Chamber of Commerce, the American Trucking
Association and the National Coalition of Petroleum Retailers is challenging
the implementation of these standards. As a result, it is too early to
determine what impact that this ruling could have on the Company.
10
<PAGE>
Expenditures required to comply with existing reformulated fuels
regulations are primarily discretionary, subject to market conditions and
economic justification. The reformulated fuels programs impose restrictions on
properties of fuels to be refined and marketed, including those pertaining to
gasoline volatility, oxygenated content, detergent addition and sulfur
content. The regulations regarding these fuel properties vary in markets in
which the Company operates, based on attainment of air quality standards and
the time of the year. The Company's Blue Island refinery has the capability to
produce up to approximately 60% of its gasoline production in RFG. Each
refinery's maximum RFG production may be limited based on the clean fuels
attainment of the Company's total refining system. The Port Arthur refinery
has the capability to produce 100% low-sulfur diesel fuel.
Market Environment
The profitability of an oil refinery is determined, in large part, by
refining margins, the spread between prices for refined products such as
gasoline, diesel fuel, and costs of crude oil. The refining margin is driven
by the supply and demand for petroleum commodities. Refinery profitability is
also influenced by the equipment configuration of the refinery, the refinery's
operating cost structure and the refinery's access to crude oil and refined
product markets.
Demand for light refined products (gasoline, diesel, kerosene/jet fuel)
grew at an annual rate of 4.2% from 1960 to 1973, according to the U.S.
Department of Energy. However, demand for light refined products declined by
0.5% per year from 1973 to 1983. The Company believes that the combination of
high prices for petroleum products due to the oil shocks of the early and late
1970's, environmental regulations favoring cleaner burning fuels, and gains in
fuel efficiency caused consumption of light refined products to decrease. From
1983 to 1998, light refined product demand increased at a rate of 1.6% per
year and from 1993 to 1998, at 2.1% per year. The Company believes the renewed
growth in light refined product demand is due to the expansion of U.S. vehicle
fleet miles driven, increased seat miles flown on the U.S. airlines, and the
reduced improvement in vehicle fuel efficiency due to consumer preference for
light trucks and sport-utility vehicles.
Demand for heavy refined products (residual and other heavy oil) grew at an
annual rate of 4.0% from 1960 to 1978, according to the U.S. Department of
Energy. The Company believes that the introduction of regulations restricting
the use of residual oil in the late 1970's drastically reduced demand for
residual oil, as demand decreased from 3 million barrels per day in 1978 to
0.9 million barrels per day in 1998, an annual decrease of 5.9%. During this
same period, overall heavy refined product demand has decreased at only
approximately 1% per year.
From 1965 through 1978, crude oil distillation capacity utilization rates
averaged approximately 89%, according to the American Petroleum Institute. The
Company believes that sagging demand for light and heavy refined products was
the primary cause of the utilization rates falling to 69% in 1981. U.S. crude
oil distillation capacity decreased from 18.1 million barrels per day in 1980
to 16.4 million barrels per day in 1999, according to the Oil & Gas Journal,
as more than 40% of the refineries in the United States closed during this
period. As a result of this decrease in capacity and the renewed increase in
demand, U.S. crude oil distillation capacity utilization rates increased from
69% in the early 1980s to 95% in 1998 and averaged approximately 93% in 1999.
The Company believes U.S. crude oil distillation utilization rates may be
approaching long-term sustainable maximums due to the requirements for routine
maintenance and the likelihood of unplanned downtime.
The Company believes the annual growth in refined product demand in the
U.S. will average 1-2%, in line with the recent trends, due to the continuing
expansion of the U.S. vehicle fleet miles driven and increased seat-miles
flown on U.S. airlines with an offset for modest improvements in vehicles
efficiency.
Crude oil represents a refinery's largest single operating cost and is
available in a range of prices depending on the equipment required for
processing the crude oil, its potential yield of refined products, and the
cost of transporting the crude oil to the refinery. Lighter and/or sweeter
crude oil is priced higher then heavy and/or sour crude oil because it is
easier to process and yields a higher-valued slate of products such as
gasoline, diesel fuel, jet fuel, and petrochemicals.
11
<PAGE>
The economies of crude oil selection compares the discounts offered for
lower quality crude oil to the gain on making higher value products instead of
residual oil. The refining margin of a heavy coking refinery is highly
sensitive to the dollar per barrel price difference between heavy sour crude
oil, such as Maya, and light sweet crude oil, such as West Texas Intermediate.
This difference is often referred to as the "heavy/light differential". This
measurement provides a reliable indication of the profitability advantage of a
heavy coking refinery because a wider heavy/light differential typically
results in lower cost feedstocks and a higher resulting refinery margin. From
1988 through 1999 the six-month moving average of the heavy/light differential
ranged from a high of $8.90 to a low of $3.76 with 1999 averaging $4.75 per
barrel.
In the late 1980's, conversion capacity, the ability to extract more
higher-valued products from the same barrel of crude oil, was fully utilized
with little or no excess capacity. As a result, returns on investment for
refiners motivated new investments in conversion. By the early 1990s, the rate
of addition of conversion capacity considerably exceeded the needed level.
Many producers added this capacity with the intention of processing heavy sour
crude oil into low sulfur diesel and reformulated gasoline. Many refiners
found that the most economic way of accomplishing this was to combine various
refinery modifications made in response to regulatory changes with expansions
of conversion capacity. Since conversion capacity is generally the most
profitable component of a refinery, many refiners believed that increasing it
was the most effective way to maximize returns on product quality improvement
investments. However, because so many refiners recognized the potential
benefit of increasing conversion capacity, an overbuilding of capacity
resulted. The overabundance of conversion capacity drove up demand for heavy
feedstock and resulted in a narrowing of the heavy/light differential through
1995.
Recovery in the heavy/light differential occurred in 1996 and 1997. The
Company believes that while this recovery was due in part to temporary
refinery operating problems at several major refinery units, which decreased
the availability of conversion capacity, this recovery was primarily driven by
the rising output of heavy sour crude oil in the Western Hemisphere. This
increasing production of heavy sour crude oil resulted in severe price
competition and residual fuel oil oversupply. The differentials reached a peak
late in 1997 and early 1998 due to these factors. In April 1998, the trends
began to reverse and the heavy/light differential began to narrow. This
reversal was brought about by the confluence of a number of factors. These
include the effects of the Asian financial crisis, which reduced demand for
refined products and opened up capacity worldwide. In addition, low crude oil
prices and high natural gas prices in the U.S. caused demand for residual fuel
to increase rather dramatically. At the same time, export demand for residual
fuel increased sharply due to El Nino related hydropower shortages in Mexico.
Although the rate of increase in conversion capacity fell sharply after
1994, several major projects are currently underway. In addition, several
conversion projects are linked to supplies of heavy sour crude oil from
Venezuela and Mexico and the Company believes these projects will absorb
increases in heavy sour crude oil production. Net additions in conversion
capacity in recent years have been at a rate of 2% per year in the United
States and nearly 4% worldwide.
The Company believes heavy sour crude oil production cuts in 1999, by
Mexico, Canada, Venezuela and other OPEC members caused the heavy/light
differential to narrow. At the same time, new conversion capacity was being
brought on and was absorbing excess heavy feedstock, thereby strengthening
heavy feedstock prices and further narrowing the differential. In addition,
high natural gas prices coupled with low residual oil prices encouraged the
burning of residual fuel, thereby squeezing the heavy feedstock balance and
narrowing the heavy/light differential even further.
The Company believes the heavy/light differential will begin to widen again
as many of the key factors determining the heavy/light differential are
expected by the Company to turn favorable:
. as the world economy, particularly Asia, improves, demand will grow
rapidly;
. crude oil prices will increase as demand increases;
. crude oil production increases, particularly heavy sour crude oil, as
demand for OPEC crude oil increases since OPEC crude oil is generally
heavier;
12
<PAGE>
. Venezuela, Mexico, and Canada are expected to expedite heavy oil
production; and
. light product demand and supply of heavy sour crude oil will likely
increase faster than conversion capacity can be added.
Sale of Retail Division
In July 1999, Clark R&M sold its retail marketing division in a
recapitalization transaction to Clark Retail Enterprises ("CRE"), which is
controlled by Apollo Management L.P., for net cash proceeds of approximately
$215 million. A subsidiary of the Company's indirect parent Clark Holdings
holds a six-percent equity interest in CRE. The retail marketing division sold
included all Company and independently-operated Clark branded stores and the
Clark trade name. In general, CRE assumed unknown environmental liabilities at
the retail stores they acquired up to $50,000 per site, as well as
responsibility for any post-closing contamination. Subject to certain risk
sharing arrangements, the Company retained responsibility for all pre-
existing, known contamination. As part of the sale agreement, the Company also
entered into a market-based supply agreement for refined products that expires
in July 2001 and may be canceled with 90 days notice by the buyer. Since the
supply agreement is market-based the Company does not expect the expiration of
the supply agreement to have a material adverse effect on the results of
operations or financial position.
Competition
The oil industry is highly competitive. Many of the Company's principal
competitors are integrated multinational oil companies that are substantially
larger and better known than the Company. Because of their diversity,
integration of operations, larger capitalization and greater resources, these
major oil companies may be better able to withstand volatile market
conditions, more effectively compete on the basis of price and more readily
obtain crude oil in times of shortages.
The principal competitive factors affecting the Company are crude oil and
other feedstock costs, refinery efficiency, refinery reliability, refinery
product mix and product distribution and transportation costs. Certain of the
Company's larger competitors have refineries which are larger and, as a
result, could have lower per-barrel costs or higher margins per barrel of
throughput. The Company has no crude oil reserves and is not engaged in
exploration and production activities. The Company obtains nearly all of its
crude oil requirements on the spot market from unaffiliated sources. The
Company believes that it will be able to obtain adequate crude oil and other
feedstocks at generally competitive prices for the foreseeable future. The
principal competitive factors affecting the Company's wholesale distribution
system are product price and quality, reliability and availability of supply
and location of distribution points.
Environmental Matters
Compliance Matters
As the current operator of refineries and the former operator of gasoline
stores, the Company is subject to comprehensive and frequently changing
federal, state and local environmental laws and regulations, including those
governing emissions of air pollutants, discharges of wastewater and
stormwater, and the handling and disposal of non-hazardous and hazardous
waste. Federal, state and local laws and regulations establishing numerous
requirements and providing penalties for violations thereof affect nearly all
of the current and former operations of the Company. Included among such laws
and regulations are the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act and the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"). Also
significantly affecting the Company are the rules and regulations of the
Occupational Safety and Health Administration. Many of these laws authorize
the imposition of civil and criminal sanctions upon companies that fail to
comply with applicable statutory or regulatory requirements. As discussed
below, federal and state agencies have filed various enforcement actions
alleging that the Company has violated a number of environmental laws and
regulations. The Company nevertheless believes that, in all material respects,
its existing operations are in compliance with such laws and regulations.
The Company's operations are large and complex. The numerous environmental
regulations to which the Company is subject are complicated, sometimes
ambiguous, and often changing. In addition, the Company may
13
<PAGE>
not have detected certain violations of environmental laws and regulations
because the conditions that constitute such violations may not be apparent. It
is therefore possible that certain of the Company's operations are not
currently in compliance with state or federal environmental laws and
regulations. Accordingly, the Company may be required to make additional
expenditures to comply with existing environmental requirements. Such
expenditures, along with compliance with environmental requirements, could
have a material adverse effect on the Company's financial condition, results
of operations, cash flow or liquidity.
The Company anticipates that, in addition to expenditures necessary to
comply with existing environmental requirements, it will incur costs in the
future to comply with new requirements. The Company cannot predict what
environmental legislation or regulations will be enacted in the future or how
existing or future laws or regulations will be administered or interpreted
with respect to products or activities to which they have not previously been
applied. Compliance with more stringent laws or regulations, as well as more
vigorous enforcement policies of the regulatory agencies or stricter
interpretation of existing laws which may develop in the future, could have an
adverse effect on the financial position or operations of the Company and
could require substantial additional expenditures by the Company for the
installation and operation of pollution control systems and equipment. See "--
Legal Proceedings."
Remediation Matters
In addition to environmental laws that regulate the Company's ongoing
operations, the Company's various operations also are subject to liability for
the remediation of contaminated soil and groundwater. Under CERCLA and
analogous state laws, certain persons may be liable as a result of the release
or threatened release of hazardous substances (including petroleum) into the
environment. Such persons include the current owner or operator of property
where such releases or threatened releases have occurred, any persons who
owned or operated such property during the time that hazardous substances were
released at such property, and persons who arranged for the disposal of
hazardous substances at such property. Liability under CERCLA is strict.
Courts have also determined that liability under CERCLA is, in most cases
where the government is the plaintiff, joint and several, meaning that any
responsible party could be held liable for all costs necessary for
investigating and remediating a release or threatened release of hazardous
substances. As a practical matter, liability at most CERCLA (and similar)
sites is shared among all the solvent "potentially responsible parties"
("PRPs"). The most relevant factors in determining the probable liability of a
party at a CERCLA site usually are the cost of investigation and remediation,
the relative amount of hazardous substances contributed by the party to the
site and the number of solvent PRPs. While the Company maintains property and
casualty insurance in the normal course of its business, such insurance does
not typically cover remediation and certain other environmental expenses.
The release or discharge of petroleum and other hazardous materials can
occur at refineries and terminals. The Company has identified a variety of
potential environmental issues at its refineries, terminals, and previously
owned retail stores. In addition, each refinery has areas on-site that may
contain hazardous waste or hazardous substance contamination and which may
have to be addressed in the future at substantial cost. The terminal sites may
also require remediation due to the age of tanks and facilities and as a
result of current or past activities at the terminal properties including
several significant spills and past on-site waste disposal practices.
Legal And Governmental Proceedings
The Company is also the subject of various environmental-related legal
proceedings. See "--Legal Proceedings."
Employees
Currently, the Company employs approximately 2,100 people, with
approximately 60% covered by collective bargaining agreements at the Blue
Island, Hartford, Lima and Port Arthur refineries. The Port Arthur and
Hartford refinery contracts expire in February 2002, the Lima refinery
contract expires in August 2002, and the Blue Island contract expires in
September 2002. Relationships with the unions have been good and the Company
has never experienced a work stoppage as a result of labor disagreements.
14
<PAGE>
Item 3. Legal Proceedings
As a result of its activities, the Company is the subject of a number of
legal and administrative proceedings relating to environmental matters. The
Company is required by the Commission to disclose all matters that could be
material or that involve a governmental authority and could reasonably involve
monetary sanctions of $100,000 or greater.
Hartford Federal Enforcement. In February 1999, the Company was served with
a complaint in the matter United States v. Clark Refining & Marketing, Inc.,
alleging violations of the Clean Air Act, and regulations promulgated
thereunder, in the operation and permitting of the Hartford refinery fluid
catalytic cracking unit. In July 1999, the Company was served with a civil
administrative complaint filed by the USEPA, alleging certain violations of
the Emergency Planning and Community Right-to-Know Act, and regulations
promulgated thereunder, with respect to certain record-keeping and reporting
requirements relating to the Hartford refinery. The administrative complaint
seeks a civil penalty of $498,000. No estimate can be made at this time of the
Company's potential liability, if any, as a result of these matters.
Hartford State Enforcement. In 1996, the matter People of the State of
Illinois v. Clark Refining & Marketing, Inc., PCB No. 95-163 was substantially
settled by the parties. Remaining issues are being discussed and resolution is
anticipated. No estimate of any liability with respect to this remaining
element of the complaint can be made at this time.
Blue Island Federal Enforcement. The Blue Island refinery is the subject of
federal investigations concerning potential violations of certain
environmental laws and regulations. In March 1997, the USEPA initiated a
multimedia investigation at the Blue Island refinery. The investigation
included an on-site visit, requests for information and meetings. In March
1997, the Company received a Grand Jury subpoena requesting certain documents
relating to wastewater discharges. The United States Attorney has interviewed
a number of current and former Blue Island refinery employees. The
investigation is on-going and the Company has cooperated fully in the matter.
In September 1998, the Company was served with a complaint in the matter,
United States v. Clark Refining & Marketing, Inc., alleging that the Company
has operated the refinery in violation of certain federal laws relating to air
pollution, water pollution and solid waste management. The Company filed an
answer denying the material allegations of the lawsuit. The parties are
negotiating the terms and conditions of a potential consent decree which would
resolve this matter. While substantial progress has been made on a conceptual
level, there is no assurance that a consent decree will be successfully
negotiated, nor can any estimate be made at this time of the Company's
potential liability, if any, as a result of these matters.
Blue Island State Enforcement. People ex rel. Ryan v. Clark Refining &
Marketing, Inc., is currently pending in the Circuit Court of Cook County,
Illinois alleging operation of the Blue Island refinery in violation of
environmental laws. The allegations originate from a fire that occurred in the
Isomax unit in March 1995, a release of hydrogen fluoride in May 1995 from a
processing unit, other releases into the air that occurred in the past three
years, and releases of wastewater and stormwater to the Cal Sag Channel. The
Company has filed an answer denying the material allegations in the lawsuit.
The Illinois Attorney General has also intervened in the federal USEPA case,
discussed above. The Company is seeking to settle this case and the USEPA case
as a consolidated matter. The parties are negotiating the terms and conditions
of a consent decree settling this matter. No estimate of any liability with
respect to this matter can be made at this time.
Sashabaw Road. In May 1993, the Company received correspondence from the
Michigan Department of Natural Resources ("MDNR") indicating that the MDNR
believes that the Company may be a potentially responsible party in connection
with groundwater contamination in the vicinity of one of its previously owned
retail stores on Sashabaw Road in Oakland County, Michigan. In July 1994, MDNR
commenced suit against the Company alleging that a retail location caused
groundwater contamination necessitating the installation of a new $600,000
drinking water system. Michigan is seeking reimbursement of this cost.
Although some contamination from the Company site may have occurred, the
Company contends that numerous other sources were responsible
15
<PAGE>
and that a total reimbursement demand from the Company is excessive. Mediation
resulted in a $200,000 finding against the Company, which the Company was
willing to pay in settlement, but the state refused any settlement less than
$500,000. The matter was tried in November 1999. The parties are awaiting a
decision.
Port Arthur Natural Resource Damage Assessment. On June 7, 1999, Clark R&M
and Chevron received a notice from a number of Federal and Texas agencies that
a study would be conducted to determine whether any natural resource damage
occurred as a result of the operation of the Port Arthur refinery. The Company
will cooperate with the government agencies in this investigation.
Port Arthur and Lima Refineries. The original refineries on the sites of
the Port Arthur and Lima refineries began operating in the late 1800s and
early 1900s prior to modern environmental laws and methods of operation. While
the Company believes as a result there is extensive contamination at these
sites, the Company is unable to estimate the cost of remediating such
contamination. Under the purchase agreement between the Company and Chevron
related to the Port Arthur refinery, Chevron will be obligated to perform the
required remediation of more than 97% of pre-closing contamination. The
Company estimates its obligation at approximately $8 million. Under the
purchase agreement between the Company and BP related to the Lima Refinery, BP
indemnified the Company for all environmental and other liabilities and
obligations arising from the ownership and operation of the Lima refinery
prior to closing, subject to the terms and limitations in the purchase
agreement. As a result of these acquisitions, the Company may become jointly
and severally liable for the costs of investigation and remediation at these
sites. In the event that Chevron or BP is unable (as a result of bankruptcy or
otherwise) or unwilling to perform the required remediation at these sites,
the Company may be required to do so. The cost of any such remediation could
be substantial and could be beyond the Company's financial ability. In June
1997, the Company, Chevron and the State of Texas entered into an agreed order
that substantially confirmed the relative obligations of the Company and
Chevron.
As of December 31, 1999, the Company had accrued a total of $36.4 million
for legal and environmental-related obligations that may result from the
matters noted above, other legal and environmental matters and obligations
associated with certain retail sites. While it is not possible at this time to
estimate the ultimate amount of liability with respect to the legal
proceedings described above, the Company is of the opinion that the aggregate
amount of any such liability, in excess of amounts previously accrued, will
not have a material adverse effect on its financial position. However, an
adverse outcome of any one or more of these matters could have a material
effect on quarterly or annual operating results or cash flows when resolved in
a future period.
In addition to the specific matters discussed above, the Company has also
been named in various other suits and claims. While it is not possible to
estimate with certainty the ultimate legal and financial liability with
respect to these other legal proceedings, the Company believes the outcome of
these other suits and claims will not have a material adverse effect on the
Company's financial position, operating results or cash flow.
Item 4. Submission of Matters to a Vote of Security-Holders
Inapplicable
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
Inapplicable
16
<PAGE>
Item 6. Selected Financial Data
The selected consolidated financial data set forth below for the Company as
of December 31, 1998 and 1999 and for each of the three years in the period
ended December 31, 1999 are derived from the audited financial statements
included elsewhere herein. The selected financial data set forth below for the
Company as of December 31, 1995, 1996 and 1997 and for each of the two years
in the period ended December 31, 1996 are derived from audited financial
statements not included herein. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes
included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
(in millions, except as noted)
<S> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Net sales and operating
revenues.............. $ 4,070.5 $ 4,656.9 $ 3,880.0 $ 3,580.5 $ 4,520.3
Cost of sales.......... (3,787.3) (4,318.1) (3,434.6) (3,115.1) (4,102.0)
Operating expenses..... (251.8) (291.3) (293.9) (341.6) (402.0)
General and
administrative
expenses.............. (34.4) (37.8) (43.0) (50.0) (48.3)
Depreciation and
amortization (a)...... (32.4) (35.7) (46.7) (54.4) (63.0)
Inventory recovery of
(write-down) to market
value................. -- -- (19.2) (86.6) 105.8
Recapitalization, asset
writeoffs and other
charges............... -- -- (40.0) -- --
Gain on sale of
pipeline interests.... -- -- -- 69.3 --
--------- --------- --------- --------- ---------
Operating income
(loss)................ (35.4) (26.0) 2.6 2.1 10.8
Interest and financing
costs, net (b)........ (39.9) (38.7) (39.8) (51.0) (61.5)
--------- --------- --------- --------- ---------
Loss from continuing
operations before
taxes and
extraordinary items... (75.3) (64.7) (37.2) (48.9) (50.7)
Income tax (provision)
benefit............... 28.6 18.6 (10.4) 12.9 16.2
--------- --------- --------- --------- ---------
Loss from continuing
operations before
extraordinary items... (46.7) (46.1) (47.6) (36.0) (34.5)
Discontinued
operations, net of
taxes (c)............. 21.2 7.6 0.1 15.1 32.3
Extraordinary items.... -- -- (10.7) -- --
--------- --------- --------- --------- ---------
Net loss............... $ (25.5) $ (38.5) $ (58.2) $ (20.9) $ (2.2)
========= ========= ========= ========= =========
Balance Sheet Data:
Cash, cash equivalents
and short-term
investments........... $ 105.0 $ 332.7 $ 243.0 $ 152.0 $ 286.3
Total assets........... 1,097.6 1,339.0 1,180.4 1,447.0 1,513.8
Long-term debt......... 419.8 417.0 586.8 805.2 794.9
Stockholder's equity... 304.1 534.9 260.9 225.0 183.3
Selected Financial Data:
Cash flows from
operating activities.. $ (85.6) $ 16.9 $ 94.9 $ (44.7) $ 76.3
Cash flows from
investing activities.. (134.1) 212.0 (123.6) (229.9) 110.9
Cash flows from
financing activities.. 174.7 30.0 (61.0) 194.0 (49.8)
Expenditures for
turnaround............ 6.5 13.9 47.4 28.3 77.9
Expenditures for
property, plant and
equipment (d)......... 15.7 20.1 26.4 101.3 57.6
Refinery acquisition
expenditures.......... 71.8 -- -- 175.0 --
Operating Data:
Port Arthur Refinery
(acquired February 27,
1995)
Production (000 bbls
per day).............. 207.7 210.8 213.5 223.9 218.2
Gross margin (per
barrel of production). $ 2.28 $ 2.78 $ 3.84 $ 3.48 $ 2.06
Operating expenses..... 121.6 164.7 170.7 172.7 168.1
Midwest & Other
Refining
Production (000 bbls
per day).............. 136.5 134.2 135.8 181.1 267.1
Gross margin (per
barrel of production). $ 2.51 $ 2.56 $ 3.79 $ 2.95 $ 1.84
Operating expenses..... 130.2 126.6 123.2 168.8 233.9
</TABLE>
- --------
(a) Amortization includes amortization of turnaround costs.
(b) Interest and financing costs, net, included amortization of debt issuance
costs of $6.6 million, $2.2 million, $7.0 million, $6.5 and $5.2 million
for the years ended December 31, 1999, 1998, 1997, 1996 and 1995,
respectively. Interest and financing costs, net, also included interest on
all indebtedness, net of capitalized interest and interest income.
(c) Discontinued operations is net of an income tax benefit of $2.7 million in
1999 (provision in 1998--$9.2 million, 1997--$0.1 million, 1996--$4.7
million, 1995--$12.9 million)
(d) Expenditures for property, plant and equipment in 1999 were net of sale
proceeds of $157.1 million from Port Arthur Coker Company L.P. for the
amount the Company had spent on the assets sold, which approximates fair
value.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Results of Operations
The following tables provide supplementary data in a format that is not
intended to represent an income statement presented in accordance with
generally accepted accounting principles. Certain reclassifications have also
been made to prior periods to conform to current period presentation. The
Company considers certain items in each of the periods discussed to be special
items. These items are discussed separately.
1999 compared with 1998 and 1997:
Financial Results:
<TABLE>
<CAPTION>
Year Ended December
31,
------------------------
1997 1998 1999
------- ------ -------
(in millions, except
as noted)
<S> <C> <C> <C>
Operating Income:
Port Arthur Refinery
Crude oil throughput (000 barrels per day)............ 206.6 219.3 200.0
Production (000 barrels per day)...................... 213.5 223.9 218.2
Gross margin (per barrel of production)............... $ 3.84 $ 3.48 $ 2.06
Gulf Coast 3/2/1 crack spread (per barrel)............ $ 3.24 $ 2.39 $ 1.71
Operating expenses.................................... (170.7) (172.7) (168.1)
Net margin.......................................... $ 128.6 $112.1 $ (4.4)
Midwest Refineries and Other
Crude oil throughput (000 barrels per day)............ 128.5 181.6 251.7
Production (000 barrels per day)...................... 135.8 181.1 267.1
Gross margin (per barrel of production)............... $ 3.79 $ 2.95 $ 1.84
Chicago 3/2/1 crack spread (per barrel)............... $ 4.04 $ 3.33 $ 2.83
Operating expenses.................................... (123.2) (168.8) (233.9)
Net margin.......................................... $ 64.9 $ 26.4 $ (54.1)
General and administrative expenses................... (43.0) (50.0) (48.3)
------- ------ -------
Operating Contribution.............................. $ 150.5 $ 88.5 $(106.8)
Inventory timing adjustments gain (loss)(a)........... (42.0) (14.7) 20.2
Inventory (write-down) recovery to market............. (19.2) (86.6) 105.8
Gain from LIFO inventory reduction.................... -- -- 54.6
Recapitalization, asset write-offs and other costs.... (40.0) -- --
Gain on sale of minority pipeline interests........... -- 69.3 --
Depreciation and amortization......................... (46.7) (54.4) (63.0)
------- ------ -------
Operating income.................................... $ 2.6 $ 2.1 $ 10.8
======= ====== =======
</TABLE>
- --------
(a) Includes adjustments to inventory costs caused by timing differences
between when and how crude oil is actually purchased and refined products
are actually sold, and a daily "market in, market out" operations
measurement methodology.
Net sales and operating revenues and cost of sales for the Company were
higher in 1999 than 1997 or 1998 principally because of higher hydrocarbon
prices and production from the Lima refinery that was acquired in August 1998.
The Company reported net losses of $2.2 million in 1999, $20.9 million in 1998
and $58.2 million in 1997. Net earnings in each of the past three years were
impacted by items the Company considers special. Special items benefited
operating income by $180.6 million in 1999, reduced operating income by $32.0
million in 1998 and reduced operating income by $101.2 million in 1997. In
1997, net earnings were reduced by $10.7 million related to an extraordinary
item for early retirement of debt. See Note 9 "Long Term Debt" and
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Note 14 "Equity Recapitalization and Change in Control" to the Consolidated
Financial Statements. These special items consisted of the following:
Inventory Timing Adjustments. An inventory timing adjustment gain of $20.2
million in 1999, and loss of $14.7 million in 1998 and $42.0 million in 1997
were principally due to the timing impact of changes in petroleum prices in
each of the past three years on crude oil purchases and refined product sale
commitments. Petroleum prices fell in 1997 and 1998 as world energy markets
became oversupplied principally as a result of an increase in OPEC production
and reduced demand resulting from the Asian economic slowdown and reduced
heating oil demand. OPEC responded by reducing production in 1999, which
caused prices to increase. These gains and losses resulted from the fact that
feedstock acquisition costs are fixed on average two to three weeks prior to
the manufacture and sale of the finished products. The Company does not
currently hedge this price risk because of the cost of entering into
appropriate hedge-related derivatives and the long-term continuing nature of
such risk. The Company does hedge price risk when its total volume-related at-
risk position deviates from long-range targets.
Inventory (Write-down) Recovery to Market. Also as a result of lower
petroleum prices in 1997 and 1998, the Company was required to record non-cash
accounting charges of $19.2 million and $86.6 million, respectively, to
reflect the decline in the value of petroleum inventories below carrying
value. When petroleum prices increased in 1999, the Company fully recovered
these charges.
Gain from LIFO Inventory Reduction. The Company recorded a LIFO gain in
1999 of $54.6 million resulting from an 8.9 million barrel reduction in
inventory and higher current year liquidation values as compared to LIFO cost.
Recapitalization, asset write-offs and other costs. Recapitalization, asset
write-offs and other costs totaled a charge of $40.0 million in 1997. This
item included a non-cash charge of $20.3 million principally to write down the
value of an idled refining capital project that was being dismantled for more
productive use. A non-cash charge of $9.0 million was also recorded in 1997
due to a change in strategic direction principally for certain legal,
environmental and other accruals related to existing actions. In addition, the
Company incurred costs of $10.7 million in connection with affiliates of
Blackstone acquiring an indirect controlling interest in the Company.
Gain on sale of minority pipeline interests. In 1997, the Company
determined that its minority interests in the Southcap and Chicap crude oil
pipelines, and the Wolverine and West Shore product pipelines, were not
strategic since the Company's shipping rights are assured due to the
pipelines' operation as common carrier pipelines and the Company's historical
throughput on these pipelines. In 1998, the Company sold its interests in
these pipelines for net proceeds of $76.4 million, which resulted in a before
and after-tax book gain of approximately $69.3 million. These pipelines
contributed earnings of approximately $5.3 million in 1998 and $8.2 million in
1997 and were recorded as a component of refinery gross margin for the Midwest
refineries.
The Company recorded in 1999 an Operating Contribution loss or loss before
interest, taxes, depreciation, amortization, inventory-related items, gain on
the sale of minority pipeline interests and recapitalization, asset write-offs
and other costs of $106.8 million. This compared to a contribution of $88.5
million in 1998 and $150.5 million in 1997. Operating Contribution decreased
in 1999 and 1998 from previous years principally due to significantly lower
margins for refined products resulting from higher U.S. refined product
inventory levels which depressed prices. These higher inventory levels
resulted from warmer winter weather that reduced heating oil demand, high
industry refinery utilization rates and the impact on world demand from the
Asian economic slowdown that began in late 1997. Oversupply of crude oil led
to low crude oil prices in 1998 and early 1999. In 1999, margins were further
reduced due to higher feedstock costs caused by the reduction in OPEC
production quotas that had the effect of narrowing discounts for heavy and
light sour crude oil. OPEC producers met the barrel denominated quotas by
eliminating the lowest revenue barrels in their production stream. In
addition, Canadian production that was reduced due to the low crude oil prices
in 1998 and early 1999 was slow to return to market.
The decrease in margins from 1997 to 1999 was reflected in the lower Gulf
Coast and Chicago industry refining margin indicators or 3/2/1 crack spreads
and narrower market discounts for lower quality crude oil. The
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<PAGE>
3/2/1 crack spread is an indicator of refining margins based on quoted market
prices that is calculated by subtracting the price for three barrels of WTI
crude oil, a high quality, light sweet crude oil, from the price of two
barrels of regular unleaded gasoline and one barrel of high sulfur diesel
fuel, and dividing the total by three. In addition to the components of
refining margins reflected in the crack spread, benchmark indicators of the
discount for lower quality alternative types of crude oil that may be
processed in the Company's refineries narrowed from 1997 to 1999. Crude oil
quality differential market indicators for light sour crude oil, or West Texas
Sour, decreased from $1.71 per barrel in 1997 and $1.56 per barrel in 1998 to
$1.30 per barrel in 1999. Market indicators for heavy sour crude oil
discounts, or Mexican Maya, decreased from $5.63 per barrel in 1997 and $5.68
in 1998 to $4.83 per barrel in 1999. Discounts for heavy sour Canadian crude
oil also narrowed as a result of low absolute crude oil prices in 1998 and
early 1999, which caused this lower-cost crude oil to become unavailable.
Major scheduled maintenance turnarounds at the Lima refinery in 1999, Blue
Island refinery in 1998 and Port Arthur and Hartford refineries in 1997
resulted in an opportunity cost from lost production of $23.0 million in 1999,
$17.1 million in 1998 and $19.3 million in 1997. Port Arthur refinery crude
oil throughput rates were reduced below capacity in 1999 due to poor crude
unit distillation margins that favored reduced rates and purchasing partially
refined feedstocks to maintain production from other refinery units.
Production increased in 1999 and 1998 versus the prior years in the Midwest
refineries due to the acquisition in August 1998 of the Lima refinery, which
averaged 118,100 barrels per day in 1999 and 130,300 barrels per day during
the nearly five months in 1998 it was owned by the Company. Production from
Midwest refineries was below capacity in 1999 due to the Lima maintenance
turnaround, leaks in third party pipelines that reduced supplies of crude oil
to the refineries and unplanned downtime. In addition to the benefit of the
Lima refinery, production increased in 1998 due to record rates being achieved
on most major units at the Port Arthur and Hartford refineries, including the
crude, FCC and coker units.
Operating expenses for the Midwest refineries increased from 1997 to 1998
primarily due to the acquisition of the Lima refinery. Operating expenses for
the Lima refinery were $37.8 million in 1998 and $98.2 million in 1999.
Operating expenses for the Port Arthur refinery were relatively flat from 1997
to 1999. General and administrative expenses decreased in 1999 principally due
to lower incentive compensation payments under the Company"s annual incentive
plan. These expenses were higher in 1998 relative to 1997 principally due to
the addition of the Lima refinery, increased employee placement costs and an
increase in information services costs related to year 2000 remediation and
upgrades and increased consulting services.
Other Financial Matters
Depreciation and amortization expenses increased in each of the past three
years principally because of the full year impact of the Port Arthur
maintenance turnaround performed in 1997, the acquisition of the Lima refinery
in 1998, the amortization of the initial Lima refinery maintenance turnarounds
performed in 1999 and higher capital expenditures.
Interest expense and finance income, net increased in 1999 as compared to
1998 due to the full year impact of the issuance in August 1998 of $110
million 8 5/8% Senior Notes due 2008, and the expansion of a $115 million
floating rate term loan due 2004 to finance the Lima refinery acquisition.
Interest expense and finance income, net were lower in 1998 than 1997 due to
reduced borrowing rates and reduced finance cost amortization resulting from
the Company's financing activities in late 1997. In late 1997, the Company
redeemed its 10 1/2% Senior Notes, due 2001 ("10 1/2% Senior Notes"), issued
$100 million 8 3/8% Senior Notes due 2007 ("8 3/8% Senior Notes"), issued $175
million 8 7/8% Senior Subordinated Notes due 2007 ("8 7/8% Senior Subordinated
Notes"), and entered into a $125 million floating rate term loan due 2004
("Floating Rate Loan"). In late 1997, the Company also entered into an amended
and restated working capital facility that was subsequently amended and
restated in 1999. See Note 8 "Working Capital Facility" and Note 14 "Equity
Recapitalization and Change in Control" to the Consolidated Financial
Statements.
The income tax benefit on the loss from continuing operations of $16.2
million for 1999 reflected the effect of intraperiod tax allocations resulting
from the utilization of current year operating losses to offset the net gain
20
<PAGE>
on the operations and sale of the discontinued retail division, offset by the
write-down of a net deferred tax asset. The income tax benefit on the loss
from continuing operations of $12.9 million for 1998 reflected the effect of
intraperiod tax allocations resulting from the utilization of current year
operating losses to offset the earnings from operations of the discontinued
retail division. The income tax provision on the loss from continuing
operations of $10.4 million for 1997 reflected the recording of a valuation
allowance against a net deferred tax asset. See Note 13 "Income Taxes" to the
Consolidated Financial Statements.
Sale of Retail Division
In July 1999, Clark R&M sold its retail marketing operation in a
recapitalization transaction to a company controlled by Apollo for
approximately $230 million. The retail marketing operation sold included all
Company and independently operated Clark-branded stores and the Clark trade
name. After all transaction costs, the sale generated cash proceeds of
approximately $215 million. See Exhibit 10.0, Asset Contribution and
Recapitalization Agreement filed with the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1999. In general, the buyer assumed
unknown environmental liabilities at the retail stores they acquired up to
$50,000 per site, as well as responsibility for any post-closing
contamination. Subject to certain risk sharing arrangements, Clark R&M
retained responsibility for all pre-existing known contamination. A subsidiary
of Clark Holdings acquired a six- percent equity interest in the retail
marketing operation. As part of the sale agreement, Clark R&M also entered
into a market-based supply agreement for refined products that expires in July
2001. The buyer may cancel the supply agreement with 90 days notice. In 1999,
the Company realized $355.9 million in sales under this contract. The retail
marketing operation was sold in order to allow the Company to focus its human
and financial resources on the continued improvement and expansion of its
refining business, which it believes will generate higher future returns.
The retail marketing operations were classified as a discontinued operation
and the results of operations were excluded from continuing operations in the
consolidated statements of operations. A pre-tax gain on the sale of $59.9
million ($36.6 million, net of income taxes) was recognized in the third
quarter of 1999.
Year 2000 Disclosure
As was widely reported, many computer systems processed dates based on two
digits for the year of a transaction and many feared that computers would be
unable to process dates in the year 2000 and beyond. There were many risks
associated with the year 2000 compliance issue, including, but not limited to,
the possible failure of the Company's systems and hardware with embedded
systems or those of the Company's business partners. The Company began
significant efforts to address its exposures related to the year 2000 issue in
1997. A project team was put in place to assess, remediate or replace, test
and implement computer systems and applications so that such systems and
related processes would continue to operate and properly process information
after December 31, 1999. The Company expended $5.9 million through December
31, 1999 on these efforts. Such costs were expensed as incurred and funded
from operations. The Company also developed contingency plans for these
systems as well as the business processes and operations that they supported.
In addition, the Company communicated with, and evaluated the systems of its
customers, suppliers, financial institutions and others with which it does
business to identify any year 2000 issues. The Company has not experienced any
significant disruptions in its business due to year 2000 problems to date and
is committed to making certain that its systems and processes continue to
function properly in the future.
Accounting Standard Not Yet Adopted
In June 1998, the FASB adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement, as amended, becomes effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Company is currently evaluating this
new standard, the impact it may have on the Company's accounting and
reporting, and planning for when to adopt the standard.
21
<PAGE>
Outlook
Since most of the Company's products are commodities, supply and demand for
crude oil and refined products have a significant impact on the Company's
results. Demand for transportation fuel products has grown by an average of 1-
2% per year since 1992, primarily as a result of increased miles driven,
little improvement in the fuel efficiency of the U.S. automobile fleet and the
strength of the U.S. economy. Warm winters for the past four years, the Asian
economic slowdown that began in late 1997 and high industry utilization rates
bloated U.S. and world-wide refined product inventories from 1997 to 1999
resulting in downward pressure on margins. However, in late 1999 and early
2000 U.S. refinery utilization rates decreased and lowered U.S. inventory
levels for the primary refinery products, gasoline and diesel fuel, to below
10-year averages. Historically, lower U.S. inventory levels have resulted in
higher margins. The Company expects that there will continue to be volatility
in refining margins and the Company's earnings because of the seasonal nature
of refined product demand and the commodity nature of the Company's refined
products. This is especially true in 2000, given the uncertainty over crude
oil production restrictions by OPEC and non-OPEC countries and the impact this
may have on feedstock costs.
Liquidity and Capital Resources
Net cash provided by operating activities, excluding working capital
changes, or Operating Cash Flow, for the year ended December 31, 1999 was
negative $43.5 million, which compared to cash flow of $33.1 million in 1998
and $46.6 million in 1997. Working capital as of December 31, 1999 was $309.3
million, a 1.66 to 1 current ratio, versus $361.8 million, a 1.99 to 1 current
ratio, at December 31, 1998. Operating Cash Flow decreased in 1999 and 1998 as
compared to 1997 and working capital decreased in 1999 as compared to 1998
principally due to lower refining margins resulting from weak refining market
conditions.
As part of its overall inventory management and crude acquisition
strategies, the Company routinely buys and sells, in varying degrees, crude
oil in the spot market. Such ongoing activities carry various payment terms
and require the Company to maintain adequate liquidity and working capital
facilities. The Company's short-term working capital requirements fluctuate
with the pricing and sourcing of crude oil. The credit agreement is used for
the issuance of letters of credit primarily for the purchase of crude oil and
other feedstocks and refined products. The Company's liquidity benefited in
1999 from the sale of its retail division, a partially completed coker project
at its Port Arthur refinery and refined product terminal assets. In addition,
during 1999 the Company sold crude oil linefill in the pipeline system
supplying the Lima refinery. The Company has an agreement in place that
requires it to repurchase approximately 2.8 million barrels of crude oil in
this pipeline system in September 2000 at market prices, unless extended by
mutual consent.
In November 1999, the Company entered into a credit agreement that provides
for borrowings and the issuance of letters of credit expiring on June 30,
2001. The credit agreement allows the Company to borrow the lesser of $620
million, or the amount of a borrowing base calculated with respect to the
Company's cash and cash equivalents, eligible investments, eligible
receivables and eligible petroleum inventories. Direct cash borrowings under
the facility are limited to $50 million. The facility is secured by liens on
substantially all of the Company's cash and cash equivalents, receivables,
crude oil, refined product inventories and other inventories and trademarks
and other intellectual property. The amount available under the facility at
December 31, 1999 was $620 million and approximately $435 million of the
facility was utilized for letters of credit. As of December 31, 1999, there
were no direct cash borrowings under the credit agreement and the Company was
in compliance with all covenants.
The credit agreement contains covenants and conditions that, among other
things, limit dividends, indebtedness, liens, investments and contingent
obligations. It also requires the Company to maintain its property and
insurance, to pay all taxes and comply with all laws, and to provide periodic
information and conduct periodic audits on behalf of the lenders. The Company
is also required to comply with certain financial covenants. The financial
covenants are (i) maintenance of working capital of at least $150 million;
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<PAGE>
(ii) maintenance of tangible net worth (as defined) of at least $150 million;
and (iii) maintenance of minimum levels of balance sheet cash (as defined) of
$50 million at all times and $75 million at the end of any month. The
covenants also provide for a cumulative cash flow test (as defined) from
October 1, 1999 which must not be less than zero with a beginning balance of
$200 million. The credit agreement also limits the amount of future additional
indebtedness that may be incurred by the Company to $75 million, subject to
certain limitations and exceptions.
Cash flows provided by investing activities in 1999 was $110.9 million with
cash flow uses of $229.9 million in 1998 and $123.6 million in 1997. Net cash
flow was provided by investing activities in 1999 due to the sale of the
retail division of $214.8 million, the sale of the terminals of $33.7 million
and the sale of the Port Arthur heavy oil upgrade project to Port Arthur Coker
Company L.P. for $157.1 million. Cash used in investing activity was greater
in 1998 than 1997 principally due to the Lima Acquisition, which was partially
offset by proceeds from the sale of the minority pipeline interests.
Capital expenditures for property, plant and equipment totaled $214.7
million in 1999 (1998--$101.3 million; 1997--$26.4 million). Expenditures for
refinery maintenance turnarounds totaled $77.9 million in 1999 (1998--$28.3
million; 1997--$47.4 million) with the Lima refinery undergoing its first
major turnaround in 1999. Expenditures for property, plant and equipment in
1999, 1998 and 1997 included $164.1 million, $42.6 million and $1.1 million,
respectively related to the Port Arthur heavy oil upgrade project, of which
$157.1 million was sold to Port Arthur Coker Company in August 1999. The
remaining amount related to the Company's portion of the project. The assets
were sold at cost, which approximated fair market value. Expenditures for
property, plant and equipment in 1999 included $27.7 million related to
mandatory capital expenditures (1998--$33.7 million; 1997--$30.9 million).
In August 1998, the Company acquired BP's 170,000 barrel per day Lima, Ohio
refinery, related terminal facilities, and non-hydrocarbon inventories for a
purchase price of approximately $175.0 million plus related acquisition costs
of $11.3 million. Hydrocarbon inventories were purchased for $34.9 million.
The Company assumed liabilities mainly related to employee benefits of $7.0
million. BP retained permanent responsibility for all known pre-existing
environmental liabilities and responsibility for a minimum of twelve years for
pre-existing but unknown environmental liabilities. The total cost of the
acquisition was accounted for using the purchase method of accounting with
$175.0 million allocated to the refinery long-term assets and $53.2 million
allocated to current assets for hydrocarbon and non-hydrocarbon inventories
and catalysts. From 1991 to 1997 the Company believes BP invested an aggregate
of approximately $212 million in the Lima refinery. Based on the Company's due
diligence, it expects mandatory capital expenditures for the Lima refinery to
average approximately $20 million per year for the period from 2000 to 2002
and maintenance turnaround expenditures to total approximately $60 million
over five years. The Company expects cash flows from the Lima refinery to be
more than adequate to cover incremental financing and mandatory capital and
turnaround costs.
The Company classifies its capital expenditures into two categories,
mandatory and discretionary. Mandatory capital expenditures are required to
maintain safe and reliable operations, or to comply with regulations
pertaining to ground, water and air contamination and occupational, safety and
health issues. The Company estimates that total mandatory capital and
turnaround expenditures will average approximately $90 million per year over
the next three years. Costs to comply with future regulations cannot be
estimated.
In March 1998, the Company entered into a long-term crude oil supply
agreement with PMI Comercio Internacional, S.A. de C.V. ("PMI"), an affiliate
of Petroleos Mexicanos, the Mexican state oil company. As a result of this
contract, the Company began developing a project to upgrade the Port Arthur
refinery to process primarily lower-cost, heavy sour crude oil of the type to
be purchased from PMI. The heavy oil upgrade project includes the construction
of new coking, hydrocracking and sulfur removal capability, and the expansion
of the existing crude unit to approximately 250,000 barrels per day. In August
1999, the Company sold for $157.1 million the construction work-in-progress on
the new processing units to Port Arthur Coker Company L.P., an affiliate that
is not controlled by the Company or its subsidiaries. The Company also sold
the oil supply
23
<PAGE>
agreement with PMI and environmental permits which had already been obtained
by the Company for $2.2 million to Port Arthur Coker Company L.P. The assets
were sold at cost, which approximated fair market value. As part of the
project the Company is undertaking the upgrading of existing units at the Port
Arthur refinery, including the expansion of the crude unit. The Company's
portion of the project is expected to cost approximately $120 million, of
which $50.7 million was expended through December 31, 1999. As of December 31,
1999, the Company had a letter of credit to the benefit of Foster Wheeler USA
for $86.9 million outstanding to collateralize its obligations related to the
Port Arthur heavy oil upgrade project.
The heavy oil upgrade project is expected to be mechanically complete by
November 2000 with start-up of the project in the first quarter of 2001. The
Company entered into agreements with Port Arthur Coker Company L.P. pursuant
to which the Company will provide certain operating, maintenance and other
services and purchase the output from the new coking and hydrocracking
equipment for further processing into finished products. The Company will
receive compensation under these agreements at fair market value that is
expected to in the aggregate favorable to the Company.
The Company has a philosophy to link routine capital expenditures to cash
generated from operations. The Company has a total capital and refinery
maintenance turnaround expenditure budget, excluding the Company's portion of
the Port Arthur refinery upgrade project, of approximately $93 million in 2000
with another approximately $97 million budgeted for the Company's portion of
the Port Arthur heavy oil upgrade project. Total capital expenditures may be
less than budget if cash flow is lower than expected, and higher than budget
if cash flow is better than expected.
Cash flow used in financing activities was $49.8 million in 1999 and $61.0
million in 1997 as compared to $194.0 million provided by financing activities
in 1998. Cash flow used in financing activities in 1999 was principally
related to a return of capital of $39.5 million to Clark USA. In 1998, the
Company funded the acquisition of the Lima refinery and related costs with
cash on hand and the proceeds of a private placement to institutional
investors of $110 million 8 5/8% Senior Notes due 2008 and a $115 million
floating rate term loan due 2004. In 1997, the Company received net proceeds
of $398 million from the issuance of 8 3/8% Senior Notes, 8 7/8% Senior
Subordinated Notes and a floating rate term loan. Also in 1997, the Company
returned capital of $215 million to Clark USA and redeemed all $225 million of
its 10 1/2% Senior Notes outstanding at a price of $1,032.96 for each
$1,000.00 principal amount of the notes.
Clark USA relies on Clark R&M for substantially all of its liquidity in
order to meet its interest and other costs. Clark USA is required to make
interest payments on its 10 7/8% Notes due 2005 of $9.5 million on June 1 and
December 1 of each year and expects its other costs to total less than $1
million per year. As of December 31, 1999, cash, cash equivalents and short-
term investments owned by Clark USA without restriction amounted to $21.3
million. However, Clark R&M's ability to return capital to Clark USA from
operating activities is limited by covenants governing certain of Clark R&M's
outstanding debt securities. As of December 31, 1999, Clark R&M was unable
under the terms of such debt securities to dividend or otherwise distribute
any additional funds to Clark USA. Clark USA believes it will have adequate
liquidity to meet its working capital needs for the next year, but, unless
such Clark R&M debt securities are amended or repaid, will require additional
liquidity to make its June 1, 2001 interest payment and to fund its needs
beyond June 2001. Such debt securities are currently redeemable at par by
Clark R&M.
Funds generated from operating activities together with existing cash, cash
equivalents and short-term investments and proceeds from asset sales are
expected to be adequate to fund existing requirements for working capital and
capital expenditure programs for the next year. Due to the commodity nature of
its products, the Company's operating results are subject to rapid and wide
fluctuations. While the Company believes that its maintenance of large cash,
cash equivalents and short-term investment balances and its operating
philosophies will be sufficient to provide the Company with adequate liquidity
through the next year, there can be no assurance that market conditions will
not be worse than anticipated. Future working capital, discretionary capital
expenditures, environmentally mandated spending and acquisitions may require
additional debt or equity capital.
24
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The market risk inherent in the Company's market risk sensitive instruments
and positions is the potential loss from adverse changes in commodity prices
and interest rates. None of the Company's market risk sensitive instruments
are held for trading.
Commodity Risk
The Company's earnings, cash flow and liquidity are significantly affected
by a variety of factors beyond its control, including the supply of, and
demand for, commodities such as crude oil, which is the Company's single
greatest cost component, as well as gasoline and other refined products, which
are the Company's only products. The demand for these refined products depends
on, among other factors, changes in domestic and foreign economies, weather
conditions, domestic and foreign political affairs, production levels, the
availability of imports, the marketing of competitive fuels and the extent of
government regulation. As a result, crude oil and refined product prices
fluctuate significantly, which directly impact the Company's net sales and
operating revenues and costs of sales.
The movement in petroleum prices does not necessarily have a direct long-
term relationship to net earnings. The effect of changes in crude oil prices
on the Company's operating results is determined more by the rate at which the
prices of refined products adjust to reflect such changes. The Company is
required to fix the price of its crude oil purchases approximately two to
three weeks prior to when the crude oil can be processed and sold. As a
result, the Company is exposed to crude oil price movements during such
period. In addition, in 1997 and 1998 the market value of the Company's
petroleum inventory was below original cost, which resulted in a writedown of
inventory to fair market value. The Company expects earnings will continue to
be impacted by these writedowns, or recovery of writedowns, to market value.
Earnings Sensitivity
The following table illustrates the estimated pre-tax earnings impact based
on average historical operating rates, fixed price purchase commitments and
inventory levels resulting from potential changes in several key refining
market margin indicators and crude oil prices described below. This analysis
may differ from actual results because the Company produces many other
products and uses many other feedstocks that are not reflected in these
indicators.
. Sweet crude oil cracking margins--the spread between gasoline and diesel
fuel prices and input costs (e.g., a benchmark light sweet crude oil)
. Sweet/sour differentials--the spread between a benchmark light sour crude
oil and a benchmark light sweet crude oil
. Heavy/light differentials--the spread between a benchmark light sweet
crude oil and a benchmark heavy sour crude oil
. Fixed price purchase commitments--fixed price purchase commitments for
crude oil required for the two to three weeks prior to when products are
refined and sold.
. Lower of cost or market adjustment--physical inventory subject to lower
of cost or market adjustments while carrying value is below original cost
<TABLE>
<CAPTION>
Assumed Annual Pre-tax Earnings
Change Barrels Impact
------------ ------------- ----------------
(per barrel) (in millions) (in millions)
<S> <C> <C> <C>
Refining margins
Sweet crude oil cracking
margin.................... $0.10 180 $18
Sweet/sour differentials... 0.10 70 7
Heavy/light differentials.. 0.10 20 2
Crude oil prices
Fixed price purchase
commitments............... 2.00 2 4
Lower of cost or market
adjustment................ 2.00 12 24
</TABLE>
25
<PAGE>
The Company utilizes limited risk management tools to mitigate risk
associated with fluctuations in petroleum prices on its normal operating
petroleum inventories. The Company believes this policy is appropriate since
inventories are required to operate the business and are expected to be owned
for an extended period of time. The Company believes the cost of the extensive
use of such tools to manage short-term fluctuations outweigh the benefits.
The Company occasionally uses several strategies to minimize the impact on
profitability of volatility in feedstock costs and refined product prices.
These strategies generally involve the purchase and sale of exchange-traded,
energy-related futures and options with a duration of six months or less. In
addition, the Company to a lesser extent uses energy swap agreements similar
to those traded on the exchanges, such as crack spreads and crude oil options,
to better match the specific price movements in the Company's markets as
opposed to the delivery point of the exchange-traded contract. These
strategies are designed to minimize, on a short-term basis, the Company's
exposure to the risk of fluctuations in crude oil prices and refined product
margins. The number of barrels of crude oil and refined products covered by
such contracts varies from time to time. Such purchases and sales are closely
managed and subject to internally established risk standards. The results of
these hedging activities affect refining cost of sales and inventory costs.
The Company does not engage in speculative futures or derivative transactions.
A sensitivity analysis was prepared to estimate the Company's exposure to
market risk associated with derivative commodity positions. This analysis may
differ from actual results. The fair value of each derivative commodity
position was based on quoted futures prices. As of December 31, 1999, a 10%
change in quoted futures prices would result in a $1.5 million change to the
fair market value of the derivative commodity position and correspondingly the
same change in operating income.
Interest Rate Risk
The Company's principal interest rate risk is associated with its long-term
debt. The Company manages this rate risk by maintaining a high percentage of
its long-term debt with fixed rates. In addition, the Company has no material
principal payments due prior to 2003, but as of December 31, 1999 had the
flexibility to call $411.7 million of its long term debt, including all of its
floating rate bank term loan. A 1% change in the interest rate on long-term
debt would result in a $9.7 million change in operating income. This
determination is based on 1% of the Company's long-term debt outstanding at
December 31, 1999. The Company is subject to interest rate risk on its
floating rate bank term loan and any direct borrowings under Clark R&M's
credit facility. As of December 31, 1999, $240.0 million of the Company's
long-term debt was based on floating interest rates. There were no direct cash
borrowings under Clark R&M's credit facility.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference
to Part IV Item 14(a) 1 and 2, Financial Statements and Financial Statement
Schedules.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
26
<PAGE>
Item 10. Directors and Executive Officers of the Registrant
The directors, executive officers, Controller, Treasurer and Secretary of
the Company and their respective ages and positions are set forth in the table
below.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
William C. Rusnack 55 President, Chief Executive Officer and Chief Operating
Officer; Director
Maura J. Clark 41 Executive Vice President--Corporate Development and
Chief Financial Officer
Jeffry N. Quinn 41 Executive Vice President--Legal, Human Resources, and
Public Affairs and General Counsel
Dennis R. Eichholz 46 Vice President, Controller and Treasurer
Richard A. Keffer 45 Secretary
Marshall A. Cohen 65 Director; Chairman of the Board
David I. Foley 32 Director
Robert L. Friedman 57 Director
Richard C. Lappin 55 Director
</TABLE>
The board of directors of the Company currently consists of five directors
who serve until the next annual meeting of stockholders or until a successor
is duly elected. With the exception of Mr. Cohen, directors do not receive any
compensation for their services as such. In 1999, for his services as a
director of the Company and Clark Holdings, Mr. Cohen received a total of
65,656 shares of common stock of Clark USA, that were subsequently converted
to shares of Clark Holdings, and options to purchase up to 50,505 shares of
common stock of Clark Holdings for services rendered to the Company and Clark
Holdings. Executive officers of the Company serve at the discretion of the
board of directors of the Company.
William C. Rusnack has served as President, Chief Operating Officer, Chief
Executive Officer and a director of the Company since April 1998. Mr. Rusnack
has served as President, Chief Executive Officer and a director of Clark USA
since April 1998. Mr. Rusnack has served as President, Chief Operating
Officer, Chief Executive Officer and a director of Clark Holdings since its
formation in April 1999. Mr. Rusnack previously served 31 years with Atlantic
Richfield Corporation ("ARCO") and was involved in all areas of its energy
business, including refining operations, retail marketing, products
transportation, exploration and production, and human resources. He most
recently served as President of ARCO Products Company from 1993 to 1997 and
was President of ARCO Transportation Company from 1990 to 1993. He has served
as a director of Flowserve (a NYSE-listed corporation) since 1993.
Maura J. Clark has served as Executive Vice President--Corporate
Development and Chief Financial Officer of the Company and Clark USA since
August 1995. Ms. Clark has served as Executive Vice President--Corporate
Development and Chief Financial Officer of Clark Holdings since its formation
in April 1999. Ms. Clark previously served as Vice President--Finance at North
American Life Assurance Company, a financial services company, from September
1993 through July 1995.
Jeffry N. Quinn has served as Executive Vice President--Legal, Human
Resources, and Public Affairs of the Company and Executive Vice-President of
Clark USA and Clark Holdings since March 1, 2000. Mr. Quinn previously served
as Senior Vice President, Law and Human Resources, Secretary & General Counsel
at Arch Coal, Inc., a NYSE-listed coal mining corporation, from 1995 to
February 2000.
Dennis R. Eichholz, who joined the Company in November 1988, has served as
Vice President--Controller of the Company and Controller and Treasurer of
Clark USA since February 1995. Mr. Eichholz has served as Vice President--
Treasurer of the Company since December 1991. Mr. Eichholz has served as
Controller and Treasurer of Clark Holdings since its formation in April 1999.
27
<PAGE>
Richard A. Keffer has served as Secretary of the Company, Clark USA, and
Clark Holdings since October 1999. Mr. Keffer has served as legal counsel for
the Company since January 1996. Mr. Keffer previously served as an independent
consultant from June 1995 to January 1996. Mr. Keffer previously served as
assistant general counsel with Pet Incorporated from May 1984 to May 1995.
Marshall A. Cohen has served as a director of the Company and Clark USA
since November 1997 and as Chairman since January 27, 1998. Mr. Cohen has also
served as a director of Clark Holdings since its formation in April 1999. Mr.
Cohen has served as Counsel at Cassels Brook & Blackwell since October 1996.
Mr. Cohen previously served as President and Chief Executive Officer of The
Molson Companies Limited from November 1988 to September 1996. Mr. Cohen also
serves as a member of the board of directors of American International Group,
Barrick Gold Corporation, GoldFarb Corporation, Golf Town, Haynes
International Inc., Lafarge, Republic Engineered Steels, Inc., SMK Speedy
International, and Toronto Dominion Bank.
David I. Foley has served as a director of the Company and Clark USA since
November 1997. Mr. Foley has also served as a director of Clark Holdings since
its formation in April 1999. Mr. Foley is a Principal at The Blackstone Group
L.P., which he joined in 1995. Prior to joining Blackstone, Mr. Foley was a
member of AEA Investors, Inc. and The Monitor Company. He currently serves on
the board of directors of Rose Hills Company.
Robert L. Friedman has served as a director of the Company, Clark USA, and
Clark Holdings since July 1999. Mr. Friedman has served as a Senior Managing
Director of The Blackstone Group L.P. since March 1999. Prior to joining
Blackstone, Mr. Friedman was a partner with Simpson Thacher & Bartlett, a New
York law firm, since 1974. He currently serves on the board of directors of
American Axle & Manufacturing Inc., Corp Group, and Republic Technologies
International Inc.
Richard C. Lappin, has served as a director of the Company, Clark USA, and
Clark Holdings since October 1999. Mr. Lappin has served as a Senior Managing
Director of The Blackstone Group L.P. since February 1999. Prior to joining
Blackstone, Mr. Lappin served as President of Farley Industries which included
West Point-Pepperell, Inc., Acme Boot Company, Inc., Tool and Engineering,
Inc., Magnus Metals, Inc. and Fruit of the Loom, Inc. from 1989 to 1998. He
currently serves on the board of directors of American Axle & Manufacturing
Inc., Collins & Aikman Corporation, Haynes International Inc., Imperial Home
Decor Group, Inc., and Republic Technologies International Inc.
Except as described above, there are no arrangements or understandings
between any director or executive officer and any other person pursuant to
which such person was elected or appointed as a director or executive officer.
There are no family relationships between any director or executive officer
and any other director or executive officer.
Item 11. Executive Compensation
The following table sets forth all cash compensation paid by the Company to
its Chief Executive Officer and its other executive officers whose total
annual compensation exceeded $100,000 for each of the years in the three-year
period ended December 31, 1999.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Name and Principal ---------------------- Other Annual Compensation All Other
Position Year Salary Bonus Compensation(a) Payouts (b) Compensation(c)
------------------ ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
William C. Rusnack...... 1999 $454,808 $370,000 $ 1,535 $ -- --
President and 1998 300,077 270,000 -- -- $ 5,746
Chief Executive Officer 1997 -- -- -- -- --
Bradley D. Aldrich (d).. 1999 317,500 175,000 17,500 -- 826,344
Executive Vice
President-- 1998 270,000 175,000 15,442 1,130,354 16,214
Refining 1997 252,611 219,600 -- -- 14,980
Maura J. Clark.......... 1999 300,769 180,000 -- -- 2,534
Executive Vice
President-- 1998 238,847 170,000 -- -- 13,793
Corporate Development
and 1997 220,998 153,300 -- -- --
Chief Financial Officer
Brandon K. Barnholt (e). 1999 123,600 -- -- -- 3,614,600
Executive Vice
President-- 1998 270,000 175,000 -- 845,878 19,391
Marketing 1997 253,003 154,600 -- -- 15,230
</TABLE>
28
<PAGE>
- --------
(a) Represents amounts paid for unused vacation and relocation expenses.
(b) Represents amounts received by Mr. Aldrich and Mr. Barnholt upon the
exercise of options to acquire TrizecHahn Subordinate Voting Shares
("TrizecHahn Shares") received as compensation from TrizecHahn for
services performed for the Company under the TrizecHahn Amended and
Restated 1987 Stock Option Plan (the "TrizecHahn Option Plan").
(c) Represents amount accrued for the account of such individuals under the
Clark Retirement Savings Plan (the "Savings Plan"), Supplemental Savings
Plan and, with respect to Mr. Aldrich and Mr. Barnholt, for 1999
represents separation benefits paid or accrued with respect to the
termination of their employment with the Company.
(d) Mr. Aldrich resigned from the Company effective January 31, 2000, and his
other compensation for 1999 included $825,000 of severance.
(e) Mr. Barnholt's employment was terminated July 7, 1999, due to the sale of
the retail division, and his other compensation for 1999 represented a
termination bonus.
Stock Option Grants
The following table sets forth information concerning grants of stock
options made during the year ended December 31, 1999, to each of the executive
officers.
<TABLE>
<CAPTION>
Potential
Realizable Value At
Assumed Annual
Rates of Stock
Individual Grants(1) Price Appreciation
----------------------------------- For Option Term(4)
Number of % of Total
Securities Options Granted
Underlying To Employees in
Name Options Granted (#) Fiscal Year 5%($) 10%($)
- ---- ------------------- --------------- --------- ---------
<S> <C> <C> <C> <C>
William C. Rusnack...... 600,000(2) 31.5 3,274,890 8,066,209
Maura J. Clark.......... 250,000(3) 13.1 1,364,538 3,360,920
</TABLE>
- --------
(1) All options are options to purchase shares of the common stock of Clark
Refining Holdings, Inc. ("Clark Holdings"), the ultimate parent of the
Company. All options were granted pursuant to the 1999 Clark Refining
Holdings Stock Incentive Plan (the "Incentive Plan") which was formally
adopted on September 28, 1999. The options expire September 30, 2008 and
are exercisable at a price of $9.90 per share.
(2) 300,000 of the options granted to Mr. Rusnack are time vested as described
in the following description of the Incentive Plan. The remaining 300,000
of options are performance vested options and vest seven years from the
date of the grant or following certain events upon the attainment of
certain target stock prices as described in the following description of
the Incentive Plan.
(3) 140,000 of the options granted to Ms. Clark are time vested. 50,000 of
such time vested options were granted as fully vested options while the
remainder vest as described in the following description of the Incentive
Plan. The remaining 110,000 of the options are performance vested options
and vest seven years from the date of the grant or following certain
events upon the attainment of certain target stock prices as described in
the following description of the Incentive Plan.
(4) For the purposes of determining the potential realizable value since the
date of the grant, the date of formal adoption of the Incentive Plan,
September 28, 1999, has been used.
Year-End Stock Option Values
The following table sets forth information with respect to the number and
value of unexercised stock options of Clark Holdings held by the named
executive officers as of December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The-Money Options
Acquired Value Options at FY-End(#) At FY-End($)
On Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
William C. Rusnack...... -0- -0- 150,000/450,000 -0- / -0-
Maura J. Clark.......... -0- -0- 95,000/155,000 -0- / -0-
Bradley D. Aldrich(1)... -0- -0- -- / -- -0- / -0-
Brandon K. Barnhold(2).. -0- -0- 50,000/ -- -0- / -0-
</TABLE>
- --------
(1) As of December 31, 1999, Mr. Aldrich held 30,000 options that were
previously granted under the 1995 Clark USA Incentive Plan. These options
were cancelled and terminated as part of Mr. Aldrich's separation
agreement relating to his resignation from the Company effective January
31, 2000.
(2) As of December 31, 1999, Mr. Barnholt held 50,000 options that were
previously granted under the 1995 Clark USA Long-Term Performance Plan at
an exercise price of $15.00 per share. Pursuant to the terms and
conditions of the termination of employment with the Company as part of
the sale of the retail business on July 8, 1999, it was agreed that Mr.
Barnholt's options can be exercised until the earlier of July 8, 2004 or
the expiration of the term thereof. A grant of an option to purchase
50,000 shares of Clark Holdings under the Incentive Plan was approved
effective April 11, 2000 by the Board of Directors of Clark Holdings, and
the options granted under the 1995 Clark USA Long-Term Performance Plan
were terminated.
29
<PAGE>
Short-Term Performance Plan
Employees of the Company participate in an annual incentive plan that
places at risk an incremental portion of their total compensation based on
Company and/or individual performance. The targeted at-risk compensation
increases with the ability of the individual to affect business performance,
ranging from 12% for support personnel to 200% for the Chief Executive
Officer. The other executive officers have the opportunity to earn an annual
incentive equal to 150% of the individual's base salary. The actual award is
determined based on financial performance with individual and executive team
performance evaluated against pre-established operating objectives designed to
achieve planned financial results. For essentially all other employees, annual
incentives are based on specific performance indicators utilized to operate
the business, principally productivity and profitability measures.
Long-Term Performance Plan
In 1999, the 1995 Clark USA Long-Term Performance Plan was terminated, and
Clark Holdings adopted the Clark Refining Holdings Inc. 1999 Stock Option
Incentive Plan ("Incentive Plan"). Under the Incentive Plan, employees of
Clark Holdings and its subsidiaries are eligible to receive awards of options
to purchase shares of the common stock of Clark Holdings. The Incentive Plan
is intended to attract and retain executives and other selected employees
whose skills and talents are important to the operations of Clark Holdings and
its subsidiaries, including the Company. Options on an aggregate amount of
2,215,250 shares of Clark Holdings' Common Stock may be awarded under the
Incentive Plan, either from authorized, unissued shares which have been
reserved for such purpose or from authorized, issued shares acquired by or on
behalf of Clark Holdings. The current aggregate amount of stock available to
be awarded is subject to a stock dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
stock. In 1999, options for the purchase of 1,752,500 shares of the common
stock of Clark Holdings were granted at an exercise price of $9.90 per share
and options for the purchase of 152,500 shares of the common stock of Clark
Holdings were granted at an exercise price of $15.00 per share. As of December
31, 1999, 1,752,500 stock options for the purchase of the common stock of
Clark Holdings were outstanding at an exercise price of $9.90 per share and
152,500 stock options were outstanding at an exercise price of $15.00 per
share under the Incentive Plan.
The Board of Directors of Clark Holdings ("Board") administers the
Incentive Plan, but may delegate certain responsibilities to the Compensation
Committee of the Board. Subject to the provisions of the Incentive Plan, the
Board is authorized to determine who may participate in the Incentive Plan and
the number and types of awards made to each participant, and the terms,
conditions, requirements, and limitations applicable to each award. Awards may
also be made in combination or in tandem with, in replacement of, or as
alternates to, grants or rights under any other employee plan of Clark
Holdings and its subsidiaries. Subject to certain limitations, the Board is
authorized to amend, modify or terminate the Incentive Plan to meet any
changes in legal requirements or for any other purpose permitted by law.
For options granted in 1999, including grants to the named executive
officers, there are two vesting options, time vesting and performance vesting,
under the Incentive Plan. Under time vesting, options are vested 50% at the
date of grant and 25% on each January 1 thereafter. Under performance vesting,
options are fully vested on and after the seventh anniversary of the date of
grant; or following a public offering of the common stock or upon a change in
control, the vesting is accelerated based on the achievement of certain per
share prices of the common stock. The accelerated vesting schedule is as
follows:
<TABLE>
<CAPTION>
Average Closing Price Per Share of
Capital Stock for Any
180 Consecutive Days; or Change in Control % of Shares With Respect to
Price Which Option is Exercisable
------------------------------------------ ---------------------------
<S> <C>
Below $12.00............................... 0%
$12.00-$14.99.............................. 10%
$15.00-$17.99.............................. 20%
$18.00-$19.99.............................. 30%
$20.00-$24.99.............................. 50%
$25.00-$29.99.............................. 75%
Above $29.99............................... 100%
</TABLE>
30
<PAGE>
The change in control price is defined as the highest price per share
received by any holder of the common stock from the purchaser(s) in a
transaction or series of transactions that result in a Change in Control. All
options expire no more than ten years after the date of grant.
If the employment of a participant terminates, subject to certain
exceptions for death, disability, or cause (as defined in the applicable
employment agreement), all shares not exercisable will be canceled
immediately, unless the award agreement provides otherwise. All exercisable
shares will terminate 90 days after the participant's termination of
employment. Subject to certain exceptions for death or disability, no award or
other benefit under the Incentive Plan is assignable or transferable, or
payable to or exercisable by anyone other than the participant to whom it was
granted.
In the event of a "Change of Control" of Clark Holdings, the Board with
respect to any award may take such actions that cause (i) the acceleration of
the award, (ii) the payment of a cash amount in exchange for the cancellation
of an award and/or (iii) the requiring of the issuance of substitute awards
that will substantially preserve the value, rights, and benefits of any
affected awards.
Clark Savings Plan
The Clark Savings Plan, which became effective in 1989, permits employees
to make before-tax and after-tax contributions and provides for employer
incentive matching contributions. Under the Savings Plan, each employee of the
Company (and such other related companies as may adopt the Savings Plan) who
has completed at least six months of service may become a participant.
Participants are permitted to make before-tax contributions to the Savings
Plan, effected through payroll deduction, of from 1% to 15% of their
compensation. The Company makes matching contributions equal to 200% of a
participant's before-tax contributions up to 3% of compensation. Additionally,
for represented employees at the Port Arthur and Lima refineries, the Company
makes matching contributions equal to 100% of a participants before-tax
contributions above 3% up to 6% of compensation. Participants are also
permitted to make after-tax contributions through payroll deduction, of from
1% to 5% of compensation, which are not matched by employer contributions;
provided that before-tax contributions and after-tax contributions, in the
aggregate, may not exceed the lesser of 15% of compensation or $10,500 in
2000. All employer contributions, except those for union represented
employees, are fully vested from the onset of eligibility in the plan. Amounts
in employees' accounts may be invested in a variety of permitted investments,
as directed by the employee. Participants' vested accounts are distributable
upon a participant's disability, death, retirement or separation from service.
Subject to certain restrictions, employees may make loans or withdrawals of
employee contributions during the term of their employment.
Compensation Committee Interlocks and Insider Participation
Compensation of the Company's executive officers has historically been
determined by the Company's board of directors. Mr. Rusnack, the Company's
President and Chief Executive Officer, is a member of the Company's board of
directors. Other than reimbursement of their expenses, the Company's directors
do not receive any compensation for their services as directors, except Mr.
Cohen. See Item 10. Directors and Executive Officers of the Registrant. There
are no interlocks between the Company and other entities involving the
Company's executive officers and board members who serve as executive officers
or board members of other entities, except with respect to Clark R&M, Clark
USA, Sabine River Holding Corp., Neches River Holding Corp., Port Arthur
Finance Corp., Clark Holdings, and Clark Holdings' principal shareholders,
Blackstone and Oxy.
Employment Agreement for William C. Rusnack
The Company has entered into a memorandum of agreement (the "Agreement")
with William C. Rusnack (the "Executive"). The Agreement has a term beginning
on the date that it was executed (the "Agreement Date") and ending on the
fourth anniversary of the Agreement Date (the "Initial Term"), provided, that
if neither the Executive nor the Company gives 30 days notice prior to the
expiration of the Initial Term then the Agreement shall be automatically
renewed for an additional one year renewal term (a "Renewal Term"). Similarly,
if neither the Executive nor the Company gives 30 days notice prior to the
expiration of any Renewal Term, then the Agreement shall be automatically
renewed for an additional one year Renewal Term. In the event of a Change in
Control (as defined therein), the Agreement shall remain in effect until at
least the second anniversary of the Change in Control.
31
<PAGE>
The Agreement also provides that: (i) the Executive shall be Chief
Executive Officer and President of the Company and Clark USA, (ii) the
Executive's base salary shall not be less than $415,000 (the "Salary"), (iii)
the Executive's bonus opportunity shall be equal to 200% of the salary and his
target bonus (the "Target Bonus") shall be equal to 100% of the Salary, (iv)
the Executive will be provided with welfare benefits and other fringe benefits
to the same extent and on the same terms as those benefits are provided to the
Company's other senior management employees, (v) the Executive shall
participate in the Company's relocation policy at level 4, and (vi) the
Executive shall receive a gross-up for any parachute excise taxes that may
result from any payment, whether under the Agreement or otherwise.
In the event that Executive's employment is (a) terminated by the Company
without Cause (as defined therein), (b) terminated by the Executive for Good
Reason (as defined therein), or (c) terminates at the end of the Initial Term
(or a Renewal Term) because the Company gave notice preventing the occurrence
of a Renewal Term, then the Executive shall receive from the Company: (i) in
addition to any other compensation and benefits accrued but unpaid, a lump sum
equal to the product of (a) three and (b) the sum of the Salary and Target
Bonus, (ii) relocation and counseling services, and (iii) continued
participation in all life insurance, medical, dental, health and accident and
disability plans, programs or arrangements in which Executive was entitled to
participate immediately prior to his termination for up to one year.
Employment Agreement for Maura J. Clark
On July 8, 1997, the Company entered into an employment agreement with
Maura J. Clark (the "Agreement") which expires in five years with a provision
for automatic extension on an annual basis unless either party gives 90 days'
notice of cancellation. The Agreement provides that if a Change of Control
occurs within two years prior to the scheduled expiration date, then the
expiration date will be automatically extended until the second anniversary of
the Change of Control date.
During the term of the Agreement, the employee is precluded from soliciting
or encouraging proposals regarding the acquisition of Clark USA or its
subsidiaries (or of another material part of the business of Clark USA),
absent explicit approval of the Chief Executive Officer of the Company.
The Agreement provides separation benefits to the employee if the
employee's employment is terminated by the Company without "Cause" prior to
the expiration date of the agreement. "Cause" is defined to include the
employee's failure to substantially perform her duties, willful misconduct
that materially injures Clark USA or its affiliates, or conviction of a
criminal offense involving dishonesty or moral turpitude. The Agreement also
provides that if the employee resigns for "Good Reason" prior to the
expiration date of the agreement, the employee will receive separation
benefits. "Good Reason" is defined to include certain demotions, reductions in
compensation, and relocation.
The separation benefits payable under the Agreement generally include a
lump sum payment of three times annual salary and bonus, acceleration of stock
option exercisability, continuation of the Company's life, medical, accident
and disability arrangements for one year after termination of employment
(subject to the employee's continuing to pay the employee share of the
premiums), payment of the cost of job relocation counseling, and payment of
legal fees in connection with termination.
The Agreement also provides for gross-up payments to be made to the
employee to cover certain penalty taxes in connection with a Change of
Control.
As a condition of receiving the separation benefits under the Agreement, an
employee is required to maintain the confidentiality of information relating
to the Company and its affiliates and to release the Company and its
affiliates from certain claims.
Employment Agreement for Jeffry N. Quinn
The Company has entered into an employment agreement (the "Agreement") with
Jeffry N. Quinn (the "Executive"). The Agreement expires on February 28, 2003,
provided that if neither the Executive nor the Company gives 60 days notice
prior to the expiration of the primary term or any extension thereof then the
Agreement shall automatically extend for an additional one year period (a
"Renewal Term").
32
<PAGE>
The Agreement also provides that: (i) the Executive shall serve as
Executive Vice President--Legal, Human Resources, and Public Affairs and
General Counsel of the Company and Executive Vice President of Clark USA and
Clark Holdings, (ii) the Executive's base salary shall not be less than
$282,500 (the "Salary"), (iii) the Executive's bonus opportunity shall be
equal to 150% of the Salary and his target bonus (the "Target Bonus") shall be
equal to 100% of the Salary (with a minimum bonus of $100,000 for 2000), (iv)
the Executive shall receive a one-time signing bonus of $125,000, (v) the
Executive will be provided with welfare benefits and other fringe benefits to
the same extent and on the same terms as those benefits are provided to the
Company's other senior management employees, and (vi) the Executive shall be
granted an option to purchase 120,000 shares of common stock of Clark Holdings
under the Incentive Plan. The Executive is subject to specified
confidentiality requirements pertaining to the business of the Company during
employment and two-years following termination. The Executive is also
restricted from solicitation of business from clients or customers of the
Company and restricted from making employment offers to Company employees for
twelve months following termination of the Executive.
In the event that Executive's employment is (a) terminated by the Company
without Cause (as defined therein), (b) terminated by the Executive for Good
Reason (as defined therein), or (c) terminates at the end of the Initial Term
(or a Renewal Term) because the Company gave notice preventing the occurrence
of a Renewal Term, then the Executive shall receive from the Company, in
addition to any other compensation and benefits accrued but unpaid, a lump sum
equal to the product of (a) two and (b) the sum of the Salary and Target
Bonus. In the event the above termination situations occur after a Change in
Control, the Executive shall receive from the Company, in addition to any
other compensation and benefits accrued but unpaid, a lump sum equal to the
product of (a) three and (b) the sum of the Salary and Target Bonus.
Item 12. Security Ownership of Certain Owners and Management
All of the Company's common stock is owned by Clark USA, which is solely
owned by Clark Holdings. The following table and the accompanying notes set
forth certain information concerning the beneficial ownership of the Common
Stock and Class F Common Stock of Clark Holdings, as of the date hereof: (i)
each person who is known by the Company to own beneficially more than 5% of
the common stock of Clark Holdings, (ii) each director and each executive
officer who is the beneficial owner of shares of common stock of Clark
Holdings, and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
Number of Percent Percent of Total
Name and Address Title of Class Shares of Class Voting Power(a)
---------------- -------------- ---------- -------- ----------------
<S> <C> <C> <C> <C>
Blackstone Management Common 20,940,828 96.6% 77.4%
Associates III L.L.C.(b)..
345 Park Avenue, New York,
NY 10154
Marshall A. Cohen(c)....... Common 116,161 0.5 0.4
William C. Rusnack(c)...... Common 225,000 1.1 0.9
Maura J. Clark(c).......... Common 117,500 0.5 0.4
Occidental Petroleum Class F Common 6,101,010 100.0 19.9
Corporation...............
10889 Wilshire Boulevard
Los Angeles, California
90024
All directors and executive Common 458,661 2.1 1.7
officers as a group(d)....
</TABLE>
- --------
(a) Represents the total voting power of all shares of common stock
beneficially owned by the named stockholder.
(b) The 20,940,828 shares held by Blackstone are directly held as follows:
16,707,667.576 shares by Blackstone Capital Partners III Merchant Banking
Fund L.P., 2,976,705.546 shares by Blackstone Offshore Capital Partners
III L.P. and 1,256,455.151 shares by Blackstone Family Investment
Partnership III L.P., each of which Blackstone Management Associates III
L.L.C. is the general partner having voting and dispositive power.
(c) Includes shares under option for which the individual holds or will have
the right to hold within the next 60 days after March 31, 2000. The shares
are as follows: Mr. Cohen--50,505; Mr. Rusnack--225,000; and Ms. Clark--
117,500.
(d) Richard C. Lappin and Robert L. Friedman, both directors of Clark
Holdings, are members of Blackstone Management Associates III L.L.C.,
which has investment and voting control over the shares held or controlled
by Blackstone and as such may be deemed to share beneficial ownership of
the shares held or controlled by Blackstone. Messrs. Peter G. Peterson and
Stephen A. Schwarzman are the founding members of Blackstone and as such
may also be deemed to share beneficial ownership of the shares held or
controlled by Blackstone. Stephen I. Chazen, a director of Clark Holdings,
is an executive officer of Occidental Petroleum Corporation and to the
extent he may be deemed to be a control person of Occidental Petroleum
Corporation may be deemed to be a beneficial owner of shares of common
stock owned by Occidental Petroleum Corporation. Each of such persons
disclaims beneficial ownership of such shares.
33
<PAGE>
Item 13. Certain Relationships and Related Transactions
The Company accrues a monitoring fee equal to $2.0 million per annum due to
an affiliate of Blackstone. Affiliates of Blackstone may in the future receive
customary fees for advisory services rendered to the Company. Such fees will
be negotiated from time to time with the independent members of the Company's
board of directors on an arm's-length basis and will be based on the services
performed and the prevailing fees then charged by third parties for comparable
services.
During 1999, the Company returned capital of $39.5 million to Clark USA to
facilitate Clark USA's payment of interest on its debt.
As of December 31, 1999, the Company had a payable to Clark Holdings for
management fees paid by Clark Holdings on the Company's behalf of $3.8
million.
In conjunction with the supply agreement with CRE, the Company's billings
to CRE in 1999 totaled $482.5 million of which $355.9 million were product
sales and $126.6 million were related Federal and state excise and motor fuel
taxes that the Company collected and then remitted to governmental agencies.
The taxes were not included in "Net sales and operating revenue", "Cost of
sales", or "Operating expenses". The Company had a $44.0 million receivable
from CRE as of December 31, 1999.
At December 31, 1999, the Company had a net outstanding receivable of $0.4
million from Port Arthur Coker Company L.P. for services rendered and fees
paid on behalf of Port Arthur Coker Company L.P.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. and 2. Financial Statements
The financial statements filed as a part of the Report on Form 10-K are
listed in the accompanying index to financial statements. There are no
financial statement schedules.
3. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of Clark Refining & Marketing,
Inc. (Incorporated by reference to Exhibit 3.1 filed with Clark Oil &
Refining Corporation Registration Statement on Form S-1 (Registration
No. 33-28146))
3.2 Certificate of Amendment to Certificate of Incorporation of Clark
Refining & Marketing, Inc. (Incorporated by reference to Exhibit 3.2
filed with Clark Oil & Refining Corporation Annual Report on Form 10-
K (Registration No. 1-11392))
3.3 By-laws of Clark Refining & Marketing, Inc. (Incorporated by reference
to Exhibit 3.2 filed with Clark Oil & Refining Corporation
Registration Statement on Form S-1 (Registration No. 33-28146))
4.1 Indenture dated as of August 10, 1998 between Clark Refining &
Marketing, Inc. and Bankers Trust Company, as Trustee, including the
form of the 8 5/8% Senior Notes due 2008 (Incorporated by reference
to Exhibit 4.1 filed with Clark Refining & Marketing, Inc. Form S-4
(Registration No. 333-64387))
4.2 Indenture between Clark Refining & Marketing, Inc. (formerly Clark Oil
& Refining Corporation) and NationsBank of Virginia, N.A. including
the form of 9 1/2% Senior Notes due 2004 (Incorporated by reference
to Exhibit 4.1 filed with Clark Oil & Refining Corporation
Registration Statement on Form S-1 (File No. 33-50748))
4.3 Supplemental Indenture between Clark Refining & Marketing, Inc. and
NationsBank of Virginia, N.A., dated February 17, 1995 (Incorporated
by reference to Exhibit 4.6 filed with Clark USA, Inc. Annual Report
on Form 10-K for the year ended December 31, 1994 (File No. 33-
59144))
4.4 Indenture between Clark Refining & Marketing, Inc. and Bankers Trust
Company, dated as of November 21, 1997, including the form of 8 3/8%
Senior Notes due 2007 (Incorporated by reference to Exhibit 4.5 filed
with Clark Refining & Marketing, Inc. Registration Statement on Form
S-4 (Registration No. 333-42431))
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.5 Indenture between Clark Refining & Marketing, Inc. and Marine Midland
Bank, dated as of November 21, 1997, including the form of 8 7/8%
Senior Subordinated Notes due 2007 (Incorporated by reference to
Exhibit 4.6 filed with Clark Refining & Marketing, Inc. Registration
Statement on Form S-4 (Registration No. 333-42431))
4.6 Supplemental Indenture between Clark Refining & Marketing, Inc. and
Marine Midland Bank, dated as of November 21, 1997 (Incorporated by
reference to Exhibit 6.1 filed with Clark Refining & Marketing, Inc.
Registration Statement on Form S-4 (Registration No. 333-42431))
10.10 Amended and Restated Credit Agreement, dated as of November 19, 1999,
among Clark Refining & Marketing, Inc., Bankers Trust Company, as
Administrative and Collateral Agent, The Toronto-Dominion Bank, as
Syndication Agent, BankBoston, N.A., as Documentation Agent, and the
other financial institutions party thereto.
10.15 Credit Agreement, dated as of November 21, 1997, among Clark Refining
& Marketing, Inc., Goldman, Sachs Credit Partners L.P., as Arranger
and Syndication Agent, and State Street Bank and Trust Company of
Missouri, N.A., as Payment Agent, the financial institutions listed
on the signature pages thereof, and Goldman Sachs Credit Partners, as
Administrative Agent (Incorporated by reference to Exhibit 10.13
filed with Clark Refining & Marketing, Inc. Registration Statement on
Form S-4 (Registration No. 333-42431))
10.16 First Amended and Restated Credit Agreement, dated as of August 10,
1998, among Clark Refining & Marketing, Inc., as Borrower, Goldman
Sachs Credit Partners L.P., as Arranger, Syndication Agent and
Administrative Agent, and State Street Bank & Trust Company of
Missouri, N.A., as Paying Agent (Incorporated by reference to Exhibit
10.15 filed with Clark Refining & Marketing, Inc. Registration
Statement on Form S-4 (Registration No. 333-64387))
10.20 Clark Refining Holdings Inc. 1999 Stock Incentive Plan
10.21 Clark Refining & Marketing, Inc. Savings Plan, as amended and restated
effective as of October 1, 1989 (Incorporated by reference to Exhibit
10.6 filed with Clark Oil & Refining Corporation Annual Report on
Form 10-K for the year ended December 31, 1989 (Commission File No.1-
11392))
10.22 Amendment to the Clark Refining & Marketing, Inc. Savings Plan dated
July 6, 1999.
10.23 Amendment to the Clark Refining & Marketing, Inc. Savings Plan dated
December 30, 1999.
10.24 Employment Agreement of William C. Rusnack (Incorporated by reference
to Exhibit 10.15 filed with Clark Refining & Marketing, Inc.
Registration Statement on Form S-4 (Registration No. 333-64387))
10.25 Employment Agreement, dated as of March 1, 2000 between Clark Refining
& Marketing, Inc. and Jeffry N. Quinn
10.26 Memorandum of Agreement, dated as of July 8,1997, between Clark
Refining & Marketing, Inc. and Maura J. Clark (Incorporated by
reference to Exhibit 10.25 filed with Clark Refining & Marketing,
Inc. Registration Statement on Form S-4 (Registration No. 333-42431))
10.30 Agreement for the Purchase and Sale of Lima Oil Refinery, dated as of
July 1, 1998 between BP Exploration & Oil Inc., The Standard Oil
Company, BP Oil Pipeline Company, BP Chemicals Inc. and Clark
Refining & Marketing, Inc. (Incorporated by reference to Exhibit 2.1
filed with Clark Refining & Marketing, Inc. Current Report on Form 8-
K, dated August 21, 1998 (File No. 1-11392))
10.31 Letter Amendment No. 1, dated August 10, 1998, to Agreement for
Purchase and Sale of Lima Oil Refinery dated July 1, 1998
(Incorporated by reference to Exhibit 2.2 filed with Clark Refining &
Marketing, Inc. Current Report on Form 8-K, dated August 21, 1998
(File No. 1-11392))
10.32 Services and Supply Agreement between Clark Refining & Marketing, Inc.
and Port Arthur Coker Company L.P. dated August 19, 1999.
10.33 Product Purchase Agreement between Clark Refining & Marketing, Inc.
and Port Arthur Coker Company L.P. dated August 19, 1999.
10.34 Asset Contribution and Recapitalization Agreement by and among Clark
USA, Inc., Clark Refining & Marketing, Inc., OTG, Inc. and CM
Acquisition, Inc. dated as of May 8, 1999. (Incorporated by reference
to Exhibit 10.0 filed with Clark Refining & Marketing, Inc. Form 10-Q
for the quarter ended March 31, 1999 (Commission File No. 1-11392)
27.0 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None
35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Clark Refining & Marketing, Inc. and Subsidiaries:
Annual Financial Statements
Independent Auditors' Report.......................................... 37
Consolidated Balance Sheets as of December 31, 1998 and 1999.......... 38
Consolidated Statements of Operations for the years ended December 31,
1997, 1998 and 1999.................................................. 39
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999.................................................. 40
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1997, 1998 and 1999..................................... 41
Notes to Consolidated Financial Statements............................ 42
</TABLE>
36
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Clark Refining & Marketing, Inc.:
We have audited the accompanying consolidated balance sheets of Clark
Refining & Marketing, Inc. and Subsidiaries (the "Company") as of December 31,
1998 and 1999 and the related consolidated statements of operations,
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1998 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
St. Louis, Missouri
February 16, 2000
37
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions except share data)
<TABLE>
<CAPTION>
December 31,
Reference ------------------
Note 1998 1999
--------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... 2 $ 147.5 $ 284.9
Short-term investments......................... 4 4.5 1.4
Accounts receivable............................ 4 130.7 197.1
Receivable from affiliates..................... 2.3 7.4
Inventories.................................... 2, 5 267.7 252.2
Prepaid expenses and other..................... 31.6 37.1
Net assets held for sale....................... 3 143.2 --
-------- --------
Total current assets......................... 727.5 780.1
PROPERTY, PLANT, AND EQUIPMENT, NET.............. 2, 6 627.4 615.3
OTHER ASSETS..................................... 2, 7 92.1 118.4
-------- --------
$1,447.0 $1,513.8
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable............................... 2, 8 $ 250.3 $ 331.1
Payable to affiliates.......................... 25.2 26.9
Accrued expenses and other..................... 9 64.3 73.4
Accrued taxes other than income................ 25.9 39.4
-------- --------
Total current liabilities.................... 365.7 470.8
LONG-TERM DEBT................................... 9 805.2 794.9
OTHER LONG-TERM LIABILITIES...................... 12 51.1 64.8
COMMITMENTS AND CONTINGENCIES.................... 16 -- --
STOCKHOLDER'S EQUITY:
Common stock ($.01 par value per share; 1,000
shares authorized and 100 shares issued and
outstanding).................................. -- --
Paid-in capital................................ 11 234.2 194.7
Retained earnings (deficit).................... (9.2) (11.4)
-------- --------
Total stockholder's equity................... 225.0 183.3
-------- --------
$1,447.0 $1,513.8
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
38
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions)
<TABLE>
<CAPTION>
For the year ended December
31,
Reference -------------------------------
Note 1997 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES AND OPERATING REVENUES.... $ 3,880.0 $ 3,580.5 $ 4,520.3
EXPENSES:
Cost of sales..................... (3,434.6) (3,115.1) (4,102.0)
Operating expenses................ (293.9) (341.6) (402.0)
General and administrative
expenses......................... (43.0) (50.0) (48.3)
Depreciation...................... 2 (26.2) (28.7) (36.0)
Amortization...................... 2, 7 (20.5) (25.7) (27.0)
Inventory recovery (write-down) to
market........................... 5 (19.2) (86.6) 105.8
Recapitalization, asset write-
offs, and other charges.......... 14 (40.0) -- --
--------- --------- ---------
(3,877.4) (3,647.7) (4,509.5)
GAIN ON SALE OF PIPELINE INTERESTS.. 3 -- 69.3 --
--------- --------- ---------
OPERATING INCOME.................... 2.6 2.1 10.8
Interest expense and finance
income, net...................... 9 (39.8) (51.0) (61.5)
--------- --------- ---------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS................ (37.2) (48.9) (50.7)
Income tax (provision) benefit.... 2, 13 (10.4) 12.9 16.2
--------- --------- ---------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEMS......... (47.6) (36.0) (34.5)
Discontinued operations, net of
income tax benefit of $2.7
(1998--$9.2 tax provision, 1997--
$0.1 tax provision).............. 3 0.1 15.1 (4.3)
Gain on disposal of discontinued
operations, net of tax provision
of $23.3......................... 3 -- -- 36.6
Extinguishment of debt............ 9 (10.7) -- --
--------- --------- ---------
NET LOSS............................ $ (58.2) $ (20.9) $ (2.2)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
39
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
<TABLE>
<CAPTION>
For the year ended Deccember 31,
--------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $ (58.2) $ (20.9) $ (2.2)
Discontinued operations................... (0.1) (15.1) 4.3
Extraordinary item........................ 10.7 -- --
Adjustments:
Depreciation............................ 26.2 28.7 36.0
Amortization............................ 27.5 28.2 33.5
Deferred income taxes................... 0.2 (10.9) 8.2
Gain on disposition of retail marketing
operations and pipeline interests...... -- (69.3) (36.6)
Inventory write-down (recovery) to
market................................. 19.2 86.6 (105.8)
Recapitalization, asset write-offs, and
other charges.......................... 21.0 -- --
Other................................... 0.1 5.8 19.1
Cash provided by (reinvested in) working
capital--
Accounts receivable, prepaid expenses
and other.............................. 79.7 (45.5) (68.8)
Inventories............................. 2.4 (125.5) 122.6
Accounts payable, accrued expenses,
taxes other than income and other...... (71.7) 75.0 90.8
---------- ---------- ----------
Net cash provided by (used in)
operating activities of continuing
operations........................... 57.0 (62.9) 101.1
Net cash provided by (used in)
operating activities of discontinued
operations........................... 37.9 18.2 (24.8)
---------- ---------- ----------
Net cash provided by (used in)
operating activities................. 94.9 (44.7) 76.3
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant, and
equipment................................ (26.4) (101.3) (214.7)
Expenditures for turnaround............... (47.4) (28.3) (77.9)
Refinery acquisition expenditures......... -- (175.0) --
Proceeds from sale of assets.............. 0.1 76.4 248.5
Proceeds from sale of assets to Port
Arthur Coker Company L.P................. -- -- 157.1
Purchases of short-term investments....... (3.0) (3.2) (3.2)
Sales and maturities of short-term
investments.............................. 3.0 13.6 2.9
Discontinued operations................... (49.9) (12.1) (1.8)
---------- ---------- ----------
Net cash provided by (used in)
investing activities................. (123.6) (229.9) 110.9
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments................... (234.2) (6.7) (3.3)
Proceeds from issuance of long-term debt.. 398.0 224.7 --
Capital contribution returned............. (215.0) (15.0) (39.5)
Deferred financing costs.................. (9.8) (9.0) (7.0)
---------- ---------- ----------
Net cash provided by (used in)
financing activities................. (61.0) 194.0 (49.8)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ (89.7) (80.6) 137.4
CASH AND CASH EQUIVALENTS, beginning of
period..................................... 317.8 228.1 147.5
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period.... $ 228.1 $ 147.5 $ 284.9
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
40
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(dollars in millions)
<TABLE>
<CAPTION>
Retained
Common Paid-in Earnings
Stock Capital (Deficit) Total
------ ------- --------- -------
<S> <C> <C> <C> <C>
Balance--January 1, 1997..................... $-- $ 464.2 $ 69.9 $ 534.1
Capital contribution returned.............. -- (215.0) -- (215.0)
Net loss................................... -- -- (58.2) (58.2)
---- ------- ------ -------
Balance--December 31, 1997................... -- 249.2 11.7 260.9
Capital contribution returned.............. -- (15.0) -- (15.0)
Net loss................................... -- -- (20.9) (20.9)
---- ------- ------ -------
Balance--December 31, 1998................... -- 234.2 (9.2) 225.0
Capital contribution returned.............. -- (39.5) -- (39.5)
Net loss................................... -- -- (2.2) (2.2)
---- ------- ------ -------
Balance--December 31, 1999................... $-- $ 194.7 $(11.4) $ 183.3
==== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
41
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1997, 1998, and 1999
(Tabular dollar amounts in millions of US dollars)
1. Nature of Business
Clark Refining & Marketing, Inc., a Delaware corporation ("Clark R&M" or
"the Company") is wholly owned by Clark USA, Inc., a Delaware corporation
("Clark USA"), which is a wholly owned subsidiary of Clark Refining Holdings
Inc. ("Clark Holdings"). Clark R&M's principal operations include the refining
of crude oil into gasoline, diesel fuel, jet fuel and other petroleum
products. The Company also sold petroleum products and convenience store items
in retail stores in the central United States until July 8, 1999 when the
Company sold these retail marketing operations. Accordingly, the retail
marketing operation's net assets have been segregated from the continuing
operations in the consolidated balance sheets, and its operating results are
segregated and reported as discontinued operations in the accompanying
consolidated statements of operations and cash flows.
The Company's earnings and cash flow from continuing operations are
primarily dependent upon processing crude oil and selling quantities of
refined petroleum products at margins sufficient to cover operating expenses.
Crude oil and refined petroleum products are commodities, and factors largely
out of the Company's control can cause prices to vary, in a wide range, over a
short period of time. This potential margin volatility can have a material
effect on financial position, current period earnings, and cash flow.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Clark Refining & Marketing, Inc. and its wholly owned subsidiaries,
principally Clark Port Arthur Pipeline, Inc., a Delaware Corporation and Clark
Investments, Inc. a Nevada Corporation. The Company consolidates the assets,
liabilities, and results of operations of subsidiaries in which the Company
has a controlling interest. Investments in companies in which the Company owns
20 percent to 50 percent voting control are generally accounted for by the
equity method. All significant intercompany accounts and transactions have
been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the dates of the financial statements, and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ from
those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments, such as time deposits,
money market instruments, commercial paper and United States and foreign
government securities, purchased with an original maturity of three months or
less, to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
under the last-in, first-out "LIFO" method for hydrocarbon inventories
including crude oil, refined products, and blendstocks. The cost of warehouse
stock and other inventories is determined under the first-in, first-out method
"FIFO".
42
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hedging Activity
The Company considers all futures and options contracts to be part of its
risk management strategy. Unrealized gains and losses on open contracts are
recognized as a product cost component unless the contract can be identified
as a price risk hedge of specific inventory positions or open commitments, in
which case the unrealized gain or loss is deferred and recognized as an
adjustment to the carrying amount of petroleum inventories or accounts payable
if related to open commitments. Deferred gains and losses on these contracts
are recognized as an adjustment to product cost when such inventories are sold
or consumed.
Property, Plant, and Equipment
Property, plant, and equipment additions are recorded at cost. Depreciation
of property, plant, and equipment is computed using the straight-line method
over the estimated useful lives of the assets or group of assets. The Company
capitalizes the interest cost associated with major construction projects
based on the effective interest rate on aggregate borrowings. The useful lives
of the plant and equipment used for depreciation are as follows:
<TABLE>
<S> <C>
Process units, buildings, and oil storage & movement....... 25 to 30 years
Office equipment and furniture............................. 10 years
Computer and computer equipment............................ 3 to 5 years
Autos...................................................... 3 years
</TABLE>
Expenditures for maintenance and repairs are expensed. Major replacements
and additions are capitalized. Gains and losses on assets depreciated on an
individual basis are reflected in current operating income. Upon disposal of
assets depreciated on a group basis, unless unusual in nature or amount,
residual cost less salvage is charged against accumulated depreciation.
The Company reviews long-lived assets for impairments whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
Deferred Turnaround
A turnaround is a periodically required standard procedure for maintenance
of a refinery that involves the shutdown and inspection of major processing
units and generally occurs approximately every three to five years. Turnaround
costs include actual direct and contract labor, and material costs incurred
for the overhaul, inspection, and replacement of major components of refinery
processing and support units performed during turnaround. Turnaround costs,
which are included in "Other assets", are amortized over the period until the
next scheduled turnaround, beginning the month following completion. The
amortization of the turnaround costs is presented as "Amortization" on the
consolidated statements of operations.
Environmental Costs
Environmental liabilities are recorded when environmental assessments
and/or remedial efforts are probable and can be reasonably estimated.
Reimbursements for underground storage remediation are also recorded when
probable and can be reasonably estimated.
Environmental expenditures are expensed or capitalized depending upon their
future economic benefit. Costs that improve a property as compared with the
condition of the property when originally constructed or acquired and costs
that prevent future environmental contamination are capitalized. Costs that
return a property to its condition at the time of acquisition or original
construction are expensed.
43
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income Taxes
Clark R&M files a consolidated U.S. federal income tax return with Clark
Holdings but computes its provision on a separate company basis. Deferred
taxes are classified as current or noncurrent depending on the classification
of the assets and liabilities to which the temporary differences relate.
Deferred taxes arising from temporary differences that are not related to a
specific asset or liability are classified as current or noncurrent depending
on the periods in which the temporary differences are expected to reverse. The
Company records a valuation allowance when necessary to reduce the net
deferred tax asset to an amount expected to be realized.
Stock Based Compensation Plan
The Company accounts for stock-based compensation issued to employees in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB Opinion No. 25") which generally requires
recognizing compensation cost based upon the intrinsic value at the date
granted of the equity instrument awarded. The Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," which encourages, but does not
require, companies to recognize compensation expense for grants of stock,
stock options and other equity instruments based on the fair value of those
instruments, but alternatively allows companies to disclose such impact in
their footnotes. The Company has elected to adopt the footnote disclosure
method.
Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, and accounts payable
approximate fair value due to the short-term nature of these items. See
Footnote 9 "Long-Term Debt" for determination of fair value of long-term debt.
New Accounting Standards
In June 1998, the FASB adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement, as amended, becomes effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Company is currently evaluating this
new standard, the impact it may have on the Company's accounting and
reporting, and planning for when to adopt the standard.
3. Acquisition and Dispositions
In July 1999, Clark R&M sold its retail marketing division in a
recapitalization transaction to Clark Retail Enterprises ("CRE"), which is
controlled by Apollo Management L.P., for net cash proceeds of $215 million. A
subsidiary of the Company's indirect parent, Clark Holdings, holds a six
percent equity interest in CRE. The retail marketing division sold included
all Company and independently-operated Clark branded stores and the Clark
trade name. In general, the buyer assumed unknown environmental liabilities at
the retail stores they acquired up to $50,000 per site, as well as
responsibility for any post closing contamination. Subject to certain risk
sharing arrangements, the Company retained responsibility for all pre-
existing, known contamination. As part of the sale agreement, the Company also
entered into a two-year market-based supply agreement for refined products
that may be canceled with 90 days notice by the buyer.
44
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The retail marketing operations were classified as discontinued and the
results of operations were excluded from continuing operations in the
consolidated statements of operations and cash flows. The net sales revenue
from the retail marketing operation for the year ended December 31, 1999 was
$485.1 million (1998--$938.8 million; 1997--$1,151.3 million). "Net assets
held for sale" included in the consolidated balance sheet as of December 31,
1998 consisted of the following:
<TABLE>
<S> <C>
Current Asset...................................................... $ 43.1
Noncurrent Assets.................................................. 187.5
------
Total Assets................................................... $230.6
------
Current Liabilities................................................ $ 62.7
Noncurrent Liabilities............................................. 24.7
------
Total Liabilities.............................................. $ 87.4
------
Net Assets Held for Sale........................................... $143.2
======
</TABLE>
In December 1999, Clark R&M sold 15 distribution terminals to Equilon
Enterprises L.L.C. ("Equilon") and a subsidiary of Equilon for net cash
proceeds of $34 million. The Company now has exchange and through-put
agreements at many of these terminal locations as well as new locations for
the distribution of refined products.
In August 1998, Clark R&M purchased BP Amoco PLC's, formerly British
Petroleum, ("BP"), 170,000 barrel per day Lima, Ohio refinery, related
terminal facilities, and non-hydrocarbon inventories for a purchase price of
$175.0 million plus related acquisition costs of $11.3 million (the "Lima
Acquisition"). Hydrocarbon inventories were purchased for $34.9 million. The
Company assumed liabilities mainly related to employee benefits of $7.0
million. BP retained permanent responsibility for all known pre-existing
environmental liabilities and responsibility for a minimum of twelve years for
pre-existing but unknown environmental liabilities. The total cost of the
acquisition was accounted for using the purchase method of accounting with
$175.0 million allocated to the refinery long-term assets and $53.2 million
allocated to current assets for hydrocarbon and non-hydrocarbon inventories
and catalysts. Clark R&M funded the Lima Acquisition with existing cash and
the proceeds from the issuance of $110 million 8 5/8% Senior Notes due 2008
and $115 million floating rate term loan due 2004 (see Note 9 "Long-Term
Debt").
In 1998, the Company sold minority interests in Westshore Pipeline Company,
Wolverine Pipeline Company, Chicap Pipeline Company, and Southcap Pipeline
Company, for net proceeds of $76.4 million that resulted in a before and
after-tax gain of $69.3 million. Income from these interests for the year
ended December 31, 1998 was $5.3 million (1997--$8.2 million).
4. Financial Instruments
Short-term Investments
Short-term investments consist of investments, including United States
government security funds, maturing more than three months from date of
purchase. The Company invests only in AA rated or better fixed income
marketable securities or the short-term rated equivalent. The Company's short-
term investments are all considered Available-for-Sale and are carried at fair
value. Realized gains and losses are presented in "Interest and finance costs,
net" and are computed using the specific identification method. As of December
31, 1999, short-term investments consisted of U.S. Debt Securities of $1.4
million and were pledged as collateral for the
45
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Company's self-insured workers compensation programs (1998--$4.5 million
pledged as collateral for the Company's self-insured workers compensation
programs and certain retail leases).
For the years ended December 31, 1997, 1998 and 1999, there were no
material unrealized or realized gains or losses on the short-term investments.
The amortized cost of short-term investments as of December 31, 1999 was $1.5
million maturing in one year or less.
Derivative Financial Instruments
Clark R&M enters into crude oil and refined products futures and options
contracts to limit risk related to hydrocarbon price fluctuations created by a
potentially volatile market. As of December 31, 1999, Clark R&M's open
contracts represented 2.5 million barrels of crude oil and refined products,
and had terms extending into June 2000. As of December 31, 1998, Clark R&M's
open contracts represented 1.2 million barrels of crude oil and refined
products and had terms extending into September 1999. As of December 31, 1999,
the Company had net unrealized gains on open futures and options contracts of
$6.6 million (1998--net unrealized gains of $1.3 million) all of which were
recognized and reflected as a component of operating income.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables. Credit risk on trade
receivables is minimized as a result of the credit quality of the Company's
customer base and industry collateralization practices. The Company conducts
ongoing evaluations of its customers and requires letters of credit or other
collateral as appropriate. Trade receivable credit losses for the three years
ended December 31, 1999 were not material.
As of December 31, 1999, the Company had $24.5 million (1998--$11.4
million) due from Chevron USA Products Co. ("Chevron"). Sales to Chevron in
1999 totaled $392.5 million (1998--$340.1 million; 1997--$455.7 million).
In conjunction with the supply agreement with CRE, the Company's billings
to CRE in 1999 totaled $482.5 million of which $355.9 million were product
sales and $126.6 million were related Federal and state excise and motor fuel
taxes that the Company collected and then remitted to governmental agencies.
The taxes were not included in "Net sales and operating revenue", "Cost of
sales", or "Operating expenses". The Company had $44.0 million receivable from
CRE as of December 31, 1999.
The Company does not believe that it has a significant credit risk on its
derivative instruments which are transacted through the New York Mercantile
Exchange or with counterparties meeting established collateral and credit
criteria.
5. Inventories
The carrying value of inventories consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------- ------
<S> <C> <C>
Crude oil................................................ $ 165.3 $ 95.1
Refined products and blendstocks......................... 186.4 134.6
LIFO inventory value excess over market.................. (105.8) --
Warehouse stock and other................................ 21.8 22.5
------- ------
$ 267.7 $252.2
======= ======
</TABLE>
46
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
With the sale of the retail marketing operations as well as an overall
reduction in refining-related inventories, inventory volumes decreased during
1999 creating a LIFO liquidation that resulted in increased pretax earnings of
$54.6 million.
Any reserve for LIFO inventory value in excess over market is reversed if
physical inventories turn and prices recover. The reserve recorded in 1998 was
fully reversed in 1999. As of December 31, 1999, the market value of crude
oil, refined products, and blendstocks inventories was approximately $78.3
million above carrying value.
6. Property, Plant, and Equipment
Property, plant, and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Real property........................................... $ 12.4 $ 8.6
Refineries.............................................. 699.3 752.8
Product terminals and pipelines......................... 69.1 20.3
Other................................................... 17.1 17.9
------- -------
$ 797.9 $ 799.6
Accumulated depreciation and amortization............... (170.5) (184.3)
------- -------
$ 627.4 $ 615.3
======= =======
</TABLE>
As of December 31, 1999, property, plant, and equipment included $112.3
million of construction in progress, of which $50.7 million related to an
upgrade to the Port Arthur refinery including increasing crude unit capacity
to approximately 250,000 barrels per day. The upgrade at the Port Arthur
refinery is being done in conjunction with the construction of additional
coking and hydrocracking capability at the Port Arthur refinery site by Port
Arthur Coker Company L.P. This project is scheduled to be complete by January
2001. The remaining $61.6 million of construction in progress related to
refinery unit upgrades of $25.0 million and other projects such as information
system, piping, metering, tank, utility, and control room modifications and
upgrades of $36.6 million. All of these projects were being prepared for their
intended use and were not being depreciated as of December 31, 1999.
As of December 31, 1998, property, plant, and equipment included $90.1
million of construction in progress, of which $43.7 million related to an
upgrade to the Port Arthur refinery as described above. The remaining $46.4
million of construction in progress related to refinery unit upgrades of $20.7
million and other projects, such as information system, tank, utility, and
control room modifications and upgrades of $25.7 million.
Capital lease assets, net of depreciation, of $18.9 million (1998--$20.1
million) were included in property, plant, and equipment as of December 31,
1999.
7. Other Assets
Other assets consisted of the following:
<TABLE>
<CAPTION>
December 31,
------------
1998 1999
----- ------
<S> <C> <C>
Deferred financing costs.................................... $19.5 $ 20.3
Deferred turnaround costs................................... 46.5 97.3
Deferred tax asset.......................................... 24.2 --
Other....................................................... 1.9 0.8
----- ------
$92.1 $118.4
===== ======
</TABLE>
47
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The company incurred deferred financing costs of $7.0 million in 1999
associated with the new working capital facility (See Footnote 8--"Working
Capital Facility").
8. Working Capital Facility
In November 1999, Clark R&M entered into a secured revolving credit
facility expiring June 30, 2001, that replaced an existing secured revolving
credit facility, that provides for borrowings and the issuance of letters of
credit of up to the lesser of $620 million or the amount available under a
defined borrowing base calculation. The defined borrowing base calculation
takes into consideration Clark R&M's cash and eligible cash equivalents,
eligible investments, eligible receivables, eligible petroleum inventories,
paid but unexpired letters of credit, and net obligations on swap contracts
that totaled $690.8 million as of December 31, 1999. Clark R&M uses the
facility primarily for the issuance of letters of credit to secure purchases
of crude oil. As of December 31, 1999, $435.4 million (1998--$244.8 million)
of the line of credit was utilized for letters of credit, of which $183.7
million supported commitments for future deliveries of petroleum products. The
credit facility also allows for the issuance of additional cash-secured
letters of credit outside the $620 million committed facility of up to $50
million as collateral for the Port Arthur upgrade project and up to $20
million as collateral for non-hydrocarbon items such as Marine Preservation
Association dues and insurance bonds. As of December 31, 1999, letters of
credit for $50.0 million and $10.8 million were outstanding for the Port
Arthur upgrade project and the non-hydrocarbon items, respectively.
Clark R&M is required to comply with certain financial covenants including
maintaining defined levels of working capital, cash, cash equivalents and
qualifying investments, tangible net worth, and cumulative cash flow. Direct
cash borrowings under the credit facility are limited to $50 million and would
be subject to interest rates related to prime lending rates in both the United
States of America and Eurodollar markets plus an applicable margin. This
margin ranges from 75 to 325 basis points depending on a matrix of the
Standard and Poors' and Moody's ratings of the Company's debt and the
Company's average cash, as defined, as a percentage of average outstanding
letters of credits under the credit facility. There were no direct cash
borrowings under any revolving credit facility as of December 31, 1999 and
1998.
9. Long-Term Debt
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
------ ------
<S> <C> <C>
8 5/8% Senior Notes due August 15, 2008 ("8 5/8% Senior
Notes")................................................... $109.7 $109.8
8 3/8% Senior Notes due November 15, 2007 ("8 3/8% Senior
Notes")................................................... 99.3 99.4
8 7/8% Senior Subordinated Notes due November 15, 2007 ("8
7/8% Senior Subordinated Notes").......................... 173.9 174.0
Floating Rate Term Loan due November 15, 2003 and 2004
("Floating Rate Loan").................................... 240.0 240.0
9 1/2% Senior Notes due September 15, 2004 ("9 1/2% Senior
Notes")................................................... 171.7 171.7
Obligations under capital leases and other notes........... 13.8 10.5
------ ------
808.4 805.4
Less current portion..................................... 3.2 10.5
------ ------
$805.2 $794.9
====== ======
</TABLE>
The estimated fair value of long-term debt as of December 31, 1999 was
$478.4 million (1998--$760.2 million), determined using quoted market prices
for these issues.
48
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The 8 5/8% Senior Notes were issued by Clark R&M in August 1998, at a
discount of 0.234% and are unsecured. The 8 5/8% Senior Notes are redeemable
at the option of the Company beginning August 2003, at a redemption price of
104.312% of principal, which decreases to 100% of principal amount in 2005. Up
to 35% in aggregate principal amount of the notes originally issued are
redeemable at the option of the Company out of the net proceeds of one or more
equity offerings at any time prior to August 15, 2002, at a redemption price
equal to 108.625% of principal.
The 8 3/8% Senior Notes and 8 7/8% Senior Subordinated Notes were issued by
Clark R&M in November 1997, at a discount of 0.734% and 0.719%, respectively.
These notes are unsecured, with the 8 7/8% Senior Subordinated Notes
subordinated in right of payment to all unsubordinated indebtedness of the
Company. The 8 3/8% Senior Notes and 8 7/8% Senior Subordinated Notes are
redeemable at the option of the Company beginning November 2002, at a
redemption price of 104.187% of principal and 104.437% of principal,
respectively, which decreases to 100% of principal amount in 2004 and 2005,
respectively. Up to 35% in aggregate principal amount of the notes originally
issued are redeemable at the option of the Company out of the net proceeds of
one or more equity offerings at any time prior to November 15, 2001, at a
redemption price equal to 108.375% of principal for the 8 3/8% Senior Notes
and 108.875% of principal for the 8 7/8% Senior Notes.
Clark R&M borrowed $125.0 million in November 1997, and an additional
$115.0 million in August 1998, under a floating rate term loan agreement
expiring in 2004. In 2003, $31.3 million of the outstanding principal amount
is due with the remainder of the outstanding principal due in 2004. The
Floating Rate Loan is a senior unsecured obligation of Clark R&M and bears
interest at LIBOR plus a margin of 275 basis points. The loan may be repaid in
whole or in part at 100% of principal amount.
The 9 1/2% Senior Notes were issued by Clark R&M in September 1992 and are
unsecured. The 9 1/2% Senior Notes are currently redeemable at the Company's
option at a redemption price of 100% of principal.
The Clark R&M note indentures contain certain restrictive covenants
including limitations on the payment of dividends, limitations on the payment
of amounts to related parties, limitations on the incurrence of debt,
redemption provisions related to change of control, and incurrence of liens
and maintenance of a minimum net worth.
The scheduled maturities of long-term debt during the next five years are
(in millions): 2000--$10.5 (included in "Accrued expenses and other"); 2001
and 2002--$0.0; 2003--$117.0; 2004 and thereafter--$679.7.
Extinguishment of Debt
In 1997, the Company redeemed its 10 1/2% Senior Notes. As a result, the
Company recorded an extraordinary loss of $10.7 million for the redemption
premiums ($5.9 million), the write-off of deferred financing costs ($3.7
million) and other related costs ($1.1 million).
Interest and finance costs, net
Interest and finance costs, net, included in the consolidated statements of
operations, consisted of the following:
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Interest expense..................................... $44.7 $61.4 $73.6
Finance costs........................................ 11.0 2.4 6.8
Interest and finance income.......................... (14.5) (9.8) (9.9)
----- ----- -----
$41.2 $54.0 $70.5
Capitalized interest................................. (1.4) (3.0) (9.0)
----- ----- -----
Interest and finance costs, net...................... $39.8 $51.0 $61.5
===== ===== =====
</TABLE>
49
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cash paid for interest in 1999 was $73.5 million (1998--$56.6 million;
1997--$44.8 million). Accrued interest payable as of December 31, 1999 of
$13.6 million (December 31, 1998--$13.3 million) was included in "Accrued
expenses and other."
10. Lease Commitments
The Company leases refinery equipment, catalyst, tank cars, office space,
and office equipment with lease terms ranging from 1 to 8 years with the
option to purchase some of the equipment at the end of the lease term at fair
market value. The leases generally provide that the Company pay taxes,
insurance, and maintenance expenses related to the leased assets. As of
December 31, 1999, net future minimum lease payments under non-cancelable
operating leases were as follows (in millions): 2000--$7.2; 2001--$5.8; 2002--
$4.3; 2003--$3.5; 2004--$1.5; and $1.5 in the aggregate thereafter. Rental
expense during 1999 was $12.6 million (1998--$10.6 million; 1997--$10.4
million).
11. Related Party Transactions
Related party transactions that are not discussed elsewhere in the
footnotes are as follows:
Clark USA, Inc.
During 1999 and 1998, the Company returned capital to Clark USA of $39.5
million and $15.0 million, respectively, for Clark USA's payment of interest
regarding the 10 7/8% Senior Notes. During 1997, the Company returned $215.0
million of capital to Clark USA for its repurchase of the Zero Coupon Notes.
Clark Refining Holdings Inc.
As of December 31, 1999, the Company had a payable to Clark Holdings for
management fees paid by Clark Holdings on the Company's behalf of $3.8
million.
Management Services
As of December 31, 1999, the Company had a payable to The Blackstone Group
("Blackstone"), an affiliate of its principal shareholder, of $0.6 million
(December 31, 1998--$3.2 million for annual monitoring fees and transaction
fees related to the Lima Acquisition) for annual monitoring fees. The Company
has an agreement with an affiliate of Blackstone under which Blackstone would
receive a monitoring fee equal to $2.0 million per annum subject to increases
relating to inflation and in respect of additional acquisitions by the
Company. Affiliates of Blackstone may in the future receive customary fees for
advisory services rendered to the Company. Such fees will be negotiated from
time to time with the independent members of the Company's board of directors
on an arm's-length basis and will be based on the services performed and the
prevailing fees then charged by third parties for comparable services.
In connection with the Blackstone Transaction in 1997 (see Note 14 "Equity
Recapitalization and Change in Control"), affiliates of Blackstone received
fees of $7.0 million, and the Company reimbursed Blackstone for $1.7 million
of out-of-pocket expenses related to the Blackstone Transaction and the
issuance of the 8 3/8% Senior Notes and 8 7/8% Senior Subordinated Notes.
12. Employee Benefit Plans
Postretirement Benefits Other Than Pensions
Clark R&M provides health insurance in excess of social security and an
employee paid deductible amount, and life insurance to most retirees once they
have reached a specified age and specified years of service.
50
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth the changes in the benefit obligation for
the unfunded post retirement health and life insurance plans for 1998 and
1999:
<TABLE>
<CAPTION>
December
31,
------------
1998 1999
----- -----
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year..................... $25.2 $35.0
Service costs............................................... 1.1 1.5
Interest costs.............................................. 2.1 2.8
Actuarial loss.............................................. 3.3 1.6
Benefits paid............................................... (1.5) (1.5)
Lima acquisition............................................ 4.8 --
----- -----
Benefit obligation at end of year........................... $35.0 $39.4
----- -----
Unrecognized net gain....................................... 0.5 --
Unrecognized prior service benefit.......................... 0.2 0.2
----- -----
Accrued postretirement benefit liability.................... $35.7 $39.6
===== =====
</TABLE>
The components of net periodic postretirement benefit costs were as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Service costs............................................ $0.8 $1.1 $1.5
Interest costs........................................... 1.7 2.1 2.8
Amortization of prior service costs...................... -- (0.2) (0.1)
---- ---- ----
Net periodic postretirement benefit cost................. $2.5 $3.0 $4.2
==== ==== ====
</TABLE>
In measuring the expected postretirement benefit obligation, the Company
assumed a discount rate of 7.50% (1998--7.00%), a rate of increase in the
compensation level of 4.00% (1998--4.00%), and a health care cost trend
ranging from 7.75% to 6.75% in 1999 to an ultimate rate of 5.25% in 2002. The
effect of increasing the average health care cost trend rates by one
percentage point would increase the accumulated postretirement benefit
obligation as of December 31, 1999, by $6.5 million and increase the annual
aggregate service and interest costs by $0.8 million. The effect of decreasing
the average health care cost trend rates by one percentage point would
decrease the accumulated postretirement benefit obligation, as of December 31,
1999, by $7.8 million and decrease the annual aggregate service and interest
costs by $1.0 million.
Employee Savings Plan
The Clark Refining & Marketing, Inc. Retirement Savings Plan and separate
Trust (the "Plan"), a defined contribution plan, covers substantially all
employees of Clark. Under terms of the Plan, Clark R&M matches the amount of
employee contributions, subject to specified limits. Company contributions to
the Plan during 1999 were $8.4 million (1998--$6.4 million; 1996-- $5.4
million).
13. Income Taxes
Clark provides for deferred taxes under the asset and liability approach,
which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
51
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The income tax provision (benefit) was summarized as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ------- -------
<S> <C> <C> <C>
Earnings (loss) before provision for income
taxes:
Continuing operations.................... $ (37.2) $ (48.9) $ (50.7)
Extraordinary item....................... (10.7) -- --
-------- ------- -------
$ (47.9) $ (48.9) $ (50.7)
======== ======= =======
Income tax provision (benefit):
Continuing operations.................... $ 10.4 $ (12.9) $ (16.2)
Extraordinary item....................... -- -- --
-------- ------- -------
$ 10.4 $ (12.9) $ (16.2)
======== ======= =======
Current provision (benefit)--Federal....... $ 8.7 $ (1.7) $ (21.9)
--State.................................... 1.5 (0.4) (2.5)
-------- ------- -------
10.2 (2.1) (24.4)
-------- ------- -------
Deferred provision (benefit)--Federal...... -- (10.4) 8.1
--State.................................... 0.2 (0.4) 0.1
-------- ------- -------
0.2 (10.8) 8.2
-------- ------- -------
Income tax provision (benefit)............. $ 10.4 $ (12.9) $ (16.2)
======== ======= =======
</TABLE>
A reconciliation between the income tax provision computed on pretax income
at the statutory federal rate and the actual provision for income taxes was as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Federal taxes computed at 35%.................... $(16.8) $(17.1) $(17.7)
State taxes, net of federal effect............... 1.1 (0.5) (1.6)
Nontaxable dividend income....................... (1.9) (0.4) --
Valuation allowance.............................. 28.4 2.3 4.6
Other items, net................................. (0.4) 2.8 (1.5)
------ ------ ------
Income tax provision (benefit)................... $ 10.4 $(12.9) $(16.2)
====== ====== ======
</TABLE>
52
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following represents the approximate tax effect of each significant
temporary difference giving rise to deferred tax liabilities and assets:
<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
------ ------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment................................ $ 84.9 $ 87.8
Turnaround costs............................................. 14.1 33.6
Inventory.................................................... -- 6.8
Other........................................................ 3.6 1.6
------ ------
$102.6 $129.8
------ ------
Deferred tax assets:
Alternative minimum tax credit............................... $ 18.8 $ 20.0
Environmental and other future costs......................... 19.5 30.4
Tax loss carryforwards....................................... 67.0 111.3
Inventory.................................................... 44.8 --
Other........................................................ 13.5 9.2
------ ------
$163.6 $170.9
------ ------
Valuation allowance............................................ (36.8) (41.4)
------ ------
Net deferred tax asset (liability)............................. $ 24.2 $ (0.3)
====== ======
</TABLE>
As of December 31, 1999, Clark has made net cumulative payments of $20.0
million under the Federal alternative minimum tax system which are available
to reduce future regular income tax payments. As of December 31, 1999, Clark
had a Federal net operating loss carryforward of $277.4 million and Federal
business tax credit carryforwards in the amount of $4.2 million. Such
operating losses and tax credit carryforwards have carryover periods of 15
years (20 years for losses and credits originating in 1998 and years
thereafter) and are available to reduce future tax liabilities through the
year ending December 31, 2019. The tax credit carryover periods will begin to
terminate with the year ending December 31, 2003 and the net operating loss
carryover periods will begin to terminate with the year ending December 31,
2010.
The valuation allowance as of December 31, 1999 was $41.4 million (1998--
$36.8 million). In calculating the increase in the valuation allowance, Clark
assumed as future taxable income only future reversals of existing taxable
temporary differences and available tax planning strategies.
Section 172 of the Internal Revenue Code ("Code") allows a 10-year
carryback period for specified liability losses, as defined. During 1997, 1998
and 1999 Clark filed federal and state refund claims based upon the carryback
of $104.0 million of specified liability losses arising in years 1994 through
1998. During 1999 the Internal Revenue Service ("IRS") concluded an audit
examination, subject to Joint Committee review, of the taxable years ended
December 31, 1995 and 1996. As part of the audit examination, the IRS reduced
the amount of the federal refund claims arising from the carryback of
specified liability losses arising in years 1994, 1995 and 1996. The carryback
of specified liability losses has reduced Clark's federal net operating loss
carryforward as of December 31, 1999 to $277.4 million. The Internal Revenue
Service has not yet audited the refund claims arising from the carryback of
specified liability losses arising in years 1997 and 1998. The unaudited
refund claims, if fully recovered, would provide a current tax benefit of $9.3
million. In addition, the unaudited refund claims, if fully recovered, would
recharacterize $7.6 million of deferred tax assets from tax loss carryforwards
to alternative minimum tax credit carryforwards. However, Section 172 of the
Code is an unsettled area of the law and the unaudited refund claims are
expected to come under audit examination. Of the total unaudited potential
current tax benefit, the Company has recognized $4.1 million.
53
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During 1999, Clark USA made net federal cash tax payments of $0.3 million
(1998--$10.2 million net cash refunds; 1997--$5.0 million net cash payments).
The Company provides for its portion of such consolidated refunds and
liability under its tax sharing agreement with Clark USA. During 1999, Clark
received net cash state tax refunds of $0.4 million (1998--$1.3 million net
cash payments; 1997--$2.6 million net cash payments).
The income tax benefit on the loss from continuing operations of $16.2
million for 1999 reflected the effect of intraperiod tax allocations resulting
from the utilization of current year operating losses to offset the net gain
on the operations and sale of the discontinued retail division, offset by the
write-down of a net deferred tax asset.
Section 382 of the Code restricts the utilization of net operating losses
and other carryover tax attributes upon the occurrence of an ownership change,
as defined. Such an ownership change occurred during 1997 as a result of the
purchase of a majority interest in the Company by an affiliate of Blackstone
(see Note 14 "Equity Recapitalization and Change in Control"). However, based
upon the existence of future taxable income from reversals of existing taxable
temporary differences and available tax planning strategies, management
believes such limitation will not restrict the Company's ability to
significantly utilize the net operating losses over the allowable carryforward
periods.
14. Equity Recapitalization and Change in Control
Pursuant to a share exchange agreement dated April 27, 1999, all the shares
of Clark R&M's parent Clark USA were exchanged on a one-for-one basis for
shares of Clark Holdings resulting in Clark Holdings being the sole
shareholder of Clark USA.
On November 3, 1997, Blackstone acquired the 13.5 million shares of Common
Stock of Clark USA previously held by TrizecHahn and certain of its
subsidiaries (the "Blackstone Transaction"), as a result of which Blackstone
obtained a controlling interest in Clark USA. In 1997, the Company recorded a
charge to operations in the amount of $40.0 million for recapitalization
expenses, asset write-offs, and other charges incurred in connection with the
Company's equity recapitalization and change in control. The total charge
included $20.3 million of asset write-offs principally related to an
investment in a project initiated to produce low-sulfur diesel fuel at the
Hartford refinery (the "DHDS Project"); $10.7 million of transaction,
advisory, and monitoring fees related to the Blackstone Transaction; and $9.0
million resulting from a change in strategic direction primarily for certain
environmental, legal and other accruals related to existing actions.
In 1992, the DHDS Project was delayed based on internal and third party
analysis that indicated an oversupply of low-sulfur diesel fuel capacity in
the Company's market. Based on the analysis, the Company projected relatively
narrow price differentials between low and high sulfur products. The Company
intended to complete the DHDS Project when differentials between low and high
sulfur diesel fuel prices widened. From 1992 to 1996 the Company performed a
cash flow analysis each year assuming the project would be completed to
determine whether the DHDS Project was impaired as defined under Statement of
Financial Accounting Standard No. 121 "Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of." In December 1997, subsequent to the
Blackstone Transaction, the Company determined that certain equipment
purchased for the DHDS Project would yield a higher value being utilized at
the Hartford and Port Arthur refineries, rather than remaining idle until the
diesel fuel differentials widened sufficiently to justify completing the DHDS
Project. As a result of this decision, the equipment was written down to its
fair market value as determined utilizing estimated used equipment market
values, and engineer costs were determined to have no value due to the
engineering being only useful for a DHDS unit.
15. Stock Option Plans
In 1999, the 1995 Clark USA Long-Term Performance Plan was terminated, and
Clark Holdings adopted the Clark Refining Holdings Inc. 1999 Stock Option
Incentive Plan ("Incentive Plan"). Under the Incentive
54
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Plan, employees of Clark Holdings and its subsidiaries are eligible to receive
awards of options to purchase shares of the common stock of Clark Holdings.
The Incentive Plan is intended to attract and retain executives and other
selected employees whose skills and talents are important to the operations of
Clark Holdings and its subsidiaries. Options on an aggregate amount of
2,215,250 shares of Clark Holdings' Common Stock may be awarded under the
Incentive Plan, either from authorized, unissued shares which have been
reserved for such purpose or from authorized, issued shares acquired by or on
behalf of the Company. The current aggregate amount of stock available to be
awarded is subject to a stock dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
stock. In 1999, options for the purchase of 1,752,500 shares of the common
stock of Clark Holdings were granted at an exercise price of $9.90 per share
and options for the purchase of 152,500 shares of the common stock of Clark
Holdings were granted at an exercise price of $15.00 per share. As of December
31, 1999, 1,752,500 stock options for the purchase of the common stock of
Clark Holdings were outstanding at an exercise price of $9.90 per share and
152,500 stock options were outstanding at an exercise price of $15.00 per
share under the Incentive Plan. Stock granted under this plan was priced at
the fair market value at the date of grant as determined based on the latest
third party sales price available.
For options granted in 1999, there are two vesting options, time vesting
and performance vesting, under the Incentive Plan. Under time vesting, options
are vested 50% at the date of option, 25% on each January 1 thereafter. Under
performance vesting, options are fully vested on and after the seventh
anniversary of the date of option; or following a public offering of the
common stock or upon a change in control, the vesting is accelerated based on
the achievement of certain per share prices of the common stock. The
accelerated vesting schedule was as follows:
<TABLE>
<CAPTION>
Average
Closing Price
Per Share of
Capital Stock
for Any
180
Consecutive
Days; or % of Shares With Respect to
Change in Which Option
Control Price is Exercisable
------------- ---------------------------
<S> <C>
Below $12.00 0%
$12.00-$14.99 10%
$15.00-$17.99 20%
$18.00-$19.99 30%
$20.00-$24.99 50%
$25.00-$29.99 75%
Above $29.99 100%
</TABLE>
The change in control price is defined as the highest price per share received
by any holder of the common stock from the purchaser(s) in a transaction or
series of transactions that result in a Change in Control. All options expire
no more than ten years after the date of its grant.
In the event of a "Change of Control" of Clark Holdings, the Board with
respect to any award may take such actions (i) the acceleration of the award,
(ii) the payment of a cash amount in exchange for the cancellation of an award
and/or (iii) the requiring of the issuance of substitute awards that will
substantially preserve the value, rights, and benefits of any affected awards.
Under SFAS 123 No. 123, "Accounting for Stock-Based Compensation", the
granting of the 1,905,000 options for shares of Clark Holdings would have
impacted operating income as of December 31, 1999, by less than $1.0 million.
Under the Clark USA Long-Term Performance Plan, which was terminated in
1999, 323,750 stock options were outstanding as of December 31, 1998 (1997--
531,500) at an exercise price of $15 per share. No shares were granted under
this plan in 1998 or 1997.
55
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Commitments and Contingencies
Clark R&M is subject to various legal proceedings related to governmental
regulations and other actions arising out of the normal course of business,
including legal proceedings related to environmental matters. Among those
actions and proceedings are the following:
Clark R&M is the subject of a purported class action lawsuit related to
an on-site electrical malfunction at Clark R&M's Blue Island Refinery on
October 7, 1994, which resulted in the release to the atmosphere of used
catalyst containing low levels of heavy metals, including antimony, nickel
and vanadium. This release resulted in the temporary evacuation of certain
areas near the refinery, including a high school, and approximately fifty
people were taken to area hospitals. Clark R&M offered to reimburse the
medical expenses incurred by persons receiving treatment. The purported
class action lawsuit was filed on behalf of various named individuals and
purported plaintiff classes, including residents of Blue Island, Illinois
and Eisenhower High School students, alleging claims based on common law
nuisance, negligence, willful and wanton negligence and the Illinois Family
Expense Act as a result of this incident. Plaintiffs seek to recover
damages in an unspecified amount for alleged medical expenses, diminished
property values, pain and suffering and other damages. Plaintiffs also seek
punitive damages in an unspecified amount.
As of December 31, 1999, the Company had accrued a total of $36.4
million for legal and environmental-related obligations that may result
from the matter above and other legal and environmental matters and
obligations associated with certain previously owned retail sites. While it
is not possible at this time to establish the ultimate amount of liability
with respect to the Company's contingent liabilities, Clark R&M is of the
opinion that the aggregate amount of any such liabilities, for which
provision has not been made, will not have a material adverse effect on its
financial position; however, an adverse outcome of any one or more of these
matters could have a material effect on quarterly or annual operating
results or cash flows when resolved in a future period.
In March 1998, the Company entered into a long-term crude oil supply
agreement with PMI Comercio Internacional, S.A. de C.V. ("PMI"), an
affiliate of Petroleos Mexicanos, the Mexican state oil company. As a
result of this contract, the Company began developing a project to upgrade
the Port Arthur refinery to process primarily lower-cost, heavy sour crude
oil of the type to be purchased from PMI. The heavy oil upgrade project
includes the construction of new coking, hydrocracking and sulfur removal
capability, and the expansion of the existing crude unit to approximately
250,000 barrels per day. In August 1999, the Company sold for $157.1
million the construction work-in-progress on the new processing units to
Port Arthur Coker Company L.P., an affiliate that is not controlled by the
Company or its subsidiaries. The Company also sold the oil supply agreement
with PMI and environmental permits which had already been obtained by the
Company for $2.2 million to Port Arthur Coker Company L.P. The assets were
sold at cost, which approximated fair market value. As part of the project
the Company is undertaking the upgrading of existing units at the Port
Arthur refinery, including the expansion of the crude unit. The Company's
portion of the project is expected to cost approximately $120 million, of
which $50.7 million was expended through December 31, 1999. As of December
31, 1999, the Company had a letter of credit to the benefit of Foster
Wheeler USA for $86.9 million outstanding to collateralize its obligations
related to the Port Arthur heavy oil upgrade project.
The heavy oil upgrade project is expected to be mechanically complete by
November 2000 with start-up of the project in the first quarter of 2001.
The Company entered into agreements with Port Arthur Coker Company L.P.
pursuant to which the Company will provide certain operating, maintenance
and other services and purchase the output from the new coking and
hydrocracking equipment for further processing into finished products. The
Company will receive compensation under these agreements at fair market
value that is expected to in the aggregate favorable to the Company. At
December 31, 1999, the Company had a net outstanding receivable of $0.4
million from Port Arthur Coker Company for services rendered and fees paid
on behalf of Port Arthur Coker Company.
56
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In December 1999, the United States Environmental Protection Agency
("USEPA") published the Tier II Motor Vehicle Emission Standards Final Rule
for all passenger vehicles, establishing standards for sulfur content in
gasoline. The ruling mandates that the sulfur content of gasoline produced
at any refinery not exceed 30 parts per million after January 1, 2006.
Starting in 2004, the USEPA will begin a program to phase in new low sulfur
gasoline requirements. Currently the sulfur content in the Company's
gasoline pool averages approximately 385 parts per million. These
regulations will likely require the Company to make some level of capital
investments at its refineries to reduce the sulfur levels in its gasoline.
The Company is evaluating its options under the new regulations and does
not currently have an estimate of how much of a capital outlay will be
required for compliance.
The USEPA has drafted a proposed regulation which, it is believed, would
require a significant reduction in the sulfur content of diesel fuel by the
year 2006. The proposed regulation has not yet been released to the public
and is currently under review of the White House Office of Management and
Budget. The USEPA anticipates that the regulation will be formally proposed
later this Spring and formally promulgated as a final rule before the end
of the year 2000. Until the regulation is formally proposed and
promulgated, and the exact nature of the USEPA's proposal becomes known,
the Company cannot assess the impact, if any, of the regulation on our
operations.
During 1999 the Company sold crude oil linefill in the pipeline system
supplying the Lima refinery. The Company has an agreement in place that
requires it to repurchase approximately 2.8 million barrels of crude oil in
this pipeline system in September 2000 at market prices, unless extended by
mutual agreement.
57
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Clark Refining & Marketing, Inc.
/s/ William C. Rusnack
By:__________________________________
William C. Rusnack
President and Chief Executive
Officer
April 4, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William C. Rusnack Director, Chief Executive April 4, 2000
____________________________________ Officer and President
William C. Rusnack
/s/ Marshall A. Cohen Director and Chairman of the April 4, 2000
____________________________________ Board
Marshall A. Cohen
/s/ David I. Foley Director April 4, 2000
____________________________________
David I. Foley
/s/ Robert L. Friedman Director April 4, 2000
____________________________________
Robert L. Friedman
/s/ Richard C. Lappin Director April 4, 2000
____________________________________
Richard C. Lappin
/s/ Maura J. Clark Executive Vice President, April 4, 2000
____________________________________ Corporate Development and
Maura J. Clark Chief Financial Officer
(Principal Financial
Officer)
/s/ Dennis R. Eichholz Controller and Treasurer April 4, 2000
____________________________________ (Principal Accounting
Dennis R. Eichholz Officer)
</TABLE>
April 4, 2000
58
<PAGE>
EXHIBIT 10.10
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 19, 1999
among
CLARK REFINING & MARKETING, INC.,
as Borrower,
BANKERS TRUST COMPANY,
as Administrative Agent and Collateral Agent,
THE TORONTO-DOMINION BANK,
as Syndication Agent,
BankBoston, N.A.,
as Documentation Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY TO THIS AGREEMENT
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. DEFINITIONS.................................................. 1
1.01 Certain Defined Terms........................................... 1
1.02 Accounting Principles........................................... 30
ARTICLE II. LOANS........................................................ 30
2.01 Commitments..................................................... 30
2.02 Borrowing of Loans.............................................. 30
2.03 Settlement of Bank Advances and Repayments...................... 32
2.04 Periodic Settlement of Agent and Bank Advances and Repayments... 33
2.05 Defaulting Banks................................................ 34
2.06 Mandatory Payment; Reduction of Commitments..................... 35
2.07 Maintenance of Loan Account; Statements of Account.............. 36
2.08 Payment Procedures.............................................. 36
2.09 Cash Management System.......................................... 36
2.10 Application of Payments......................................... 37
2.11 Increase of Commitments......................................... 37
ARTICLE III. LETTERS OF CREDIT............................................ 37
3.01 Issuance of Letters of Credit................................... 37
3.02 Terms of Letters of Credit; Existing Letters of Credit.......... 38
3.03 Banks' Participation............................................ 39
3.04 Notice of Issuance.............................................. 39
3.05 Payment of Amounts Drawn Under Letters of Credit................ 40
3.06 Payment by Banks................................................ 40
3.07 Nature of Issuing Bank's Duties................................. 40
3.08 Obligations Absolute............................................ 41
3.09 Uniform Customs and Practice and Uniform Commercial Code........ 42
ARTICLE IV. INTEREST, FEES AND EXPENSES, ETC............................. 42
4.01 Interest on Prime Rate Loans.................................... 42
4.02 Interest on Eurodollar Rate Loans............................... 42
4.03 Interest After Event of Default................................. 43
4.04 Reimbursement of Expenses....................................... 43
4.05 Commitment Fees and Certain Other Fees.......................... 43
4.06 Letter of Credit Fees........................................... 44
4.07 Special Provisions Relating to Eurodollar Rate Loans............ 45
4.08 Indemnification in Certain Events............................... 48
4.09 Net Payments.................................................... 49
4.10 Affected Banks.................................................. 51
4.11 Sharing of Payments............................................. 51
4.12 Calculations.................................................... 52
ARTICLE V. CONDITIONS PRECEDENT......................................... 52
5.01 Conditions of Effectiveness..................................... 52
i
<PAGE>
Page
----
5.02 Addition of Banks................................................ 55
5.03 Reallocation of Pro Rata Shares.................................. 56
5.04 Outstanding Loans and L/C Obligations............................ 56
5.05 Conditions to All Loans.......................................... 56
5.06 Conditions to All Letters of Credit.............................. 58
ARTICLE VI. REPRESENTATIONS AND WARRANTIES................................ 58
6.01 Corporate Existence and Power.................................... 58
6.02 Corporate Authorization; No Contravention........................ 59
6.03 Governmental Authorization....................................... 59
6.04 Binding Effect................................................... 59
6.05 Litigation....................................................... 59
6.06 No Default....................................................... 59
6.07 ERISA Compliance................................................. 60
6.08 Use of Proceeds; Margin Regulations.............................. 60
6.09 Title to Properties.............................................. 60
6.10 Taxes............................................................ 60
6.11 Financial Condition.............................................. 61
6.12 Environmental Matters............................................ 61
6.13 Collateral Documents............................................. 63
6.14 Regulated Entities............................................... 63
6.15 No Burdensome Restrictions....................................... 63
6.16 Copyrights, Patents, Trademarks and Licenses, etc................ 63
6.17 Subsidiaries..................................................... 63
6.18 Insurance........................................................ 64
6.19 Solvency......................................................... 64
6.20 Full Disclosure.................................................. 64
6.21 Maintenance of Accounts.......................................... 64
6.22 Receivables...................................................... 64
6.23 Inventory........................................................ 64
6.24 Holdings Note Indenture, 9 1/2% Note Indenture, 1997 Floating
and Fixed Rate Note Indentures, 1998 Fixed Rate Note Indenture
and 1998 Floating Rate Credit Agreement.......................... 64
6.25 Material Adverse Effect.......................................... 65
6.26 Year 2000 Compliance............................................. 65
ARTICLE VII. AFFIRMATIVE COVENANTS......................................... 65
7.01 Financial Statements............................................. 65
7.02 Certificates; Other Information.................................. 67
7.03 Notices.......................................................... 68
7.04 Preservation of Corporate Existence, Etc......................... 69
7.05 Maintenance of Property.......................................... 70
7.06 Insurance........................................................ 70
7.07 Payment of Obligations........................................... 70
7.08 Compliance with Laws............................................. 71
ii
<PAGE>
Page
----
7.09 Inspection of Property and Books and Records..................... 71
7.10 Environmental Laws............................................... 71
7.11 Use of Proceeds.................................................. 72
7.12 Further Assurances............................................... 72
7.13 Account Customers................................................ 73
7.14 Accounts......................................................... 73
7.15 Transfer of Funds into the Collection Bank Account and
Concentration Account............................................ 73
7.16 Year 2000 Compliance............................................. 74
ARTICLE VIII. NEGATIVE COVENANTS.......................................... 74
8.01 Limitation on Liens.............................................. 74
8.02 Disposition of Assets............................................ 76
8.03 Consolidations and Mergers....................................... 77
8.04 Loans and Investments............................................ 78
8.05 Limitation on Indebtedness....................................... 79
8.06 Transactions with Affiliates..................................... 80
8.07 Use of Proceeds.................................................. 81
8.08 Contingent Obligations........................................... 81
8.09 Joint Ventures and Pipeline Subsidiary........................... 81
8.10 Lease Obligations................................................ 82
8.11 Restricted Payments.............................................. 82
8.12 Change in Business............................................... 83
8.13 Accounting Changes............................................... 83
8.14 ERISA............................................................ 83
8.15 Collection Banks and Concentration Banks; Cash, Cash Equivalents
and Qualifying Investments....................................... 84
8.16 Financial Covenants.............................................. 84
8.17 Speculative Trading.............................................. 85
8.18 Amendments of Certain Documents.................................. 85
ARTICLE IX. EVENTS OF DEFAULT........................................... 85
9.01 Event of Default................................................. 85
9.02 Remedies......................................................... 88
9.03 Rights Not Exclusive............................................. 89
ARTICLE X. THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT........... 89
10.01 Appointment of Agent............................................. 89
10.02 Nature of Duties of Administrative Agent......................... 89
10.03 Lack of Reliance on Agent Related Persons........................ 90
10.04 Certain Rights of the Administrative Agent....................... 90
10.05 Reliance by Administrative Agent................................. 91
10.06 Indemnification of Agent-Related Persons......................... 91
10.07 Administrative Agent in Individual Capacity...................... 91
iii
<PAGE>
Page
____
10.08 Holders of Notes............................................... 91
10.09 Successor Administrative Agent................................. 92
10.10 Collateral Matters............................................. 92
10.11 Actions with Respect to Default................................ 94
10.12 Delivery of Information........................................ 94
10.13 Liability of Agent-Related Persons............................. 94
10.14 Agents Other Than Administrative Agent......................... 94
ARTICLE XI. MISCELLANEOUS................................................ 95
11.01 Amendments and Waivers......................................... 95
11.02 Notices........................................................ 96
11.03 No Waiver: Cumulative Remedies................................. 97
11.04 Indemnity...................................................... 97
11.05 Marshaling; Payments Set Aside................................. 98
11.06 Successors and Assigns......................................... 99
11.07 Assignments, Participations, etc............................... 99
11.08 Confidentiality................................................ 100
11.09 Set-off........................................................ 100
11.10 Notification of Addresses, Lending Offices, Etc................ 101
11.11 Counterparts................................................... 101
11.12 Severability................................................... 101
11.13 No Third Parties Benefitted.................................... 101
11.14 Governing Law and Jurisdiction................................. 101
11.15 Waiver of Jury Trial........................................... 102
11.16 Entire Agreement............................................... 102
iv
<PAGE>
SCHEDULES
Schedule 1.01(a) Commitments
Schedule 1.01(b) Eligible Carriers
Schedule 1.01(c) Reserved
Schedule 1.01(d) Major Oil Companies
Schedule 1.01(e) Pricing Grid
Schedule 1.01(f) Money Market Mutual Funds
Schedule 3.02 Existing Letters of Credit
Schedule 5.01(j) Material Contracts
Schedule 5.02 Additional Banks
Schedule 6.05 Litigation
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.17 Subsidiaries and Minority Interests
Schedule 6.18 Insurance Matters
Schedule 6.25 Material Adverse Effect
Schedule 7.06 Insurance Policies
Schedule 8.01 Permitted Liens
Schedule 8.01(m) Counterparties Not Subject to Pledge Requirement
Schedule 8.02 Asset Sales
Schedule 8.05 Permitted Indebtedness
Schedule 8.08 Contingent Obligations
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit A-1 Form of Incumbency Certificate for Borrowings
Exhibit A-2 Form of L/C Request
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Perfection Certificate
Exhibit F Form of Legal Opinion of Company's Counsel
Exhibit G Form of Legal Opinion of Administrative Agent's Counsel
Exhibit H Form of Assignment and Acceptance
Exhibit I Form of Note
Exhibit J-1 Form of Security Agreement
Exhibit J-2 Form of Trademark Security Agreement
Exhibit K Form of Concentration Bank Agreement
Exhibit L Form of Collection Bank Agreement
Exhibit M Form of Custodian Account Agreement
Exhibit N-1 Form of Collateral Account Agreement
Exhibit N-2 Form of Commodities Account Agreement
Exhibit O Form of Tax Sharing Agreement
Exhibit P Form of Confirmation Agreement
v
<PAGE>
CREDIT AGREEMENT
----------------
This AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") is
entered into as of November 19, 1999 by and among Clark Refining & Marketing,
Inc., a Delaware corporation (the "Company"), the several financial institutions
from time to time party to this Agreement (collectively, the "Banks" and
individually, a "Bank"), Bankers Trust Company, a New York banking corporation
("BT"), as the administrative agent and collateral agent for the Banks (in such
capacities, together with its successors and assigns, the "Administrative Agent"
and the "Collateral Agent", respectively), as an Issuing Bank, and as a Co-
Arranger, The Toronto-Dominion Bank, a Canadian chartered bank ("TD"), as a Co-
Arranger and as the syndication agent for the Banks (in such capacity, the
"Syndication Agent"), The Toronto Dominion Bank, as an Issuing Bank and
BankBoston, N.A., a national banking association ("BKB"), as an Issuing Bank, a
Co-Arranger and as documentation agent (in such capacity, the "Documentation
Agent").
WHEREAS, certain of the parties to this Agreement are party to the
Credit Agreement, dated as of September 25, 1997 and as further amended or
modified (the "Existing Credit Agreement"), which provides for aggregate
Commitments of $700,000,000; and
WHEREAS, the Company desires to amend and restate the Existing Credit
Agreement as provided herein, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
Article I.
DEFINITIONS
-----------
1.01 Certain Defined Terms . The following terms have the
following meanings: "Acceptable Issuer" means a United States domestic bank or
United States branch of a foreign bank, in each case rated "A-" or higher by S&P
and "A3" or higher by Moody's.
"Account" means, any "account", as such term is defined in Section 9-
106 of the UCC, now owned or hereafter acquired by the Company and, in any
event, shall include, without limitation, all accounts receivable, book debts
and all other rights to receive the payment of money or other consideration now
owned or hereafter received or acquired by or owing to the Company and arising
in connection with services rendered or goods sold, leased or delivered whether
or not earned by performance and whether or not evidenced by or set forth in or
arising out of any present or future chattel paper, note, draft, lease,
acceptance, writing, bond, instrument, document or general intangible, and all
extensions and renewals thereof, and all rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by the Company and arising in
connection with, services rendered or goods sold, leased or delivered, and all
of the Company's rights to any goods represented by any of the foregoing
(including,
<PAGE>
without limitation, rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), and all moneys
due or to become due to the Company under all contracts for the sale of goods or
the performance of services or both (whether or not yet earned by performance on
the part of the Company or in connection with any other transaction), now in
existence or hereafter occurring, including, without limitation, the right to
receive the proceeds of any of the foregoing, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
"Account Debtor" means any Person who is or who may become obligated
to the Company under, with respect to, or on account of, an Account.
"Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of more than 50% of the capital stock,
partnership interests or equity of any Person or otherwise causing any Person,
to become a Subsidiary, or (c) a merger or consolidation or any other
combination with another Person (other than a Person that is a Subsidiary)
provided that the Company or the Subsidiary is the surviving entity.
"Adjusted Eurodollar Rate" means, with respect to each Interest Period
for any Eurodollar Rate Loan, the rate obtained by dividing (i) the Eurodollar
Rate for such Interest Period by (ii) a percentage equal to one (1) minus the
stated maximum rate (stated as a decimal) of all reserves, if any, required to
be maintained against "Eurocurrency Liabilities" as specified in Regulation D of
the FRB (or against any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Rate Loans is determined or
any category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents).
"Administrative Agent" has the meaning specified in the introductory
clause of this Agreement.
"Administrative Agent's Payment Office" means the address for payments
set forth on the signature pages to this Agreement in relation to the
Administrative Agent, or such other address as the Administrative Agent may from
time to time specify.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Agent Advances" has the meaning specified in Section 2.02.
"Agent-Related Persons" means BT, BKB, and TD and any successor
Administrative Agent and Collateral Agent arising under Section 10.09 and any
successor letter of credit issuing banks hereunder, in each case together with
their respective Affiliates (including, in the case of BT, in its capacity as
Collateral Agent, an Arranger, as the Concentration Bank, as a Collection Bank
and as the holder of the Collateral Account under the
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<PAGE>
Collateral Account Agreement), and the officers, directors, employees, agents
and attorneys-in-fact of such Persons and Affiliates.
"Agents" means the Administrative Agent, the Syndication Agent and the
Documentation Agent, collectively.
"Agreement" means this Amended and Restated Credit Agreement.
"Applicable Margin" means (i) with respect to any date of
determination on or prior to March 31, 2000, 150 and 250 basis points per annum
with respect to determinations of the rate of interest accruing on Prime Rate
Loans and Eurodollar Rate Loans, respectively, and (ii) with respect to any date
of determination after March 31, 2000, the interest rate per annum set forth on
the Pricing Grid with respect to determinations of the rate of interest accruing
on Prime Rate Loans or Eurodollar Rate Loans, in each case under the applicable
calculation for such date of determination.
"Assignment and Assumption Agreement" has the meaning specified in
Section 11.07(b).
"Bank" has the meaning specified in the introductory clause to this
Agreement. References to the "Banks" shall include BT, BKB and TD, in their
respective capacities as Issuing Banks.
"Bank Advances" has the meaning specified in Section 2.02.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. (S)101, et seq.).
"Bank Swap Parties" means any Bank or any Affiliate of any Bank that
has entered into a Swap Contract with the Company or a Subsidiary.
"BKB" has the meaning specified in the introductory clause to this
Agreement.
"Borrowing" means a borrowing hereunder consisting of Loans of the
same Type made to the Company on the same day by the Banks under Article II,
and, other than in the case of Prime Rate Loans, having the same Interest
Period.
"Borrowing Base" means, as of any date of determination, the sum,
without duplication, of the following amounts (in the case of items (a), (b) and
(g) as reflected on the books or records of the Administrative Agent on such
date of determination and in the case of items (c), (d), (e) and (f) as set
forth in the latest Borrowing Base Certificate delivered pursuant to, and
subject to the provisions of, Section 7.02(e)):
(a) 100% of Eligible Cash and Eligible Cash Equivalents,
(b) 95% of Eligible Investments,
(c) 90% of Major Oil Company Receivables,
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<PAGE>
(d) 85% of Eligible Receivables not included in clause (c) above,
(e) 80% of Eligible Petroleum Inventory,
(f) 80% of Eligible Petroleum Inventory-Not-Received, and
(g) 100% of Paid but Unexpired Standby Letters of Credit; less
(h) the greater of (i) the aggregate of all net obligations of the
Company, as of the date of determination of any Borrowing Base, to any Bank Swap
Party under any Swap Contracts and (ii) zero ($0).
"Borrowing Base Certificate" has the meaning specified in Section
7.02(e).
"Borrowing Date" means any date on which a Borrowing occurs under
Section 2.02 or under Section 3.05.
"British Petroleum" means, collectively, BP Exploration & Oil Inc., an
Ohio corporation, The Standard Oil Company, an Ohio corporation, BP Oil Pipeline
Company, a Delaware corporation, BP Amoco Corporation and BP Chemicals Inc., an
Ohio corporation, and their subsidiaries and successors.
"BT" has the meaning specified in the introductory clause to this
Agreement.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close and, if the applicable Business Day relates to any Eurodollar Rate
Loan, means such a day on which dealings are carried on in the applicable
offshore dollar interbank market.
"Capital Expenditures" means, for any period, the sum of all
expenditures and other amounts capitalized for financial statement purposes in
accordance with GAAP (whether payable in cash or other property or accrued as a
liability), including the capitalized portion of Capitalized Leases, that
portion of Investments allocable to property, plant or equipment and "turnaround
expenditures" (as such term is customarily used in the refining industry).
"Capital Stock" of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of capital stock and
any rights (other than debt securities convertible into capital stock), warrants
or options to acquire such capital stock.
"Capitalized Lease" means, as applied to any Person, any lease of
property by such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" means the capitalized amount of all
obligations under Capitalized Leases.
"Cash" means United States Dollars or a credit deposit in a deposit
account denominated in United States Dollars that is available for withdrawal.
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<PAGE>
"Cash Collateralize" means to pledge and deposit with or deliver to
the Collateral Agent, for the benefit of the Banks, as additional collateral for
the L/C Obligations or Outstanding Eligible LOIs, as the case may be, cash or
deposit account balances pursuant to documentation in form and substance
satisfactory to the Administrative Agent (which documents are hereby consented
to by the Banks). Variations of such term shall have corresponding meaning.
The Company hereby grants to the Collateral Agent, for the benefit of the Banks,
a security interest in all such cash and deposit account balances.
"Cash Equivalents" means shares of the BT Institutional Cash
Management Fund, the BT Institutional Cash Reserve Fund and the BT Institutional
Treasury Money Fund and other similar funds as may be requested by the Company
and agreed to by the Administrative Agent.
"CERCLA" has the meaning specified in the definition of "Environmental
Laws."
"Change of Control" means any of (a) the failure of Holdings to own at
all times (directly or indirectly) 100% of the outstanding Voting Shares of the
Company, (b) any Person or "group" (as such term is defined in Section 13(d) of
the Exchange Act), other than the Fund Affiliates or Occidental, controls,
directly or indirectly, whether by ownership of Voting Shares, contract or
otherwise, the power to direct the affairs of or control the composition of at
least a majority of the board of directors or other equivalent body of Holdings
or (c) the acquisition of the beneficial ownership, whether directly or
indirectly of more than 25% of the outstanding capital stock of Holdings
(including any stock so owned on the Effective Date) by any Person or "group"
(as such term is defined in Section 13(d) of the Exchange Act), other than the
Fund Affiliates or Occidental; provided, that, as long as the Fund Affiliates
maintain the power to direct the affairs or control the board or other
equivalent body of Holdings (as described in clause (b) above), a Change of
Control shall not be deemed to occur under clause (c) above unless and until a
Person or "group" (as such term is defined in Section 13(d) of the Exchange Act)
other than the Fund Affiliates or Occidental, directly or indirectly, acquires
or holds more than 35% of the outstanding capital stock of Holdings.
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Company and its Restricted
Subsidiaries in or upon which a Lien now or hereafter exists in favor of the
Collateral Agent for the benefit of the Banks and the Bank Swap Parties, whether
under this Agreement, under any Collateral Document, or under any other
documents executed by any such Person and delivered to the Administrative Agent,
the Collateral Agent or the Banks.
"Collateral Account" means those certain collateral accounts
maintained by the Collateral Agent with BT, the terms and conditions of which
are set forth in the Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement
entered into by the Company and the Collateral Agent, on behalf of the Banks and
the Bank Swap Parties, in substantially the form of Exhibit N-1.
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<PAGE>
"Collateral Agent" has the meaning specified in the introductory
clause to this Agreement.
"Collateral Documents" means, collectively, (i) the Security
Agreement, the Trademark Security Agreement, the Collection Bank Agreement, the
Concentration Bank Agreement, the Collateral Account Agreement, the Custodian
Account Agreement, and each of the Commodities Account Agreements and all other
security agreements, patent and trademark assignments, guarantees and other
similar agreements between the Company or any of its Subsidiaries and the Banks
or the Collateral Agent for the benefit of the Banks and the Bank Swap Parties
now or hereafter delivered to the Banks, the Collateral Agent or the
Administrative Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable documents now
or hereafter filed in accordance with the UCC or comparable law) against the
Company or any of its Subsidiaries as debtor in favor of the Collateral Agent
for the benefit of the Banks and the Bank Swap Parties as secured party, and
(ii) any amendments, supplements, modifications, renewals, replacements,
consolidations, substitutions and extensions of any of the foregoing.
"Collection Bank" means the "Collection Bank" as defined in the
Collection Bank Agreement.
"Collection Bank Agreement" means the Collection Account Agreement
among the Company, the Administrative Agent and the Collection Bank,
substantially in the form of Exhibit L.
"Collection Deposit Account" means each Collection Deposit Account
established pursuant to the Collection Bank Agreement.
"Commercial L/C Risk Participation Fee Rate" means (i) with respect to
each day on or prior to March 31, 2000, 250 basis points per annum and (ii) with
respect to each day after March 31, 2000, the fee rate per annum set forth on
the Pricing Grid with respect to fees accruing on Commercial Letters of Credit.
"Commercial Letter of Credit" means any Letter of Credit Issued by an
Issuing Bank for the account of the Company under which the payment for the
purchase of Inventory by the Company is made in the ordinary course of business
through the presentation of applicable documentation, such as drafts, bills of
lading and/or other documents.
"Commitment", as to each Bank, shall mean the amount set forth
opposite such Bank's name on Schedule 1.01(a) as such amount may be increased or
reduced from time to time pursuant to the terms of this Agreement.
"Commitment Fee Rate" means, with respect to each day, the fee rate
per annum set forth on the Pricing Grid with respect to fees accruing on the
Commitments.
"Commodities Account Agreement" means the Assignment of Commodities
Account Security Agreement entered into by the Company and the Administrative
Agent, on behalf of the Banks and the Bank Swap Parties, in substantially the
form of Exhibit N-2.
6
<PAGE>
"Company" has the meaning specified in the introductory clause to this
Agreement.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C.
"Concentration Account" means the Concentration Collateral Account
established pursuant to the Concentration Bank Agreement.
"Concentration Bank" means the "Concentration Bank" as defined in the
Concentration Bank Agreement.
"Concentration Bank Agreement" means the Concentration Bank Agreement
among the Company, the Concentration Bank and the Collateral Agent on behalf of
the Banks and the Bank Swap Parties, substantially in the form of Exhibit K.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or without
recourse, and without duplication, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
another Person (the "primary obligor"), including any obligation of that Person
(i) to purchase, repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or discharge
of any such primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b) with
respect to any Surety Instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings or payments;
(c) to purchase any materials, supplies or other property from, or to obtain the
services of, another Person if the relevant contract or other related document
or obligation requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of whether delivery of
such materials, supplies or other property is ever made or tendered, or such
services are ever performed or tendered; (d) in respect of any Swap Contract; or
(e) in respect of any Outstanding Eligible LOI. The amount of any Contingent
Obligation shall, in the case of Guaranty Obligations, be deemed equal to the
stated or determinable amount of the primary obligation in respect of which,
such Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, and in the case of
other Contingent Obligations, shall be equal to the maximum reasonably
anticipated liability in respect thereof.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
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<PAGE>
"Conversion/Continuation Date" means any date on which, under Section
4.07, the Company (a) converts Loans of one Type to another Type, or (b)
continues as Loans of the same Type, but with a new Interest Period, Loans
having Interest Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any Loans
hereunder, and (b) the Issuance of any Letters of Credit hereunder.
"Cumulative Cash Flow" means, for the period beginning on October 1,
1999 and ending on the applicable measurement date, (a)(i) EBITDA of the Company
and the Restricted Subsidiaries plus (ii) cumulative cash equity contributions
made by Holdings or Parent to the Company and the Restricted Subsidiaries plus
(iii) cumulative cash interest income of the Company and the Restricted
Subsidiaries plus (iv) borrowings, other than under this Agreement, that are
permitted under Section 8.05 plus (v) net cash proceeds to the Company and the
Restricted Subsidiaries from asset sales plus (vi) cash dividends paid to the
Company and the Restricted Subsidiaries by any of the Unrestricted Subsidiaries
plus (vii) $200,000,000 minus (b)(i) cash interest expense of the Company and
the Restricted Subsidiaries, (ii) cash dividends or distributions paid by the
Company and the Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary), (iii) cash taxes paid by the Company and the Restricted
Subsidiaries, (iv) Capital Expenditures made by the Company and the Restricted
Subsidiaries in cash, (v) cash payments by the Company and the Restricted
Subsidiaries of principal (including Capital Lease Obligations and any reduction
of outstanding Indebtedness as a result of refinancing the 9 1/2% Notes, the
1997 Floating and Fixed Rate Notes, the 1998 Fixed Rate Notes or the 1998
Floating Rate Loans but excluding Loans hereunder) on Indebtedness and (vi)
Investments made by the Company and the Restricted Subsidiaries not prohibited
under Section 8.04, in each case on a cumulative basis during such period and
determined on a consolidated basis.
"Current Assets" of a Person means, as of any date of determination,
the aggregate amount of all assets of such Person that are classified as current
assets in accordance with GAAP.
"Current Liabilities" of a Person means, as of any date of
determination, the aggregate amount of all liabilities of such Person that are
classified as current liabilities in accordance with GAAP (including, without
limitation, tax and other proper accruals) and the current portion of any
Indebtedness and, with respect to the Company, the aggregate outstanding
principal amount of the Loans.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the United
States.
"EBITDA" means, for any period, an amount equal to (a) Net Income
(other than extraordinary items (in accordance with GAAP)) plus (b) gross
accrued interest expense (other than capitalized interest) during such period,
plus (c) an amount equal to the Company's income tax expense, plus (d) charges
for depreciation and amortization during such period, plus (e) the
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<PAGE>
amount of expense, if any, from non-cash inventory write-down-to-market, minus
(f) the amount of income, if any, from non-cash inventory write-up- to-market,
plus or minus, as the case may be (g) any other non-cash charges and expenses
which have been subtracted or added, as the case may be, in calculating Net
Income of such Person for such period, all as determined in accordance with
GAAP.
"Effective Amount" means (i) with respect to any Loans on any date,
the aggregate outstanding principal amount thereof after giving effect to any
Borrowings and prepayments or repayments of Loans occurring on such date; (ii)
with respect to any outstanding L/C Obligations on any date, the amount of such
L/C Obligations on such date after giving effect to any Issuances of Letters of
Credit occurring on such date and any other changes in the aggregate amount of
the L/C Obligations as of such date, including as a result of any reimbursements
of outstanding unpaid drawings under any Letters of Credit or any reductions in
the maximum amount available for drawing under Letters of Credit taking effect
on such date; and (iii) with respect to any Outstanding Eligible LOI, the dollar
value of the Petroleum Product in respect of which such Outstanding Eligible LOI
has been issued.
"Effective Date" means November 19, 1999.
"Eligible Carrier" means any of the carriers and pipeline companies
listed in Schedule 1.01(b) to this Agreement as revised by the Company from time
to time with the consent of the Administrative Agent, using reasonable business
judgment.
"Eligible Cash" means any and all Cash deposited with the Collateral
Agent or one of its Affiliates and in each case under the control of the
Collateral Agent, and which is subject to a valid, first priority perfected lien
and security interest in favor of the Collateral Agent on behalf of the Banks
and the Bank Swap Parties.
"Eligible Cash Equivalents" means any and all Cash Equivalents held by
the Collateral Agent in the Collateral Account and which are subject to a valid,
first priority perfected lien and security interest in favor of the Collateral
Agent on behalf of the Banks and the Bank Swap Parties.
"Eligible Investments" means any and all Qualifying Investments of the
Company which are subject to a valid, first priority perfected lien and security
interest in favor of the Collateral Agent on behalf of the Banks and the Bank
Swap Parties and which are valued at market.
"Eligible LOI" means any LOI for which all of the following criteria
have been met: (i) the Company shall have made a request in writing to a Bank
to issue such LOI; (ii) such written request shall state (x) the dollar value of
the Petroleum Product in respect of which such LOI is to be issued, (y) that
there is no Event of Default under this Agreement and (z) the format of such
LOI; (iii) such written request shall have attached a letter of indemnity or a
copy thereof if the original is unavailable (the "Backup LOI") (in form and
substance satisfactory to such Bank) from the supplier of the Petroleum Product
addressed to the Company pursuant to which the supplier of the Petroleum Product
warrants good title is held by the Company; provided, however, if the Company is
the original supplier of the Petroleum Products, this clause (iii) shall
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<PAGE>
not apply; (iv) the Administrative Agent shall have received a copy of such
written request, including a copy of the Backup LOI (if applicable), and shall
have confirmed availability under this Agreement; (v) such LOI shall include a
provision stating that such LOI will be canceled upon the receipt by the
beneficiary thereof of certain specified documents, including, without
limitation, title documents; (vi) such Bank shall have determined, in its sole
and absolute discretion, to issue such LOI; and (vii) such LOI shall be issued
pursuant to documentation negotiated between the Company and such Bank.
"Eligible Petroleum Inventory" means Petroleum Inventory that:
(a) (i) is subject to a valid, first priority perfected lien and
security interest in favor of the Collateral Agent on behalf of the Banks and
the Bank Swap Parties; provided that such requirement shall not apply to
Petroleum Inventory which is in transit on the high seas and not supported by a
Commercial Letter of Credit, the inclusion of which Inventory in the Borrowing
Base shall be limited as provided in the last proviso of this definition of
Eligible Petroleum Inventory or (ii) has been delivered to an Eligible Carrier
subject to a valid, first priority perfected lien and security interest in favor
of the Collateral Agent on behalf of the Banks and the Bank Swap Parties and
UCC-1 Financing Statements perfecting the security interest of the Collateral
Agent on behalf of the Banks and the Bank Swap Parties in such Petroleum
Inventory have been duly filed in each state and, where required, each county
through which such Petroleum Inventory is to be carried and the place of
delivery and either (x) no document of title is issued with respect to such
Petroleum Inventory by such Eligible Carrier, or (y) if a document of title is
issued with respect to such Petroleum Inventory by such Eligible Carrier, the
original of such document of title is delivered to the Collateral Agent or its
designated bailee or agent; provided that Eligible Petroleum Inventory shall not
include any amount in excess of $300,000,000 which is attributable to Inventory
described in the immediately preceding clause (ii) of this paragraph (a),
(b) is in good saleable condition, is not deteriorating in quality and
is not obsolete, and is of a quality which (in the locations where sold by the
Company) is marketable at prevailing market prices for such products and meets
all applicable governmental regulations and standards at the place of intended
sale,
(c) is owned by the Company or its Restricted Subsidiaries (provided
all documentation necessary to provide the Collateral Agent with a first
priority, perfected Lien thereon shall be in full force and effect) or, in the
case of Inventory described in clause (ii) of paragraph (a) above, the Company
has the absolute and unconditional right to obtain such Inventory or Inventory
equivalent to such Inventory from an Eligible Carrier, in each case, free and
clear of any and all Liens, security interests and encumbrances whatsoever,
other than those in favor of the Collateral Agent on behalf of the Banks and the
Bank Swap Parties created pursuant to the Collateral Documents and other than
the Permitted Liens described in Sections 8.01(c), 8.01(d) and 8.01(q) and
Permitted Liens described in Section 8.01(p) arising in the ordinary course of
business which are not delinquent or remain payable without penalty or which are
being contested in good faith and by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property subject
thereto.
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(d) is located at a location owned or leased by the Company, the
Pipeline Subsidiary or Clark Pipeline Company and set forth in the Perfection
Certificates or has been delivered to an Eligible Carrier under an arrangement
described in clause (ii) of paragraph (a) above; provided that the value of
Eligible Petroleum Inventory shall be reduced by the amount of unpaid storage
and throughput obligations for Petroleum Inventory located at a location leased
by the Company unless the Administrative Agent has received a waiver from the
landlord of such property with respect to any liens (including, without
limitation, statutory liens) which the landlord may have on the Petroleum
Inventory located thereon (it being agreed that no such waiver shall be required
during the first ninety (90) days after the Effective Date or, with respect to
any lease entered into after the Effective Date, within ninety (90) days after
entering into such lease),
(e) is not commingled with Inventory of any Person other than the
Company and/or its Restricted Subsidiaries or has been delivered to an Eligible
Carrier under an arrangement described in clause (ii) of paragraph (a) above,
and
(f) is otherwise satisfactory to the Administrative Agent, using
reasonable business judgment; provided that Eligible Petroleum Inventory shall
not include any amount which is attributable to Petroleum Inventory in transit
on the high seas unless such Petroleum Inventory (i) is supported by a
Commercial Letter of Credit Issued under this Agreement or (ii) is supported by
a Standby Letter of Credit issued under this Agreement and does not at any time
exceed $20,000,000 in the aggregate.
"Eligible Petroleum Inventory-Not-Received" means, at any date of
determination, the aggregate market price of Petroleum Inventory contracted for
purchase by the Company, if
(a) such Petroleum Inventory is subject to no Liens other than those
granted pursuant to the Collateral Documents,
(b) such Petroleum Inventory has not, as of such date of
determination, been delivered into an Eligible Carrier,
(c) such Petroleum Inventory has not been included for the Company as
Eligible Petroleum Inventory in the then effective Borrowing Base Certificate
but will be eligible for inclusion in the Company's Borrowing Base upon delivery
of such Petroleum Inventory to the Company,
(d) is in good saleable condition, is not deteriorating in quality and
is not obsolete, and is of a quality which (in the locations where sold by the
Company) is marketable at prevailing market prices for such products and meets
all applicable governmental regulations and standards at the place of intended
sale, and
(e) the Company's obligations to pay the purchase price of such
Inventory is supported by (A) a Commercial Letter of Credit Issued under this
Agreement which Commercial Letter of Credit requires the original bill of lading
(or other original "document of title" (as defined in the UCC)) relating to such
Petroleum Inventory to be delivered to the applicable Issuing Bank or its
designee in connection with a drawing under such Commercial Letter of
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Credit, or (B) a Standby Letter of Credit Issued under this Agreement which
Standby Letter of Credit provides that the beneficiary thereunder is not
permitted to make any drawing thereunder until the beneficiary has delivered a
certificate to the Issuing Bank certifying that delivery of such Petroleum
Inventory has been made by the beneficiary (to be paid for by such drawing) to
the Company and payment therefor is past due and owing, and (i) such Petroleum
Inventory, in the case of subclause (B) of this clause (e), is to be delivered
to the Company not more than thirty (30) days from the date such Petroleum
Inventory was shipped to the Company by the seller thereof and, if delivered to
a carrier, such carrier is an Eligible Carrier and (ii) for purposes of
inclusion of such Petroleum Inventory in the Borrowing Base, such Petroleum
Inventory shall be valued at an amount not to exceed the maximum drawing amount
of such Letter of Credit supporting the purchase price thereof.
"Eligible Receivables" means, at any given time, the aggregate amount
of all Accounts (including Accounts from Account Debtors located in Canada which
are acceptable to the Administrative Agent, in its sole discretion), carried on
the books of the Company in accordance with GAAP arising from the sale or
exchange of Inventory in the ordinary course of business with any Person (other
than any Affiliate of the Company), and which Accounts also meet all of the
following requirements:
(a) are invoiced upon delivery of such Inventory (or if such delivery
is made pursuant to a contract between the Company and the Account Debtor, the
invoice is issued not later than 40 days after such delivery) and which Accounts
are originally due within thirty (30) days of the original invoice date thereof
(or with respect to Account Debtors which are railroad companies or purchasers
of asphalt within forty-five (45) days of the original invoice date thereof) and
are not more than thirty (30) days past due;
(b) constitute the valid, binding and legally enforceable obligation
of the Account Debtor and are not subordinate to any other claim against such
Account Debtor;
(c) are not evidenced by any instrument, unless such instrument has
been pledged and delivered to the Collateral Agent on behalf of the Banks and
the Bank Swap Parties;
(d) are owned by the Company free and clear of all Liens, security
interests or encumbrances whatsoever, other than those in favor of the
Collateral Agent on behalf of the Banks and the Bank Swap Parties and other than
the Permitted Liens described in Sections 8.01(c), 8.01(d) and 8.01(q), and
Permitted Liens described in Section 8.01(p) arising in the ordinary course of
business which are not delinquent or remain payable without penalty or which are
being contested in good faith and by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property subject
thereto;
(e) are not the subject of a return, rejection, loss of or damage to
the goods, the sale of which gave rise to the Accounts, or any request for
credit or adjustment, or any other dispute with the Account Debtor on the
Accounts and all actions required to be performed by the Company with respect to
such Accounts have been performed (unless such return or rejection has been
made, such loss or damage has been compensated, or such credit or adjustment has
been allowed and, in each case, has been reflected in the amount of such
Eligible Receivable on the applicable Borrowing Base Certificate);
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(f) if the Account Debtor on any such Accounts is located outside the
United States or Canada, such Accounts are payable in full in Dollars and either
(i) the Account Debtor has been approved in writing by the Administrative Agent,
using reasonable business judgment or (ii) an Acceptable Issuer has issued an
irrevocable letter of credit in the amount of such Accounts for the benefit of
the Company and on which the Company may draw in the event of a default by such
Account Debtor in respect of such Accounts, provided that such letter of credit
is subject to a valid, first priority perfected lien and security interest in
favor of the Collateral Agent on behalf of the Banks and the Bank Swap Parties
or that BT is the collecting bank for such letter of credit and a copy of such
letter of credit has been delivered to the Collateral Agent and, provided
further, that the proceeds of any drawing under such letter of credit are to be
deposited into the Concentration Account;
(g) are owing by an Account Debtor which has not been determined to be
uncreditworthy in the reasonable business judgment of the Administrative Agent
and notice of such determination, identifying such Account Debtor, shall have
been sent to the Company by the Administrative Agent; provided that any Account
of any Account Debtor which is so determined to be uncreditworthy shall not be
excluded from Eligible Receivables solely on the basis of such determination if
an Acceptable Issuer has issued an irrevocable letter of credit in the amount of
such Account for the benefit of the Company and on which the Company may draw in
the event of a default by such Account Debtor in respect of such Account and (i)
such letter of credit is subject to a valid, first priority perfected lien and
security interest in favor of the Collateral Agent on behalf of the Banks and
the Bank Swap Parties or BT is the negotiating and collecting bank for such
letter of credit and a copy of such letter of credit has been delivered to the
Collateral Agent and (ii) the proceeds of any drawing under such irrevocable
letter of credit are to be deposited into the Concentration Account;
(h) are owing by an Account Debtor which has not (i) filed or had
filed against it, any Insolvency Proceeding, (ii) failed, (iii) suspended
business operations, (iv) become insolvent, (v) called a meeting of its
creditors for the purpose of obtaining any material financial concession or
accommodation, or (vi) had or suffered a receiver or a trustee to be appointed
for all or a significant portion of its assets or affairs (this clause (h) shall
not apply if and to the extent an Acceptable Issuer has issued an irrevocable
standby letter of credit in the amount of such Eligible Receivable for the
benefit of the Company and on which the Company may draw in the event of a
default by the Account Debtor with respect to such Eligible Receivable; provided
that such letter of credit is subject to a valid, first priority perfected lien
and security interest in favor of the Collateral Agent on behalf of the
Administrative Agent, the Banks and the Bank Swap Parties or that BT is the
collecting bank for such letter of credit and a copy of such letter of credit
has been delivered to the Collateral Agent and the Administrative Agent; and
provided, further, that the proceeds of any drawing under such letter of credit
are to be deposited into the Concentration Account);
(i) are subject to a valid, first priority, perfected lien and
security interest in favor of the Collateral Agent on behalf of the Banks and
the Bank Swap Parties;
(j) are due from a customer to the extent that such Accounts due from
such customer and its Affiliates do not exceed in the aggregate an amount equal
to (i) if such customer is a Person listed on Schedule 1.01(d)(as such schedule
may be amended from time to time with
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the approval of the Administrative Agent), 25% of the aggregate of all Accounts
at such time and (ii) otherwise, 10% of the aggregate of all Accounts at such
time; provided that notwithstanding clause (i) or (ii) above, (x) Accounts due
from Chevron U.S.A. Inc. and its Affiliates may exceed 25% of the aggregate of
all Accounts at such time but shall not, if in excess of 25% of the aggregate
Accounts due at such time, have a face amount in the aggregate in excess of
$50,000,000 (it being understood that only such portions which exceed the limit
set forth above will be excluded from Eligible Receivables), (y) there shall be
no limit on Accounts due from British Petroleum which may be included as
Eligible Receivables so long as, to the extent that the amount of such
receivables exceeds $50,000,000, such excess is supported by a letter of credit
from a financially sound financial institution, on a dollar-for-dollar basis,
for the benefit of the Company (it being understood that only such portion of
such excess which is not so supported will be excluded from Eligible
Receivables) and (z) Accounts due from Clark Retail Enterprises Inc. may exceed
the limitations set forth in clauses (i) and (ii) but shall not exceed the
greater of (I) $10,000,000 and (II) the Company's internal credit policy limit
for such Account Debtor from time to time; and provided, further, that
notwithstanding anything herein to the contrary, there shall be excluded from
Accounts and the aggregate of all Accounts in the above calculations, Accounts
generated from the sale of West Texas Intermediate - Cushing and due from
certain Account Debtors (as previously disclosed, in writing, to the Agents and
as may be changed, from time to time, with the approval of the Administrative
Agent) so long as, to the extent that the amount of such receivables from any
such Account Debtor exceeds the Company's internal credit policy limit (as
previously disclosed, in writing, to the Agents and as may be changed, from time
to time, with the approval of the Administrative Agent) in respect of such
Account Debtor, such excess is supported by a letter of credit from a
financially sound financial institution, on a dollar-for-dollar basis, for the
benefit of the Company (it being understood that only such portion of such
excess which is not so supported will be excluded from Eligible Receivables);
(k) are not denominated in any currency other than Dollars and are not
payable outside the United States or Canada; and
(l) otherwise have not been determined to be unsatisfactory to the
Administrative Agent, using reasonable business judgment and notice of such
determination, identifying such Eligible Receivable, shall have been sent to the
Company by the Administrative Agent; and
(m) less (A) all reserves established in the reasonable business
judgment of the Administrative Agent with respect to such Accounts and (B) any
and all offsets, counterclaims or contracts in respect thereof, including all
federal, state and other taxes (but excluding income taxes) in respect thereof.
For the purpose of this definition, to the extent that the Company is at any
time directly or contingently indebted for any reason to any Account Debtor, the
Accounts owing to the Company by such Account Debtor shall be deemed to be
subject to an offset, counterclaim or contra in the amount of such Indebtedness;
provided that to the extent that any Indebtedness of the Company to any Account
Debtor is secured by a Letter of Credit, the portion of the Indebtedness so
secured (not to exceed the lesser of (i) the face amount of the Letter of Credit
and (ii) the outstanding amount of such Indebtedness) shall not be deemed to be
an offset, counterclaim or contra with respect to the Accounts of such Account
Debtor owing to the Company.
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"Environmental Claims" means all claims, complaints, actions, suits,
proceedings or investigations, however commenced or asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), investigation, cleanup, removal, remedial or response costs,
monitoring, contribution, restitution, civil or criminal penalties, injunctive
relief, or other type of relief, resulting from or based upon the presence,
placement, storage, transportation or use, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental, placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from any Facility,
whether or not owned by the Company.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, licenses, approvals, judicial judgments
or decrees, authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters; including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, ("CERCLA"), the Clean Air Act,
the Federal Clean Water Act, the Solid Waste Disposal Act, the Federal Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the Emergency
Planning, Community Right-to-Know Act, the Federal Occupational Safety and
Health Act, the Hazardous Materials Transportation Act, the National
Environmental Policy Act, the Federal Oil Pollution Act of 1990 and any similar
state laws (including state laws implementing such federal laws), each as
amended and in effect at the relevant time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute thereto and all final or
temporary regulations promulgated thereunder and published, generally applicable
rulings entitled to precedential effect.
"ERISA Affiliate" means any entity required at any relevant time to be
aggregated with the Company under Sections 414(b) or (c) of the Code or Section
4001 of ERISA; provided, however, that for purposes of the provisions of this
Agreement relating to Section 412 of the Code or Section 302 of ERISA, the term
ERISA Affiliate shall also mean any entity that is a member of any group of
persons, as provided in Sections 414(m) or (o) of the Code, of which the Company
is a member.
"ERISA Event" means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA if such withdrawal could reasonably be expected to result in a material
liability to the Company; (c) a complete or partial withdrawal by the Company or
any ERISA Affiliate from a Multiemployer Plan, notification that a Multiemployer
Plan is in reorganization, the termination of a Multiemployer Plan under Section
4041A of ERISA or the commencement of proceedings to terminate a Multiemployer
Plan, if any of the foregoing events
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could reasonably be expected to result in a material liability to the Company;
(d) the filing of a notice of intent to terminate a Pension Plan under Section
4041(c) of ERISA or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan; or (e) the imposition of any material liability under
Title IV of ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA, upon the Company or any ERISA Affiliate.
"Eurodollar Rate" shall mean, with respect to the Interest Period for
each Eurodollar Rate Loan comprising part of the same Borrowing, an interest
rate per annum equal to the rate (rounded upward to the nearest whole multiple
of one-sixteenth (1/16) of one percent (1.00%) per annum, if such rate is not
such a multiple) of the offered quotation, if any, to first class banks in the
Eurodollar market by BT for U.S. dollar deposits of amounts in immediately
available funds comparable to the principal amount of the Eurodollar Rate Loan
for which the Eurodollar Rate is being determined with maturities comparable to
the Interest Period for which such Eurodollar Rate will apply as of
approximately 10:00 A.M., New York City time, two (2) Business Days prior to the
commencement of such Interest Period. If BT fails to provide its offered
quotation to the Administrative Agent, the Eurodollar Rate shall be determined
on the basis of the arithmetic average of the quotations of such other reference
banks as determined by the Administrative Agent, in its sole discretion.
"Eurodollar Rate Loan" shall mean a Loan that bears interest based on
the Eurodollar Rate.
"Event of Default" means any of the events or circumstances specified
in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Existing Credit Agreement" has the meaning specified in the recitals
to this Agreement.
"Expenses" shall mean all reasonable present and future expenses
incurred by or on behalf of the Administrative Agent and/or the Collateral Agent
in connection with any other Loan Document or otherwise related thereto, whether
incurred heretofore or hereafter, which expenses shall include, without being
limited to, the cost of record searches, the reasonable fees and expenses of
attorneys and paralegals, all costs and expenses incurred by the Administrative
Agent and/or the Collateral Agent in opening bank accounts and lockboxes,
depositing checks, receiving and transferring funds, and any charges imposed on
the Administrative Agent and/or the Collateral Agent due to insufficient funds
of deposited checks and the Administrative Agent's and/or the Collateral Agent's
standard fee relating thereto, reasonable fees and expenses of collateral
examinations and collateral audits, and of accountants, appraisers or other
consultants, experts or advisors employed or retained by the Administrative
Agent and/or the Collateral Agent, fees and taxes relative to the filing or
recording of financing statements and other Collateral Documents, costs of
recording Collateral Documents, all expenses, costs and fees set forth in
Article 4 of this Agreement, reasonable fees and expenses incurred in connection
with the negotiation, preparation, review, execution and delivery of the Loan
Documents,
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irrespective of whether the transactions contemplated hereby are consummated,
including any amendments, supplements, waivers or consents executed and
delivered in connection therewith, with syndicating the credit facility
contemplated hereunder (including, without limitation, costs and expenses for
preparation of information packages for prospective Banks and arranging and
conducting "due diligence" meetings), with the administration, collection,
enforcement and termination (including termination of any Liens) of the Loan
Documents, and with the completion of the due diligence review by the
Administrative Agent and the Banks and all fees and expenses required to be paid
pursuant to the Fee Letters. In addition, Expenses shall include all costs and
expenses (including the reasonable fees and disbursements of counsel and other
professionals, including internal counsel) paid or incurred by the Agents or any
Bank in (i) enforcing or defending its rights under or in respect of any Loan
Document, the Collateral Documents or any other document or instrument now or
hereafter executed and delivered in connection herewith, (ii) collecting the
Loans and reimbursement obligations under Letters of Credit, (iii) foreclosing
or otherwise collecting upon the Collateral or any part thereof, and (iv)
obtaining any legal, accounting or other advice in connection with any of the
foregoing, including in a "work out", restructuring or similar scenario.
"External FW Letter of Credit" means that letter of credit in an
aggregate principal amount not to exceed $50,000,000 at any time, to be issued
for the account of the Company in favor of Foster Wheeler USA Corporation or any
of its Affiliates to support the Company's obligations under that certain
Engineering, Procurement and Construction Agreement between the Company and
Foster Wheeler USA Corporation dated March 24, 1998, as amended, as such letter
of credit may be amended, modified or supplemented from time to time.
"Facilities" means any real property now, heretofore or hereafter
owned or leased or used by the Company or any of its Subsidiaries, including all
real property relating to the land and improvements known as the Blue Island
Refinery, located in Blue Island, Illinois, together with the terminals, tanks,
pipelines and related facilities used or intended for use in connection
therewith, the land and improvements known as the Hartford Refinery, located in
Hartford, Illinois, together with the terminals, tanks, pipelines and related
facilities used or intended for use in connection therewith, the land and
improvements known as the Lima Refinery, located in Lima, Ohio, together with
the terminals, tanks, pipelines and related facilities used or intended for use
in connection therewith, the Port Arthur Refinery and all terminals owned,
leased or operated by the Company or any of its Subsidiaries.
"Facility Expiry Date" means the earliest of (a) the occurrence of an
Event of Default and termination of the Commitments pursuant to Section 9.02,
(b) June 30, 2001 and (c) any other termination of the commitments pursuant to
the terms of this Agreement.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic mean as
determined by the Administrative Agent of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that
day by each of three
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leading brokers of Federal funds transactions in New York City selected by the
Administrative Agent.
"Fee Letter" has the meaning specified in Section 4.05(a).
"Fees" shall mean, collectively, fees referred to in Sections 4.05 and
4.06.
"FIFO" means the first-in-first-out method of determining value of
Inventory in accordance with GAAP.
"FRB" means the Board of Governors of the Federal Reserve System, and
any successor Governmental Authority.
"Fund Affiliates" means Blackstone Capital Partners III Merchant
Banking Fund L.P., a Delaware limited partnership, Blackstone Offshore Capital
Partners III L.P., a Delaware limited partnership, Blackstone Family Investment
Partnership III L.P., a Delaware limited partnership, each of their respective
Affiliates that is not an operating company or controlled by an operating
company and each general partner of any of them who is a partner or employee of
The Blackstone Group L.P. and their families, related trusts and controlled
entities.
"FW Letter of Credit" means the Letter of Credit, dated August 18,
1999 issued for the account of the Company in favor of Foster Wheeler USA
Corporation or any of its Affiliates to support the Company's obligations under
that certain Engineering, Procurement and Construction Agreement between the
Company and Foster Wheeler USA Corporation, dated March 24, 1998, as amended, as
such Letter of Credit may be amended, modified or supplemented from time to
time.
"GAAP", as more fully discussed in Section 1.02, means generally
accepted accounting principles in the United States as in effect from time to
time as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements of such other entity as may be approved by a significant
segment of the accounting profession which are applicable to the circumstances.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any interstate or multistate authority, any
central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Hazardous Materials" means any substances that are regulated by, or
which form the basis of liability under, any Environmental Law, including all
substances identified under any Environmental Law as a pollutant, contaminant,
hazardous waste, hazardous constituent, special
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waste, hazardous substance, hazardous material, or toxic substance, and
petroleum or petroleum derived substance or waste.
"Holdings" means Clark USA, Inc., a Delaware corporation.
"Holdings Note Indenture" means that certain Indenture, dated as of
December 1, 1995 between Holdings and The Chase Manhattan Bank N.A., as trustee
relating to the 10 7/8% Notes, due 2005, as the same may hereafter be amended,
amended and restated, supplemented or otherwise modified in accordance with the
terms thereof and of this Agreement and in effect.
"Holdings Notes" means the 10 7/8% Notes, due 2005 of Holdings issued
under the Holdings Note Indenture.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property) and all obligations under any linefill agreements; (f)
all Capitalized Lease Obligations; (g) all net obligations with respect to Swap
Contracts; (h) all indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness;
and (i) all Guaranty Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section 11.05.
"Indemnified Person" has the meaning specified in Section 11.05.
"Independent Auditor" has the meaning specified in Section 7.01(a).
"Information Systems and Equipment" means all computer hardware,
firmware and software, as well as other information processing systems, or any
equipment containing embedded microchips, whether directly owned, licensed,
leased, operated or otherwise controlled by the Company or any of its
Subsidiaries, including through third-party service providers, and which, in
whole or in part, are used, operated, relied upon, or integral to, the Company's
or any of its Subsidiaries' conduct of their business.
"Insolvency Proceeding" means (a) any case, action or proceeding
before any Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the
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benefit of creditors, composition, marshaling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.
"Institutional Finance Documents" means the 9 1/2% Notes, the 9 1/2%
Note Indenture, the 1997 Floating and Fixed Rate Notes, the 1997 Floating and
Fixed Rate Note Indentures, the 1998 Fixed Rate Notes, the 1998 Fixed Rate Note
Indenture, the 1998 Floating Rate Loans, the 1998 Floating Rate Credit
Agreement, the Holdings Notes, the Holdings Note Indenture (including, in each
case, any refinancing, replacement or refunding thereof in accordance with the
terms of this Agreement), each of the exhibits and schedules thereto, and all
other agreements, instruments and documents relating thereto.
"Interest Period" means, as to any Eurodollar Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as an Eurodollar Rate
Loan, and ending on the date one, two, three or six months thereafter as
selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that: (i) if any Interest Period would
otherwise end on a day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day; (ii) any Interest
Period that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and (iii) no Interest Period for any
Loan shall extend beyond the Facility Expiry Date then in effect.
"Inventory" means any "inventory" as that term is defined in Section
9-109(4) of the UCC, as well as all inventory which is held for sale or which
consists of raw materials or work in process.
"Investment" means all expenditures made and all liabilities incurred
(including Contingent Obligations) for or in connection with the acquisition of
stock, other equity interests or Indebtedness of another Person, loans,
advances, capital contributions or transfers of property (other than sales or
transfers permitted under Section 8.02) to another Person, acquisition of assets
of another Person (other than assets acquired as a creditor in a third party's
bankruptcy or reorganization and assets acquired in the ordinary course of
business), or any other investment whether such investment is acquired by
purchase, exchange, issuance of stock or other securities, merger,
reorganization or otherwise; provided, however, that the term "Investment" shall
not include (a) current trade and customer accounts receivable for goods
furnished or services rendered in the ordinary course of business and payable in
accordance with customary trade terms, (b) advances, payments and prepayments to
suppliers for goods and services in the ordinary course of business, (c)
advances to employees for travel expenses, drawing accounts and similar
expenditures, (d) stock or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due or owing or as
security for any such Indebtedness or claim, (e) demand deposits in banks or
trust companies, (f) any Capital Expenditures or (g) Guaranty Obligations to the
extent included in Indebtedness. In determining the aggregate amount of
Investments outstanding at any particular time, (i) a guaranty shall be valued
at not
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less than the principal amount outstanding; (ii) returns of capital (but only by
repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution) shall be deducted; (iii) earnings, whether as
dividends, interest or otherwise, shall not be deducted; and (iv) decreases in
the market value shall not be deducted unless such decreases are computed in
accordance with GAAP.
"IRS" means the Internal Revenue Service, and any successor
Governmental Authority.
"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"Issuing Bank" means each of BT, BKB and TD in its capacity as issuer
of one or more Letters of Credit.
"Issuing Bank Fees" has the meaning set forth in Section 4.06(c).
"Joint Venture" means a partnership, joint venture or other similar
legal arrangement (whether created by contract or conducted through a separate
legal entity) now or hereafter formed by the Company or any of its Restricted
Subsidiaries with another Person in order to conduct a common venture or
enterprise with such Person.
"L/C Obligations" means, at any time, without duplication, the sum of
(i) the aggregate undrawn stated amount of all Letters of Credit outstanding at
such time, plus (ii) with respect to determinations of whether a Loan shall be
made or a Letter of Credit issued, the aggregate undrawn stated amount of all
Letters of Credit requested by the Company the issuance of which has been
authorized by an Issuing Bank but which have not yet been issued, plus (iii) the
aggregate amount of all drawings under Letters of Credit for which any Issuing
Bank has not at such time been reimbursed, plus (iv) the aggregate amount of all
payments made by each Bank to an Issuing Bank with respect to such Bank's
participation in Letters of Credit as provided in Section 3.03 for which the
Company has not at such time reimbursed the Banks, whether by way of a Loan or
otherwise.
"L/C-Related Documents" means the Letters of Credit, the L/C Requests
and any other document relating to any Letter of Credit, including any of the
applicable Issuing Bank's standard form documents for Letter of Credit
Issuances.
"L/C Request" means a notice substantially in the form of Exhibit A-2.
"Lead Bank" means each of BT, BKB and TD, in each case in its capacity
as a Bank.
"Lending Office" means, as to any Bank, the office or offices of such
Bank specified as its "Lending Office" or "Domestic Lending Office" or
"Eurodollar Lending Office", as the case may be, on the signature page of such
Bank attached to this Agreement, or such other office or offices as such Bank
may from time to time notify the Company and the Administrative Agent.
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"Letter of Credit" means any Letter of Credit (whether a Standby
Letter of Credit or a Commercial Letter of Credit) Issued by any Issuing Bank
pursuant to Article III (including any Letter of Credit issued and outstanding
under the Existing Credit Agreement which is deemed a Letter of Credit hereunder
pursuant to Article III).
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance or lien
(statutory or other) of any kind or nature whatsoever in respect of any property
(including those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a capital
lease, any financing lease having substantially the same economic effect as any
of the foregoing, or the filing of any financing statement naming the owner of
the asset to which such lien relates as debtor, under the UCC or any comparable
law) and any contingent or other agreement to provide any of the foregoing, but
not including the interest of a lessor under an operating lease.
"Loan" has the meaning specified in Section 2.01 and may be a Prime
Rate Loan or a Eurodollar Rate Loan.
"Loan Account" has the meaning set forth in Section 2.07.
"Loan Documents" means this Agreement, any Notes, the Collateral
Documents, the Fee Letters, the L/C-Related Documents, any Swap Contracts
between the Company and the Bank Swap Parties, any Eligible LOIs (and the
agreements executed and delivered in connection therewith) and all other
documents delivered to the Administrative Agent, the Collateral Agent or any
Bank in connection herewith or therewith.
"Lockbox" means a lockbox and related accounts in which wholesale
customers deposit checks representing proceeds of Collateral, the withdrawal of
funds therefrom being limited to withdrawals by the Collection Bank pursuant to
the direction of the Company and otherwise in accordance with the Credit
Agreement.
"LOI" means any letter of indemnity issued to enable the Company to
obtain payment under a letter of credit issued in favor of the Company for
payment, or to obtain payment from a purchaser, for Petroleum Product sold by
the Company despite the Company's inability to present to the issuing bank or to
the purchaser, as the case may be, certain documents including, without
limitation, title documents, required for payment.
"Major Oil Company Receivable" means, (a) an Eligible Receivable
carried on the books of the Company as to which the Account Debtor thereon is
listed on Schedule 1.01(d) to this Agreement (which Schedule may be amended from
time to time by the Administrative Agent, using reasonable business judgment (by
either adding to or deleting from such Schedule the names of Account Debtors)),
or (b) any Eligible Receivable as to which an Acceptable Issuer has issued an
irrevocable standby letter of credit in the amount of such Eligible Receivable
for the benefit of the Company and on which the Company may draw in the event of
a default by the Account Debtor with respect to such Eligible Receivable;
provided that such letter of credit is subject to a valid, first priority
perfected lien and security interest in favor of the Collateral Agent on behalf
of the Administrative Agent, the Banks and the Bank Swap Parties or that BT is
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<PAGE>
the collecting bank for such letter of credit and a copy of such letter of
credit has been delivered to the Collateral Agent and the Administrative Agent;
and provided, further, that the proceeds of any drawing under such letter of
credit are to be deposited into the Concentration Account.
"Majority Banks" means at any time Banks then holding at least 51% of
the then aggregate unpaid principal amount of the Loans and/or Letters of
Credits, or, if no such principal amount is then outstanding, Banks then having
at least 51% of the Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse effect upon,
the operations, business, properties, condition (financial or otherwise) or
prospects of the Company or the Company and the Restricted Subsidiaries taken as
a whole; (b) a material impairment of the ability of the Company or any
Restricted Subsidiary to perform under any Loan Document and to avoid any Event
of Default; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability against the Company or any Restricted
Subsidiary of any Loan Document.
"Material Contracts" means each contract, agreement and commitment
(other than the other Loan Documents) to which the Company or any of the
Restricted Subsidiaries will be a party after giving effect to the transactions
contemplated by the Loan Documents, and that will be or are material to the
business, assets or operations of the Company and the Restricted Subsidiaries,
taken as a whole.
"Moody's" shall mean Moody's Investors Service, Inc. and any successor
thereto.
"Multiemployer Plan" means a "multiemployer plan", within the meaning
of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate
makes, is making, or is obligated to make contributions or, during the preceding
three calendar years, has made, or been obligated to make, contributions.
"Net Income" means, for any period, the net income (or net loss, as
the case may be) of the Company and the Restricted Subsidiaries for such period,
determined on a consolidated basis among them in accordance with GAAP.
"Net Worth" of any Person means, as of any date of determination, the
excess of the Total Assets of such Person at such date of determination over the
Total Liabilities of such Person at such date of determination.
"9 1/2% Note Indenture" means that certain Indenture dated as of
September 15, 1992 between the Company and Bank of New York, N.A., as trustee,
relating to the 9 1/2% Senior Notes, as the same may hereafter be amended,
amended and restated, supplemented or otherwise modified or refinanced or
replaced, in each case in accordance with the terms thereof and of this
Agreement and in effect.
"9 1/2% Notes" means the 9 1/2% Senior Notes due September 15, 2004 of
the Company issued under the 9 1/2% Note Indenture.
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"1997 Floating and Fixed Rate Note Indentures" means (i) that certain
Indenture, dated as of November 21, 1997, between the Company and Bankers Trust
Company, as trustee relating to the Company's 8-3/8% Notes of the Company due
2007, and (ii) that certain Indenture, dated as of November 21, 1997 between the
Company and Marine Midland Bank, as trustee relating to the Company's 8-7/8%
Notes due 2007.
"1997 Floating and Fixed Rate Notes" means (i) the Company's 8-3/8%
Notes due November 2007 and (ii) the Company's 8-7/8% Notes due November 2007.
"1998 Fixed Rate Notes" means the Company's 8-5/8% Senior Notes due
August 2009.
"1998 Fixed Rate Note Indenture" means that certain Indenture, dated
as of August 10, 1998, between the Company and Bankers Trust Company, as
Trustee, relating to the Company's 8-5/8% Notes.
"1998 Floating Rate Loans means the loans under the 1998 Floating Rate
Credit Agreement.
"1998 Floating Rate Credit Agreement" means the Credit Agreement dated
as of August 10, 1998 among the Company, the lenders signatory thereto and
Goldman Sachs Credit Partners, LP, as Administrative Agent.
"Note" means a promissory note executed by the Company in favor of a
Bank pursuant to Section 5.01(a), in substantially the form of Exhibit I.
"Notice of Borrowing" means a notice in substantially the form of
Exhibit A.
"Notice of Conversion/Continuation" means a notice in substantially
the form of Exhibit B.
"Obligations" means all advances, debts, liabilities, obligations,
Fees and Expenses, covenants and duties arising under any Loan Document owing by
the Company to any Bank, the Administrative Agent, the Collateral Agent, any
Issuing Bank, any Bank Swap Party, any Indemnified Person, or any other Agent-
Related Persons whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising.
"Occidental" means Occidental Petroleum Corporation, a Delaware
corporation.
"Organization Documents" means, for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of designations or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made
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hereunder or from the execution, delivery or registration of, or otherwise with
respect to any Loan Document.
"Outstanding Eligible LOI" means any Eligible LOI for which the Bank
issuing such Eligible LOI has not notified the Administrative Agent that such
Eligible LOI has been canceled.
"PACC Coker Project" means the approximately 80,000 barrel per stream
day delayed coking unit, 35,000 barrel per stream day hydrocracker and 417 long
ton per day sulfur complex and related assets currently being constructed and
which upon completion will be operated by the Company.
"Paid but Unexpired Standby Letters of Credit" means, as of any date
of determination, the excess, if any, of (a) the outstanding amount of Standby
Letters of Credit issued to support the purchase of Inventory of the Company as
of such date of determination, over (b) the aggregate outstanding amount due and
owing as of such date of determination by the Company to the supplier(s) of such
Inventory on account of the purchase(s) of such Inventory.
"Parent" means Clark Refining Holdings, Inc., a Delaware corporation.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor Governmental Authority.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA (other than a Multiemployer Plan) which the
Company sponsors, maintains, or to which it makes, is making, or is obligated to
make contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA), has made contributions at any time during the
immediately preceding five (5) plan years.
"Perfection Certificate" has the meaning specified in Section 5.01(f).
"Permitted Liens" has the meaning specified in Section 8.01.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture or
Governmental Authority.
"Petroleum Inventory" means Inventory consisting of crude oil,
petroleum, refined petroleum products, byproducts and intermediate feedstocks,
and other energy-related commodities, including, without limitation, blend
components commonly used in the petroleum industry to improve characteristics
of, or meet governmental or customer specifications for, petroleum or refined
petroleum products, all of which Inventory shall be valued at market.
"Petroleum Product" means crude oil, petroleum, refined petroleum
products, byproducts and intermediate feed stocks, and other energy-related
commodities, including, without limitation, blend components commonly used in
the petroleum industry to improve characteristics of, or meet governmental or
customer specifications for, petroleum or refined petroleum products.
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"Pipeline Subsidiary" means Clark Port Arthur Pipeline Company, a
Delaware corporation and a wholly-owned subsidiary of the Company.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA), other than a multiemployer plan (as defined in Section 3(37) of ERISA),
which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Port Arthur Purchase Agreement" means that certain Asset Purchase
Agreement by and between Chevron U.S.A. Inc. and the Company dated as of August
16, 1994, as the same may at any time be amended, amended and restated,
supplemented or otherwise modified in accordance with the terms thereof and of
this Agreement and in effect.
"Port Arthur Refinery" means the land and improvements known as the
Port Arthur Refinery, located in Port Arthur, Texas, together with the terminals
(including the Beaumont, Texas terminal, the Fannett, Texas terminal, the Lucas,
Texas terminal and the Port Arthur product station terminal), tanks, pipelines
and related facilities used or intended for use in connection therewith.
"Pricing Grid" means the pricing grid attached as Schedule 1.01(e) to
this Agreement.
"Prime Rate" means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in effect for
such day as publicly announced from time to time by BT, as its "prime lending
rate." (The "prime lending rate" is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer of BT and BT
may make loans at rates of interest at, above or below the "prime lending
rate").
Any change in the "prime lending rate" announced by BT shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Prime Rate Loan" means a Loan that bears interest based on the Prime
Rate.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of all Banks.
"Qualifying Investments" means (i) readily marketable certificates of
deposit issued by a Bank or any other bank organized under the laws of the
United States of America or any state thereof, if as of the date of purchase
thereof by the Company, such Bank or bank has a short term rating of not less
than P-1 by Moody's and A-1 by S&P and having a final maturity of not more than
360 days, (ii) commercial paper or finance company paper that is rated as of the
date of purchase thereof not less than P-1 by Moody's and A-1 by S&P and having
a final maturity of not more than 270 days, (iii) auction rate securities with
intermediate to perpetual maturities that are structured with short term holding
periods of 7-49 days and whose long-term rating as of the date of purchase
thereof is not less than A-1 by Moody's and A+ by S&P, (iv) direct obligations
of the United States of America having an average maturity of not more than one
year, (v) obligations of agencies of the United States of America including, but
not limited
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<PAGE>
to, Federal Home Loan Bank, Federal National Mortgage Association, Student Loan
Marketing Association and Government National Mortgage Association that are
rated as of the date of purchase thereof not less than Aaa by Moody's and AAA by
S&P and having a final maturity of not more than 366 days, (vi) repurchase and
reverse repurchase agreements, in each case with durations of less than 31 days
that are fully secured by direct obligations of the United States of America,
(vii) a portfolio composed of any Qualifying Investments described in (i)
through (vi) above with a weighted average maturity of not more than one year,
provided that the only Qualifying Investments which may have a longer maturity
than described in the relevant sections (i) through (vi) are those Qualifying
Investments (iv) and (v), and (viii) money market mutual funds set forth on
Schedule 1.01(f) to this Agreement as it may be amended from time to time at the
request of the Company with the approval of the Administrative Agent, provided
that Qualifying Investments shall not include more than $50,000,000 invested in
any one such mutual fund.
"Reportable Event" means, any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, the
president, any executive vice president, the treasurer, the controller or the
secretary of the Company, or any other officer having substantially the same
authority and responsibility designated by the Company; or, with respect to
financial statements, compliance with financial covenants, the Compliance
Certificate and the Borrowing Base Certificate, the chief executive officer, the
chief financial officer, the controller or the treasurer of the Company.
"Restricted Subsidiary" means a Subsidiary of the Company that is not
an Unrestricted Subsidiary.
"Sale-Leaseback Transaction" means any arrangement between the Company
or any of the Restricted Subsidiaries and any other Person providing for the
leasing by the Company or such Restricted Subsidiary of real or personal or
mixed property which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such other Person.
"S&P" means Standard & Poor's Corporation and any successor thereto.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Security Agreement" means the Security Agreement executed by the
Company and Collateral Agent and the Administrative Agent, on behalf of the
Banks and the Bank Swap Parties, in substantially the form of Exhibit J-1.
"Settlement Date" has the meaning specified in Section 2.04(a).
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"Significant Environmental Issue" means any event, situation or
circumstance giving rise to any Environmental Claim, or requiring the incurrence
of remedial or capital expenditures, reasonably expected to equal or exceed,
$1,000,000 in relation to any retail gas station claim under the indemnification
provisions of the Asset Contribution and Recapitalization Agreement, dated May
8, 1999, among the Company, Holdings and certain other parties thereto,
$2,000,000 in relation to any terminal (including related storage tanks and
pipelines) other than a terminal at a Facility or $7,500,000 in relation to any
Facility (including any related storage tanks and pipe lines).
"Solvent" means, as to any Person at any time, that (a) the fair value
of the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code and, in the alternative, for purposes of the
applicable Uniform Fraudulent Transfer Act; (b) the present fair saleable value
of the property of such Person is not less than the amount that will be required
to pay the probable liability of such Person on its debts as they become
absolute and matured; (c) such Person is able to realize upon its property and
pay its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of business; (d)
such Person does not intend to, and does not believe that it will, incur debts
or liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (e) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Standby L/C Risk Participation Fee Rate" means (i) with respect to
each day on or prior to March 31, 2000, 250 basis points per annum and (ii) with
respect to each day after March 31, 2000, the fee rate per annum set forth on
the Pricing Grid with respect to fees accruing on Standby Letters of Credit.
"Standby Letter of Credit" means any Letter of Credit which is not a
Commercial Letter of Credit.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof.
"Surety Instrument" means any letter of credit (including standby and
commercial), banker's acceptance, bank guaranty, shipside bond, surety bond or
similar instrument.
"Swap Contracts" means any swap agreement (as such term is defined in
Section 101 of the Bankruptcy Code) and any other agreement or arrangement
(including forwards and futures) designed to provide protection against
fluctuations in interest or currency exchange rates or commodity
prices."Tangible Net Worth" of any Person means, as of any date of
determination, the Net Worth of such Person, as of such date of determination,
excluding however, from the
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determination of the Total Assets of such Person, as of such date of
determination (i) all goodwill, organizational expenses, research and
development expenses, trademarks, trade names, copyrights, patents, patent
applications, licenses and rights in any thereof, and other similar intangibles,
(ii) securities which are not readily marketable, and (iii) any items (other
than capitalized financing fees) not included in clauses (i) and (ii) above
which are treated as intangibles in conformity with GAAP, all of the foregoing
as determined for any such date of determination as of the end of the
immediately preceding fiscal quarter in accordance with GAAP. Any calculation of
Tangible Net Worth shall be adjusted to eliminate any after-tax non-cash book
writedown or writeup of inventory carrying value to market.
"Taxes" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including tax under Internal Revenue
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not,
excluding in the case of each Bank, each Issuing Bank, the Collateral Agent and
the Administrative Agent, such taxes (including income taxes or franchise taxes)
as are imposed on or measured by each Bank's, each Issuing Bank's, the
Collateral Agent's or the Administrative Agent's net income by the jurisdiction
(or any political subdivision thereof) under the laws of which such Bank, the
Issuing Bank, the Collateral Agent or the Administrative Agent, as the case may
be, is organized, maintains the lending office through which it has entered into
this agreement or its principal office.
"Tax Sharing Agreement" means the Tax Sharing Agreement entered into
as of August 19, 1999 among Holdings, Parent, the Company and the signatories
listed on the signature pages thereto, in the form attached to this Agreement as
Exhibit O, as the same may at any time be amended, amended and restated,
supplemented or otherwise modified in accordance with the terms thereof and of
this Agreement and in effect.
"TD" has the meaning specified in the introductory clause to this
Agreement.
"Terminal Business" means the terminals owned by the Company and its
Subsidiaries together with related inventory and assets and the business
conducted thereby.
"Total Assets" of any Person means, as of any date of determination,
the total consolidated assets of such Person, determined in accordance with
GAAP.
"Total Liabilities" of any Person means, as of any date of
determination, the total consolidated liabilities of such Person, determined in
accordance with GAAP.
"Trademark Security Agreement" means the Trademark Security Agreement
executed by the Company and the Collateral Agent and the Administrative Agent,
on behalf of the Banks and the Bank Swap Parties, in substantially the form of
Exhibit J-2.
"Treasury Securities" means U.S. Treasury Notes with maturities not
exceeding two years.
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"Type" means either a Eurodollar Rate Loan or a Prime Rate Loan.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the United States of America.
"Unrestricted Subsidiary" means a Subsidiary of the Company designated
by the Company as an Unrestricted Subsidiary, but only if and for so long as
such Subsidiary: (i) has no Indebtedness as to which the Company or any of its
Restricted Subsidiaries (a) provides credit support of any kind other than a
non-recourse pledge of stock of an Unrestricted Subsidiary, (b) is directly or
indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender
(other than as permitted by Section 8.04(j)), (ii) has no Indebtedness with
respect to which a default thereunder would permit any holder of such
Indebtedness or of any other Indebtedness of the Company or any of its
Subsidiaries to declare a default on any Indebtedness of the Company or any of
its Restricted Subsidiaries, or cause the payment of any Indebtedness of the
Company or any of its Restricted Subsidiaries to be accelerated or payable prior
to its stated maturity, (iii) has no Indebtedness as to which the lenders have
not been notified in writing that such lenders will not have any recourse to the
stock or assets of the Company or its Restricted Subsidiaries other than a non-
recourse pledge of stock of an Unrestricted Subsidiary, (iv) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation to subscribe for additional equity interest or
to maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve any specified levels of operating results (other than as
permitted by Section 8.04(j))and (v) has no Guaranteed Obligations with respect
to the Indebtedness of the Company or any of its Restricted Subsidiaries.
"Voting Shares" means Capital Stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of corporate directors.
"Working Capital" means, as of any date of determination, the amount
by which Current Assets (determined on a FIFO basis) exceeds Current
Liabilities, in each case determined with respect to the Company and the
Restricted Subsidiaries on a consolidated basis among them in accordance with
GAAP.
"Year 2000 Compliant" means, with respect to all Information Systems
and Equipment, that all such systems and equipment accurately process, in all
material respects date data (including, but not limited to, calculating,
comparing and sequencing), before, during and after the year 2000, as well as
same and multi-century dates, or between the years 1999 and 2000, taking into
account all leap years, including the fact that the year 2000 is a leap year,
and further, that when used in combination with, or interfacing with, other
Information Systems and Equipment, shall accurately accept, release and exchange
date data, and shall in all material
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respects continue to function in the same manner as it performs today and shall
not otherwise impair the accuracy or functionality of Information Systems and
Equipment.
1.02 Accounting Principles. Unless otherwise defined or specified herein,
all accounting terms used in this Credit Agreement shall be construed in
accordance with GAAP, applied on a basis consistent in all material respects
with the audited Financial Statements delivered to the Agent. All accounting
calculations under Sections 8.16 and 8.17 shall be made in accordance with GAAP
as in effect on the Effective Date and applied on a basis consistent in all
material respects with such audited Financial Statements. The Financial
Statements required to be delivered hereunder from and after the Effective Date,
and all financial records, shall be prepared and maintained in accordance with
GAAP. If GAAP shall change from the basis used in preparing the audited
Financial Statements referred to in Section 6.11(a) the certificates required to
be delivered pursuant to Section 7.01 demonstrating compliance with the
covenants contained herein shall, at the election of the Company or upon the
request of the Majority Banks, include calculations setting forth the
adjustments necessary to demonstrate how the Company is in compliance with the
financial covenants based upon GAAP as in effect on the Effective Date.
Article II.
LOANS
-----
2.01 Commitments. On the terms and subject to the conditions set forth in
this Agreement, on and after the Effective Date and to and excluding the
Facility Expiry Date, each Bank severally agrees to make loans and advances to
the Company ("Loans") in an amount equal to such Bank's Pro Rata Share of the
Loans requested or deemed requested by the Company. Notwithstanding the
foregoing, (a) the Effective Amount of all outstanding Loans plus the Effective
Amount of all L/C Obligations plus the Effective Amount of all Outstanding
Eligible LOIs, shall not at any time exceed the lesser of (i) the combined
Commitments then in effect and (ii) the Borrowing Base then applicable and (b)
the Effective Amount of all outstanding Loans shall not at any time exceed
$50,000,000.
The Administrative Agent may, but shall not be required to, rely on
Borrowing Base Certificates and any other schedules or reports delivered to the
Administrative Agent in connection herewith, in determining eligibility.
2.02 Borrowing of Loans. It is contemplated that Loans will be made
available to the Company directly by the Banks ("Bank Advances") and, in the
circumstances described in Section 2.02(b), from the Administrative Agent acting
on behalf of the Banks ("Agent Advances"). The Company hereby agrees to execute
and deliver to each Bank a Note in the form of Exhibit I to evidence the Loans
to the Company by such Bank.
(a) Bank Advances of Loans. Subject to the determination by the
Administrative Agent and the Banks that the conditions to Borrowing contained in
Article 5 are satisfied, upon receipt from the Company of a Notice of Borrowing,
Bank Advances of Loans shall be made to the extent of each Bank's Pro Rata Share
of the requested Borrowing. The
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Notice of Borrowing shall specify whether the requested Borrowing is of Prime
Rate Loans or Eurodollar Rate Loans.
(b) Agent Advances of Loans. The Administrative Agent is authorized by
the Banks, but is not obligated, to make Agent Advances consisting only of Prime
Rate Loans upon a Notice of Borrowing received by the Administrative Agent.
Agent Advances shall be subject to periodic settlement with the Banks under
Section 2.04. Any Agent Advance so made by the Administrative Agent shall
constitute part of the Obligations secured by the Collateral and shall be repaid
by the Company no later than the fifteenth (15th) day after the earliest date on
which any condition precedent to the making of a Loan set forth in Section 5.05
shall fail to be satisfied. Agent Advances may be made only in the following
circumstances:
(i) For administrative convenience and subject to Section 2.01, the
Administrative Agent may, but is not obligated to, make Agent Advances in
reliance upon the Company's actual or deemed representations under Section
5.05 that the conditions for borrowing are satisfied;
(ii) If the conditions for borrowing under Section 5.05 cannot be
fulfilled, the Company shall in its Notice of Borrowing or otherwise give
immediate notice thereof to the Administrative Agent and the Banks and the
Administrative Agent may, but is not obligated to, continue to make Agent
Advances during the thirteen-day period beginning two (2) Business Days
after receipt of such notice by the Administrative Agent, if the Company
shall at such time be in compliance with the limitations set forth in
Section 2.01; provided however, that the Majority Banks may sooner instruct
the Administrative Agent to cease making such Agent Advances at any time.
The Administrative Agent may apply any payments or other amounts which it
receives to the repayment of the outstanding Agent Advances (beginning with the
oldest Agent Advance), prior to repayment of any other Loans, notwithstanding
any provision contained in any Loan Document or any direction of the Company or
any other Person to the contrary.
(c) Disbursement of Loans. Loans, whether made as Bank Advances or Agent
Advances, subject to the terms and conditions of this Credit Agreement, will be
made as follows:
(i) It is contemplated that Loans be made available to reimburse an
Issuing Bank for a drawing under a Letter of Credit, as described in
Section 3.05, and such Loans may be made available by the Administrative
Agent directly to an Issuing Bank upon notice from such Issuing Bank of
such drawing.
(ii) The Administrative Agent will make requested Loans available as
instructed in a Notice of Borrowing.
(d) Notices of Borrowing; Minimum Amounts. A Notice of Borrowing for
(i) Bank Advances of Prime Rate Loans shall be given not later than 1:00 P.M.,
New York City time, on the Business Day prior to the proposed Borrowing and (ii)
Agent Advances of Prime Rate Loans shall be given not later than 1:00 P.M., New
York City time, on the Business Day prior to the proposed Borrowing. A Notice of
Borrowing for Eurodollar Rate Loans shall be
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given not later than 5:00 P.M., New York City time, on the third Business Day
prior to the proposed Borrowing.
(A) Notices of Borrowing may be given under this Section by
telephone or facsimile transmission, and, if by telephone, promptly
confirmed in writing. Once given, a Notice of Borrowing is irrevocable by
and binding on the Company.
(B) The Company shall specify in each Notice of Borrowing whether the
conditions for the requested Borrowing are satisfied and whether the
requested Borrowing is of Prime Rate Loans or Eurodollar Rate Loans. The
Company may request one or more Borrowings on the same Business Day. Each
such Borrowing shall, unless otherwise specifically provided herein,
consist entirely of Loans of the same Type and, if such Borrowing is to
consist of Eurodollar Rate Loans, shall be in an aggregate amount for all
Banks of not less than $5,000,000 or in an integral multiple of $1,000,000
in excess thereof. The right of the Company to choose Eurodollar Rate
Loans is subject to the provisions of Section 4.07.
(C) On or prior to the Effective Date, the Company shall have
provided to the Administrative Agent a list, with specimen signatures, of
officers authorized to request Loans, substantially in the form attached to
this Agreement as Exhibit A-1. The Administrative Agent is entitled to rely
upon such list until it is replaced by the Company. The Administrative
Agent shall have no duty to verify the authenticity of the signature
appearing on any Notice of Borrowing or other writing delivered hereunder
and, with respect to an oral request for Loans, the Administrative Agent
shall have no duty to verify the identity of any individual representing
himself as one of the officers authorized to make such request on behalf of
the Company. Neither the Administrative Agent nor any of the Banks shall
incur any liability to the Company as a result of acting upon any
telephonic notice the Administrative Agent believes in good faith to have
been given by a duly authorized officer or other individual authorized to
request Loans on behalf of the Company or for otherwise acting in good
faith with respect to any such request for Loans.
2.03 Settlement of Bank. The Administrative Agent shall give each Bank
prompt notice by telephone or facsimile Advances and Repayments transmission of
a Notice of Borrowing that requests Bank Advances of Loans and in any event
shall use its best efforts to notify each Bank on the same Business Day as
receipt of such Notice of Borrowing. No later than 2:00 P.M., New York City
time, on the date designated for the Borrowing, each Bank, for the account of
its applicable Lending Office, shall make available to the Administrative Agent
at the Administrative Agent's Payment Office its Pro Rata Share of such
Borrowing in immediately available funds. Unless the Administrative Agent
receives contrary written notice prior to the date of any such Borrowing of
Loans, it is entitled to assume that each Bank will make available its Pro Rata
Share of the Borrowing and in reliance upon that assumption, but without any
obligation to do so, may advance such Pro Rata Share on behalf of such Bank.
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2.04 Periodic Settlement of Agent and Bank Advances and Repayments.
(a) The Settlement Date. The amount of each Bank's Pro Rata Share of
Loans shall be computed weekly (or more frequently in the Administrative Agent's
discretion) and shall be adjusted upward or downward based on all Loans
(including Agent Advances) and repayments of Loans received by the Agent as of
5:00 P.M., New York City time, on the last Business Day of the period specified
by the Administrative Agent (such date being referred to as the "Settlement
Date").
(b) Summary Statements; Settlements.
(i) The Administrative Agent shall deliver to each of the Banks
promptly after the Settlement Date a summary statement of the amount of
outstanding Loans (including Agent Advances) for the period and the amount of
repayments received for the period. As reflected on the summary statement:
(i) the Administrative Agent shall transfer to each Bank its allocated share
of interest, Commitment Fees, Standby L/C Risk Participation Fees and
Commercial L/C Risk Participation Fees, and its Pro Rata Share of repayments;
and (ii) each Bank shall transfer to the Administrative Agent (as provided
below), or the Administrative Agent shall promptly transfer to each Bank,
such amounts as are necessary to insure that, after giving effect to all such
transfers, the amount of Loans made by each Bank shall be equal to such
Bank's Pro Rata Share of the aggregate amount of Loans outstanding as of such
Settlement Date. If the summary statement requires transfers to be made to
the Administrative Agent by the Banks and is received prior to 12:00 Noon,
New York City time, on a Business Day, such transfers shall be made in
immediately available funds no later than 3:00 P.M., New York City time, that
day; and, if received after 12:00 Noon, New York City time, then no later
than 3:00 P.M., New York City time on the next Business Day. The obligation
of each Bank to transfer such funds is irrevocable, unconditional and without
recourse to or warranty by the Administrative Agent. Each of the
Administrative Agent and the Banks agree to mark their respective books and
records on each Settlement Date to show at all times the Dollar amount of
their respective Pro Rata Shares of the outstanding Loans.
(ii) To the extent that the Administrative Agent has made any such
amounts available and the settlement described above shall not yet have
occurred, upon repayment of Loans by the Company, the Administrative Agent
may apply such amounts repaid directly to the amounts made available by the
Administrative Agent pursuant to this Section 2.04(b).
(c) Distribution of Interest, Commitment Fees, Standby L/C Risk
Participation Fees and Commercial L/C Risk Participation Fees. Interest on the
Loans (including Agent Advances) together with the amount of the Commitment
Fees, Standby L/C Risk Participation Fees and Commercial L/C Risk Participation
Fees, shall be allocated by the Agent to each Bank in accordance with the Pro
Rata Share of Loans actually funded by and repaid to each Bank or such Bank's
Pro Rata Share of Letters of Credit outstanding, as applicable, and shall accrue
from and including the date such Loans are so advanced or such Letters of Credit
are issued and to but excluding the date such Loans are either repaid by the
Company or actually settled under this Section or such Letters of Credit are
drawn upon or expire or are canceled
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(undrawn). Promptly after the end of each month (or, with respect to interest on
Eurodollar Rate Loans, promptly after such interest is received by the Agent),
the Agent shall distribute to each Bank its Pro Rata Share of the interest,
Commitment Fees, Standby L/C Risk Participation Fees and Commercial L/C Risk
Participation Fees accrued during that month.
2.05 Defaulting Banks.
(a) A Bank who fails to pay the Administrative Agent its Pro Rata Share
of any Loans (including Agent Advances) made available by the Administrative
Agent on such Bank's behalf, or who fails to pay any other amount owing by it to
the Administrative Agent or any Issuing Bank (including, without limitation,
under Section 3.06), is a "Defaulting Bank." The Administrative Agent may
recover all such amounts owing by a Defaulting Bank on demand. If the Defaulting
Bank does not pay such amounts on the Administrative Agent's demand, the
Administrative Agent shall promptly notify the Company and the Company shall pay
such amounts within five Business Days. In addition, the Defaulting Bank or the
Company, as the case may be in accordance with the two immediately preceding
sentences, shall pay the Administrative Agent interest on such amount for each
day from the date it was made available by the Administrative Agent to the
Company to the date it is recovered by the Administrative Agent at a rate per
annum equal to (x) the overnight Federal Funds Rate, if paid by the Defaulting
Bank, or (y) the then applicable rate of interest calculated under Section 4.01,
if paid by the Company. Nothing herein shall be deemed to relieve any Bank from
its obligation to fulfill its commitments hereunder or to prejudice any rights
which the Company may have against any Bank as a result of any default by such
Bank hereunder, including, without limitation, the right of the Company to seek
reimbursement from any Defaulting Bank for any amounts paid by the Company under
clause (y) above on account of such Defaulting Bank's default.
(b) The failure of any Bank to fund its Pro Rata Share of any Loan
(including Agent Advances) shall not relieve any other Bank of its obligation to
fund its Pro Rata Share of such Loan. Conversely, no Bank shall be responsible
for the failure of another Bank to fund its Pro Rata Share of a Loan.
(c) Notwithstanding anything contained herein to the contrary, so long
as any Bank shall be in default in its obligation to fund its Pro Rata Share of
any Loan or shall have rejected its Commitment, then such Bank shall not be
entitled to receive any payments of principal of or interest on the Loans or its
share of any Commitment or other fees payable hereunder, and for purposes of
voting or consenting to matters with respect to the Loan Documents, such Bank
shall be deemed not to be a "Bank" hereunder, the combined Commitments then in
effect shall be reduced by an amount equal to such Bank's Commitment and such
Bank's Commitment shall be deemed to be zero (0), unless and until (x) (i) the
Loans and all interest thereon and all fees and other amounts owing under the
Loan Documents (other than amounts owing to such Bank) have been paid in full in
cash and (ii) the L/C Obligations shall have been repaid in full in cash and/or
collateralized in full in cash in such manner and order as shall be determined
by the Administrative Agent, (y) such failure to fulfill its obligation to fund
is cured and such Bank shall have paid, as and to the extent provided in this
Section 2.05, to the applicable party, if any, interest on the amount of funds
that such Bank failed to timely fund or (z) in respect of receiving payments but
not in respect of voting or consenting, the
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Obligations under this Agreement shall have been declared or shall have become
immediately due and payable. No Commitment of any Bank shall be increased or
otherwise affected by any such failure or rejection by any other Bank. Any
payments of principal or interest which would, but for this paragraph, be paid
to any Bank, and which shall have been reimbursed by the Company to the
Administrative Agent pursuant to Section 2.05(a), shall be paid to the Banks who
shall not be in default under their respective Commitments and who shall not
have rejected any Commitment, for application to the Loans or to provide cash
collateral in such manner and order as shall be determined by the Administrative
Agent.
2.06 Mandatory Payment; Reduction of Commitments.
(a) In the event that (i) the Effective Amount of all Loans then
outstanding exceeds the lesser of (x) $50,000,000 and (y) the combined
Commitments then in effect or (ii) the Effective Amount of all Loans then
outstanding plus the Effective Amount of all L/C Obligations plus the Effective
Amount of all Outstanding Eligible LOIs exceeds the lesser of (x) the combined
Commitments then in effect and (y) the Borrowing Base, then the Loans (subject
to the third sentence of Section 2.06(c)) shall be immediately due and payable
in the amount of such excess without the necessity of any demand, provided that
if there shall be no Loans then outstanding, the Company shall Cash
Collateralize outstanding Letters of Credit and Outstanding Eligible LOIs as
provided in Section 2.06(d) in an amount equal to such excess.
(b) The Company shall repay Loans to the extent necessary to ensure that
during the year 2000 there is a consecutive thirty (30) day period in which no
Loans are outstanding.
(c) On the Facility Expiry Date, the Commitment of each Bank shall
automatically reduce to zero and may not be reinstated. The Company may reduce
or terminate the Commitments at any time and from time to time in whole or in
part (a "Voluntary Reduction"). Each such Voluntary Reduction must be in an
amount not less than $5,000,000 (and in increments of $1,000,000 in excess
thereof). If the Company seeks to implement a Voluntary Reduction of the
combined Commitments to an amount less than $25,000,000, then the combined
Commitments shall be deemed reduced to zero and, at the option of the
Administrative Agent, all amounts hereunder shall be immediately due and
payable, provided, that the amount of each such Voluntary Reduction may not
reduce the combined Commitments to an amount equal to less than the sum of (i)
the Effective Amount of the Loans plus (ii) the Effective Amount of all L/C
Obligations plus (iii) the Effective Amount of all Outstanding Eligible LOIs
less, in the case of a Voluntary Reduction of the combined Commitments to zero,
the amount of Letters of Credit and Outstanding Eligible LOIs which are Cash
Collateralized in accordance with Section 2.06(d). Once reduced, no portion of
the Commitments may be reinstated.
(d) If any Letter of Credit is outstanding or there exists any Outstanding
Eligible LOIs upon the termination of the combined Commitments, or if at any
time there shall be any Loans, interest thereon or Commitment Fees, Standby
Letter of Credit fees, or Commercial Letter of Credit fees outstanding and
unpaid and the L/C Obligations shall be greater than the lesser of (i) the
Borrowing Base and (ii) the combined Commitments, the Company shall deposit with
the Administrative Agent, for the ratable benefit of the Banks, Cash
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in the amount of all such Letters of Credit outstanding and Outstanding Eligible
LOIs upon such termination or the amount of such excess L/C Obligations and
Outstanding Eligible LOIs, as the case may be, which Cash shall be held as
collateral in an interest bearing account on terms satisfactory to the
Administrative Agent.
2.07 Maintenance of Loan Account; Statements of Account. The
Administrative Agent shall maintain an account on its books in the name of the
Company (the "Loan Account") in which the Company will be charged with all loans
and advances made by the Banks to the Company or for the Company's account,
including the Loans and all L/C Obligations, the Fees, the Expenses and any
other Obligations. The Loan Account will be credited with all amounts received
by the Administrative Agent from the Company or from others for the Company's
account, on the date received provided such amounts are received by no later
than 3:00 P.M., New York City time, and on the next Business Day if received
after such time. In no event shall prior recourse to any Collateral be a
prerequisite to the Administrative Agent's right to demand payment of any
Obligation upon its maturity. After the end of each month, the Administrative
Agent shall send the Company a statement accounting for the charges, loans,
advances and other transactions occurring among and between the Administrative
Agent, the Banks and the Company during that month. The monthly statements
shall, absent manifest error, be an account statement, which is final,
conclusive and binding on the Company; provided, however, that in respect of
Expenses that are, by the express terms of this Agreement required to be
reasonable, the Company reserves the right to assert that unreasonable Expenses
should not be so reimbursed.
2.08 Payment Procedures. Payments of interest, Fees and Expenses shall be
made not later than 2:00 P.M., New York City time, on the day when due, in
immediately available Dollars, to the Administrative Agent at its address
provided pursuant to Section 11.02 of this Agreement. The Company hereby
authorizes the Administrative Agent to charge the Loan Account or any other
deposit account of the Company with the Administrative Agent with the amount of
all payments to be made hereunder and under the other Loan Documents, including
all Fees and Expenses, as and when such payments become due. The Company's
obligations to the Banks with respect to such payments shall be discharged by
making such payments to the Administrative Agent pursuant to this Section or by
charging the Loan Account or such other deposit account.
2.09 Cash Management System. The Company shall during the term of this
Agreement maintain the existing cash management system including its network of
Lockbox, Collection Deposit Account and Concentration Account pursuant to the
Collection Bank Agreement and the Concentration Bank Agreement.
2.10 Application of Payments. All amounts received shall be credited to
the Loan Account for application to the Obligations in the following order:
first, to the payment of any Fees, Expenses or other Obligations due and payable
to the Collateral Agent and the Administrative Agent under any of the Loan
Documents, excluding Agent Advances; second, to the payment of interest due on
any Agent Advances and other amounts which have not been reimbursed to the
Administrative Agent by the Banks; third, to the payment of principal of Agent
Advances; fourth, to the payment of any Fees, expenses or other Obligations due
and payable to the Issuing Banks under any of the Loan Documents; fifth, to the
ratable payment of any Fees,
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expenses or other Obligations due and payable to the Banks under any of the Loan
Documents other than those Obligations specifically referred to in this Section
2.10; sixth, to the ratable payment of interest due on the Loans; seventh, to
the ratable payment of principal due on the Loans; and eighth, to the Cash
Collateralization of outstanding Letters of Credit and Outstanding Eligible LOIs
in such manner and order as shall be determined by the Administrative Agent. Any
payment received hereunder as a distribution in any proceeding referred to in
Section 9.01(g) shall, unless paid with respect to amounts specifically owing to
the Administrative Agent or any Issuing Bank, be distributed and applied to the
payment of the amounts due hereunder and under the Notes ratably in accordance
with such amounts (or, if a court of competent jurisdiction shall otherwise
specify, as specified by such court).
2.11 Increase of Commitments . The Company may at any time and from
time to time request that the aggregate Commitments under this Agreement be
increased by up to $160,000,000 ("Commitment Increase Amount"). In the event the
Company desires to increase the Commitments, the Company shall, (i) offer to the
Banks the opportunity to participate, pro rata, in all of the Commitment
Increase Amount and (ii) if the Banks decline to participate or participate for
less than the entire Commitment Increase Amount, with the consent of the
Administrative Agent in the case of banks, financial institutions or other
entities which are not Banks (which shall not be unreasonably withheld), offer
the Banks which accept such offer and one or more additional banks, financial
institutions or other entities the opportunity to participate in the remaining
portion of the Commitment Increase Amount. Any such increase shall become
effective upon the execution by the Company, the Administrative Agent and the
lender providing a portion of the Commitment Increase Amount (a "New Bank") of
an assumption agreement in form and substance reasonably satisfactory to the
Administrative Agent and the Company pursuant to which the New Bank becomes a
Bank under this Agreement and the other Loan Documents with respect to its
portion of the Commitment Increase Amount. This Agreement and the other Loan
Documents shall be deemed to be amended to reflect the Commitment Increase
Amount and the addition of the New Banks as Banks party hereto and thereto.
Article III.
LETTERS OF CREDIT
3.01 Issuance of Letters of Credit. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties of the
Company set forth herein, each Issuing Bank shall issue Letters of Credit
hereunder at the request of the Company and for its account, as more
specifically described below. No Issuing Bank shall, in the case of clauses (a)
and (b) be permitted to, and in the case of clauses (c) and (d) be obligated to,
issue any Letter of Credit for the account of the Company if at the time of such
requested Issuance:
(a) the Effective Amount of all L/C Obligations plus the Effective Amount
of all Outstanding Eligible LOIs plus the Effective Amount of all Loans exceeds
the lesser of the combined Commitments then in effect and the Borrowing Base
then in effect, or the participation of any Bank in the Effective Amount of all
L/C Obligations plus the Effective Amount of the Loans of such Bank exceeds such
Bank's Commitment;
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(b) the aggregate face amount of all Standby Letters of Credit issued for
any purpose other than for the purchase of inventory is at any time in excess of
the greater of (i) $50,000,000 less the maximum amount which may be drawn under
the External FW Letter of Credit and (ii) the maximum amount which may be drawn
under the FW Letter of Credit;
(c) Any order, judgment or decree of any Governmental Authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing Bank
from issuing such Letter of Credit or any Requirements of Law applicable to such
Issuing Bank or any request or directive (whether or not having the force of
law) from any Governmental Authority with jurisdiction over such Issuing Bank
shall prohibit, or request that the Issuing Bank refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Issuing Bank with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which such Issuing Bank is
not otherwise compensated) not in effect as of the Effective Date, or any
unreimbursed loss, cost or expense which was not applicable, in effect or known
to such Issuing Bank as of the Effective Date and which such Issuing Bank deems
in good faith to be material to it; or
(d) A default of any Bank's obligations to fund under Section 3.05
exists, or such Bank is a Defaulting Bank under Section 2.05, unless such
Issuing Bank has entered into satisfactory arrangements with the Company to
eliminate such Issuing Bank's risk with respect to such Bank, including Cash
Collateralization of such Bank's Pro Rata Share of the L/C Obligations in such
manner and order as the Administrative Agent shall determine.
3.02 Terms of Letters of Credit; Existing Letters of Credit.
(a) The Letters of Credit shall be in a form customarily Issued by the
Issuing Bank or in such other form as has been approved by such Issuing Bank. At
the time of Issuance the terms and conditions of each Letter of Credit, and of
any drafts or acceptances thereunder, shall be subject to approval by the
Administrative Agent and the Company. In no event may the term of (i) any
Standby Letter of Credit (other than those referred to in (ii) below) issued
hereunder to purchase Inventory exceed 120 days (except that such Letters of
Credit may provide for automatic renewal), (ii) any other Standby Letter of
Credit exceed 365 days (except that such Letters of Credit may provide for
automatic renewal) or (iii) the term of any Commercial Letter of Credit exceed
90 days, and all Letters of Credit issued hereunder shall expire no later than
the date that is three (3) calendar days prior to the Facility Expiry Date. Any
Letter of Credit containing an automatic renewal provision shall also contain a
provision pursuant to which, notwithstanding any other provisions thereof, it
shall expire no later than the date that is three (3) calendar days prior to the
Facility Expiry Date and a provision pursuant to which the Issuing Bank may, by
notice to the beneficiary of such Letter of Credit at least sixty days (60)
prior to the expiration of its term, elect not to renew such Letter of Credit
for an additional term.
(b) All outstanding letters of credit issued under the Existing Credit
Agreement and set forth on Schedule 3.02 shall be deemed issued hereunder and
shall be, for all purposes, Letters of Credit hereunder.
3.03 Banks' Participation. Immediately upon Issuance or amendment by the
Issuing Bank of any Letter of Credit in accordance with the procedures set forth
in Section 3.01,
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each Bank shall be deemed to have irrevocably and unconditionally purchased and
received from the Issuing Bank, without recourse or warranty, an undivided
interest and participation to the extent of such Bank's Pro Rata Share (based
upon its Commitment) in the liability with respect to such Letter of Credit
(including, without limitation, all obligations of the Company with respect
thereto, other than amounts owing to the Issuing Bank consisting of Issuing Bank
Fees) and any security therefor or guaranty pertaining thereto.
3.04 Notice of Issuance.
(a) Whenever the Company desires the Issuance of a Letter of Credit, the
Company shall deliver (i) to the Issuing Bank a letter of credit application and
(ii) to Administrative Agent and to the applicable Issuing Bank, a L/C Request
no later than 2:00 P.M., New York City time, at least one (1) Business Day (or
such shorter period as may be agreed to by the Issuing Bank) in advance of the
proposed date of Issuance. The transmittal by the Company of each L/C Request
shall be deemed to be a representation and warranty by the Company that the
Letter of Credit may be Issued in accordance with and will not violate any of
the requirements of Section 3.01. Prior to the Issuance of each Letter of
Credit, the Company shall provide to the applicable Issuing Bank (with a copy to
the Administrative Agent) a precise description of the documents and the text of
any certificate to be presented by the beneficiary of such Letter of Credit
which, if presented by such beneficiary on or prior to the expiration date of
the Letter of Credit, would require such Issuing Bank to make payment under the
Letter of Credit. The Issuing Bank, in its reasonable judgment, may require
changes in any such documents and certificates. No Commercial Letter of Credit
shall require payment against a conforming document to be made thereunder prior
to the second Business Day (under the laws of the jurisdiction of the Issuing
Bank) after the date on which such document is presented, together with all
documents and/or certificates required to be presented in connection therewith
under the terms of the applicable Letter of Credit. A L/C Request and/or letter
of credit application may be given in writing or electronically and, if
requested by the Administrative Agent or the applicable Issuing Bank, with
prompt confirmation in writing. Any electronic L/C Request or letter of credit
application shall be deemed to have been prepared by, or under the supervision
of a Responsible Officer of the Company.
(b) When the Administrative Agent is not the Issuing Bank for all Letters
of Credit, then the other Issuing Banks are to send to the Administrative Agent
no later than 12:00 noon on each business day, by facsimile transmission, their
daily aggregate stated amount of Standby and Commercial Letters of Credit
balances for the previous day. The Agent shall deliver to each Bank upon each
calendar month end and concurrently with each Letter of Credit fee payment a
report setting forth for such period the daily aggregate stated amount available
to be drawn under Standby and Commercial Letters of Credit issued by all Issuing
Banks during such period.
3.05 Payment of Amounts Drawn Under Letters of Credit. In the event of
any drawing under any Letter of Credit by the beneficiary thereof, the
applicable Issuing Bank shall notify the Administrative Agent, which shall
notify the Company of such draw, not later than 11:00 A.M., New York City time,
on the day on which the Issuing Bank intends to honor such drawing. Unless the
Company shall, at the time of such drawing, have posted funds with such Issuing
Bank sufficient to reimburse such drawing in full in Cash, the Company will be
deemed
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to have concurrently given a Notice of Borrowing to the Administrative Agent for
Prime Rate Loans in the amount of and at the time of such drawing. Subject to
satisfaction or waiver of the conditions specified in Article 5 and the other
terms of and conditions to Borrowing contained herein, the Banks shall be
obligated, on the date of such drawing, to make Loans in the amount of such
drawing, the proceeds of which shall be applied directly by the Agent to
reimburse the applicable Issuing Bank for the amount of such drawing or payment.
If for any reason, proceeds of such Loans are not received by such Issuing Bank
on such date in an amount equal to the amount of such drawing, the Company shall
be obligated to and shall reimburse such Issuing Bank, on the Business Day
(under the laws of the jurisdiction of the Issuing Bank) immediately following
the date of such drawing, in an amount in immediately available funds equal to
the excess of the amount of such drawing over the amount of such Loans, if any,
which are so received, plus accrued interest on such amount at the rate set
forth in Section 4.01 of this Agreement.
3.06 Payment by Banks. If Loans are not made in an amount sufficient to
reimburse the applicable Issuing Bank in full for the amount of any draw, the
Administrative Agent shall promptly notify each Bank of the unreimbursed amount
of such drawing and of such Bank's respective participation therein. Each Bank
shall make available to the Administrative Agent for the benefit of the
applicable Issuing Bank an amount equal to such Bank's respective participation
in immediately available funds, not later than 1:00 P.M., New York City time, on
the Business Day (under the laws of the jurisdiction of the Issuing Bank) after
the date notified by the Administrative Agent. In addition, in the event that
any Bank fails to make available to the Administrative Agent the amount of any
such Bank's participation in such L/C Obligation as provided in this Section
3.06, the Administrative Agent may, but shall not be obligated to, fund the
amount of such Defaulting Bank's participation in such Letter of Credit and
recover such amount on demand from such Defaulting Bank in accordance with
Section 2.05 of this Agreement. In the event that any Bank fails to make
available to the Administrative Agent the amount of such Bank's participation in
such Letter of Credit as provided in this Section 3.06, and the Administrative
Agent does not elect to fund to the Issuing Bank such Defaulting Bank's
participation in such Letter of Credit, the Issuing Bank shall be entitled to
recover such amount on demand from such Bank together with interest at the
Federal Funds Rate for the first three Business Days while such amount remains
unpaid and thereafter at the Prime Rate. The Administrative Agent shall
distribute to each other Bank which has paid all amounts payable by it under
this Section 3.06 with respect to any Letter of Credit Issued by the applicable
Issuing Bank such other Bank's Pro Rata Share of all payments subsequently
received by the Administrative Agent from the Company in reimbursement of
drawings honored by the Issuing Bank under such Letter of Credit when such
payments are received.
3.07 Nature of Issuing Bank's Duties. In determining whether to pay under
any Letter of Credit, the applicable Issuing Bank shall be responsible only to
determine that the documents and certificates required to be delivered under
that Letter of Credit have been delivered and that they comply on their face
with the requirements of that Letter of Credit. As between the Company, any
Issuing Bank and each other Bank, the Company assumes all risks of the acts and
omissions of such Issuing Bank (except to the extent that it is finally
judicially determined that such acts or omissions were the result of such
Issuing Bank's gross negligence or willful misconduct) or misuse of the Letters
of Credit by the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, neither the
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Administrative Agent, any Issuing Bank nor any of the other Banks shall be
responsible (i) for the form, validity, sufficiency, accuracy, genuineness or
legal effects of any document submitted by any party in connection with the
application for and Issuance of or any drawing honored under such Letters of
Credit even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged, (ii) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit, or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason, (iii) for failure of the beneficiary of
any such Letter of Credit to strictly comply with conditions required in order
to draw upon such Letter of Credit, (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex, facsimile or otherwise, whether or not they be in cipher, (v) for errors
in interpretation of technical terms, (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit, or of the proceeds thereof, (vii) for the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing honored under such Letter of Credit, and (viii) for any
consequences arising from causes beyond the control of such Issuing Bank, the
Administrative Agent or the other Banks. The Issuing Bank shall not be obligated
to and shall not pay against any non-conforming documents presented to it in
connection with any Letters of Credit without the prior written consent of the
Company. None of the above shall affect, impair, or prevent the vesting of any
of the Issuing Bank's rights or powers hereunder. Any action taken or omitted to
be taken by the Issuing Bank under or in connection with any Letter of Credit,
if taken or omitted in the absence of gross negligence or willful misconduct,
shall not create for the Issuing Bank any liability to the Company, the
Administrative Agent or any Bank.
3.08 Obligations Absolute. The obligations of the Company to reimburse
the Issuing Bank for drawings honored under the Letters of Credit and the
obligations of the Banks under Section 3.06 shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
(a) any lack of validity or enforceability of any Letter of Credit;
(b) the existence of any claim, setoff, defense or other right which the
Company or any Affiliate of the Company may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons or
entities for whom any such beneficiary or transferee may be acting), the
applicable Issuing Bank, any Bank or any other Person, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction;
(c) any draft, demand, certificate or any other documents presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(d) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents;
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(e) payment by the Issuing Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
(f) failure of any drawing under a Letter of Credit or any nonapplication
or misapplication by the beneficiary of the proceeds of any drawing; or
(g) the fact that a Default or an Event of Default shall have occurred
and be continuing;
provided, however, that the Company shall have no obligation to reimburse any
Issuing Bank, and the Banks shall have no obligation under Section 3.06, in the
event of such Issuing Bank's willful misconduct or gross negligence in
determining whether documents presented under the Letter of Credit comply with
the terms of such Letter of Credit.
3.09 Uniform Customs and Practice and Uniform Commercial Code. The
Uniform Customs and Practice for Documentary Credits as published by the
International Chamber of Commerce ("UCP") most recently at the time of Issuance
of any Letter of Credit shall (unless otherwise expressly provided in the
Letters of Credit) apply to the Letters of Credit. Without limiting the
foregoing, to the extent not addressed in the UCP, the UCC shall (unless
otherwise expressly provided in the Letters of Credit) apply to the Letters of
Credit.
Article IV.
INTEREST, FEES AND EXPENSES, ETC.
4.01 Interest on Prime Rate Loans . Subject to the provisions of Section
4.03, interest on Prime Rate Loans shall be payable monthly in arrears on the
second Business Day of each month at an interest rate per annum equal to the
Prime Rate plus the Applicable Margin calculated for the relevant period for
which payment is required to be made. In the event of any change in said Prime
Rate, the rate under this Section 4.01 shall change, effective as of the day the
Prime Rate changes. Each determination by the Agent of an interest rate under
this Section 4.01 shall be conclusive and binding for all purposes, absent
manifest error.
4.02 Interest on Eurodollar. Subject to the provisions of Section 4.03,
interest on Eurodollar Rate Loans shall be payable Rate Loans (a) on the last
day of each month with respect to such Eurodollar Rate Loan, (b) at the date of
conversion of such Eurodollar Rate Loan (or a portion thereof) to a Prime Rate
Loan and (c) at maturity of such Eurodollar Rate Loan at an interest rate per
annum during the Interest Period in effect for such Eurodollar Rate Loan equal
to the Adjusted Eurodollar Rate for such Interest Period for such Eurodollar
Rate Loan plus the Applicable Margin calculated for the relevant period for
which payment is required to be made. The Administrative Agent upon determining
the Adjusted Eurodollar Rate for any Interest Period shall promptly notify the
Company and the Banks by telephone (confirmed promptly in writing) or in writing
thereof. Each determination by the Administrative Agent of an interest rate
under this Section 4.02 shall be conclusive and binding for all purposes, absent
manifest error.
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4.03 Interest After Event of Default. Upon the occurrence and during
the continuation of an Event of Default resulting from the failure of the
Company to make any payment of principal or interest as provided in Section
9.01(a), or after notice is delivered to Company of the occurrence of any other
Event of Default, and at all times thereafter until the earlier of the date upon
which (i) all Obligations have been paid and satisfied in full or (ii) such
Event of Default shall no longer be continuing, interest on overdue principal on
the Loans and to the extent permitted by law, overdue interest in respect of
such Loans, shall be payable on demand at a rate per annum equal to the rate at
which the Loans would bear interest pursuant to Sections 4.01 and 4.02 above, as
the case may be, plus two percent (2.00%). In the event of any change in said
applicable interest rate, the rate under this Section 4.03 shall change,
effective as of the day the applicable interest rate changes, so as to remain
two percent (2.00%) above the then applicable interest rate.
4.04 Reimbursement of Expenses.
(a) From and after the Effective Date, the Company shall reimburse BT
within five (5) Business Days after demand (subject to Section 5.01(e)) (and the
Administrative Agent is entitled to charge the Loan Account) for all reasonable
Expenses of BT incurred by BT and upon receipt of invoices therefor and, if
requested by the Company, such reasonable backup materials and information as
the Company shall reasonably request.
(b) The Company shall promptly reimburse the Agents and the Banks (and the
Administrative Agent is entitled to charge the Loan Account) upon furnishing of
an invoice for all costs and Expenses incurred by them in connection with the
enforcement, attempted enforcement or preservation of any rights or remedies
under any Loan Document and in connection with any workout, restructuring,
renegotiation or refinancing of the Loans and the other Obligations under the
Agreement and the other Loan Documents.
4.05 Commitment Fees and Certain Other Fees. (a) The Company shall pay
to the Administrative Agent, for distribution in accordance with the terms
thereof, all fees payable to each applicable Person as required by the letter
agreement among the Company, BT, BKB and TD dated September 27, 1999 (the "Fee
Letter").
(a) Commitment Fees. The Company shall pay to the Administrative Agent
for the account of each Bank a commitment fee on the average daily unused
portion (whether or not available to be used) of such Bank's Commitment set
forth in Schedule 1.01(a) to this Agreement, as such Commitment may be increased
or reduced hereunder, for the period commencing on the Effective Date and
continuing thereafter, and computed on a monthly basis in arrears as of the last
Business Day of each calendar month based upon the daily utilization for that
month as calculated by the Administrative Agent, in an amount equal to the
average daily unused portion of such Bank's Commitment times the applicable
average rate per annum that is derived from the Commitment Fee Rate calculated
for the relevant period for which payment is required to be made. Except as set
forth above, such commitment fee shall accrue from the Effective Date to the
Facility Expiry Date and shall be due and payable monthly in arrears upon
calculation by the Administrative Agent and such fees shall be charged to the
Loan Account in accordance with Section 2.08; provided that, in connection with
any termination of Commitments under Section 2.06, the accrued commitment fee
calculated for the period ending
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on such date shall also be paid on the date of such termination. The commitment
fees provided in this Section shall accrue at all times after the above-
mentioned Effective Date, including at any time during which one or more
conditions in Article V are not met.
4.06 Letter of Credit Fees.
(a) The Company shall pay to the Administrative Agent for the account of
each of the Banks, a Letter of Credit fee (i) with respect to Standby Letters of
Credit in an amount equal to the product of (A) the applicable rate per annum
that is derived from the Standby L/C Risk Participation Fee Rate calculated for
the relevant period for which payment is required to be made times (B) the
average daily maximum amount available to be drawn under such Standby Letters of
Credit while outstanding, and (ii) with respect to Commercial Letters of Credit
in an amount equal to the product of (A) the applicable rate per annum that is
derived from the Commercial L/C Risk Participation Fee Rate calculated for the
relevant period for which payment is required to be made times (B) the average
daily maximum amount available to be drawn under such Commercial Letters of
Credit while outstanding, in each case computed on a monthly basis in arrears as
of the last Business Day of each calendar month based upon Letters of Credit
outstanding for that month as calculated by the Administrative Agent. Such
Letter of Credit fees shall be due and payable monthly in arrears upon
calculation by the Administrative Agent and such amounts shall be charged to the
Loan Account in accordance with Section 2.08. Solely for purposes of determining
fees payable in connection with the outstanding Letters of Credit issued under
the Existing Credit Agreement, such Letters of Credit shall be considered as if
they were issued on the Effective Date; it being understood that issuance fees
with respect to such Letters of Credit have been paid.
(b) The Company shall pay to the Administrative Agent for the account of
each Issuing Bank a Letter of Credit fronting fee for all Letters of Credit
Issued by such Issuing Bank equal to 0.15% per annum of the average daily
maximum amount available to be drawn under all such Letters of Credit while
outstanding Issued by such Issuing Bank, computed on a monthly basis in arrears
as of the last Business Day of each calendar month based upon Letters of Credit
outstanding for that month as calculated by the Administrative Agent. Such
fronting fees shall be due and payable monthly in arrears upon calculation by
the Administrative Agent and such amounts shall be charged to the Loan Account
in accordance with Section 2.08.
(c) The Company shall pay to each Issuing Bank from time to time on
demand, upon the furnishing of an invoice therefor, the normal issuance,
presentation, amendment and other processing fees and commissions, and other
standard costs and charges, of such Issuing Bank relating to Letters of Credit
Issued by such Issuing Bank as from time to time in effect (the "Issuing Bank
Fees").
(d) Upon the occurrence and during the continuation of an Event of Default
resulting from the failure of Company to make any payment of principal or
interest as provided in Section 9.01(a), or after notice is delivered to Company
of the occurrence of any other Event of Default, and at all times thereafter
until the earlier of the date upon which (i) all Obligations have been paid and
satisfied in full in cash (including any required Cash Collateralization) or
(ii) such Event of Default shall no longer be continuing, as the case may be,
applicable Letter of Credit Fees shall be payable on overdue amounts on demand
at a rate equal to the rate at which
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the applicable Letter of Credit Fees are charged pursuant to Section 4.06(a)
above, plus two percent (2.00%).
4.07 Special Provisions Relating to Eurodollar Rate Loans.
(a) Continuation. With respect to any Borrowing consisting of
Eurodollar Rate Loans, the Company may (so long as no Default or Event of
Default has occurred and is continuing unless otherwise agreed to by the
Majority Banks), subject to the provisions of Section 4.07(c), elect to maintain
such Borrowing or any portion thereof as consisting of Eurodollar Rate Loans by
selecting a new Interest Period for such Borrowing, which new Interest Period
shall commence on the last day of the immediately preceding Interest Period.
Each selection of a new Interest Period shall be made by the giving of a Notice
of Continuation not later than 5:00 P.M., New York City time, on the third
Business Day prior to the date of any such continuation relating to Eurodollar
Rate Loans, by the Company to the Administrative Agent. Such Notice of
Continuation by the Company shall be by telephone or facsimile transmission, and
if by telephone, promptly confirmed in writing, in each case specifying (i) the
date of such continuation, (ii) the aggregate amount of Loans subject to such
continuation and (iii) the duration of the selected Interest Period. The Company
may elect to maintain more than one Borrowing consisting of Eurodollar Rate
Loans by combining such Borrowings into one Borrowing and selecting a new
Interest Period pursuant to this Section 4.07(a); provided, however, that each
of the Borrowings so combined shall consist of Loans having Interest Periods
ending on the same date. If the Company shall fail to select a new Interest
Period for any Borrowing consisting of Eurodollar Rate Loans in accordance with
this Section 4.07(a), such Loans will automatically on the last day of the then
existing Interest Period therefor, convert into Prime Rate Loans.
(b) Conversion. The Company may on any Business Day (so long as no
Default or Event of Default has occurred and is continuing unless otherwise
agreed to by the Majority Banks), upon the giving of a Notice of Conversion
given to the Administrative Agent, and subject to the provisions of Section
4.07(c), convert the entire amount of or a portion of all Loans of one Type
comprising the same Borrowing into Loans of another Type; provided, however,
that any conversion of any Eurodollar Rate Loans into Prime Rate Loans shall be
made on, and only on, the last day of an Interest Period for such Eurodollar
Rate Loans and, upon conversion of any Prime Rate Loans into Eurodollar Rate
Loans, the Company shall pay accrued interest to the date of conversions on the
principal amount converted. Each such Notice of Conversion shall be given not
later than 1:00 P.M., New York City time, on the day of any proposed conversion
into Prime Rate Loans and not later than 5:00 P.M. on the third Business Day
prior to the date of any proposed conversion into Eurodollar Rate Loans. Subject
to the restrictions specified above, each Notice of Conversion shall be by
telephone or facsimile transmission and, if by telephone, promptly confirmed in
writing, in each case specifying (i) the requested date of such conversion, (ii)
the Type of Loans to be converted, (iii) the portion of such Type of Loan to be
converted, (iv) the Type of Loan such Loans are to be converted into and (v) if
such conversion is into Eurodollar Rate Loans, the duration of the Interest
Period of such Loan. Each conversion shall be in an aggregate amount for the
Loans of all Banks of not less than $5,000,000 or in an integral multiple of
$1,000,000 in excess thereof. The Company may elect to convert the entire amount
of or a portion of all Loans of one Type comprising more than one Borrowing into
Loans of another Type by combining such Borrowings into one
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Borrowing consisting of Loans of another Type; provided, however, that if the
Borrowings so combined consist of Eurodollar Rate Loans, such Loans shall have
Interest Periods ending on the same date.
(c) Certain Limitations on Eurodollar Rate Loans. The right of the
Company to maintain, select, continue or convert Eurodollar Rate Loans shall be
limited as follows:
(i) If the Administrative Agent is advised by BT that it is not
offering U.S. dollar deposits (in the applicable amounts) in the London
interbank market, or the Administrative Agent determines that adequate and
fair means do not otherwise exist for ascertaining the Eurodollar Rate for
Eurodollar Rate Loans comprising any requested Borrowing, continuation or
conversion, the right of the Company to select or maintain Eurodollar Rate
Loans for such Borrowing or any subsequent Borrowing shall be suspended
until the Administrative Agent shall notify the Company and the Banks that
the circumstances causing such suspension no longer exist, and each Loan
comprising such Borrowing shall be made as a Prime Rate Loan.
(ii) If the Majority Banks shall, at least one Business Day before
the date of any requested Borrowing of, continuation of or conversion into
a Eurodollar Rate Loan, notify the Administrative Agent that the Eurodollar
Rate for Loans comprising such Borrowing, continuation or conversion will
not adequately reflect the cost to such Banks of making or funding their
respective Loans for such Borrowing or conversion, or maintaining such
continuation, the right of the Company to select or continue Eurodollar
Rate Loans for such Borrowing, continuation or conversion shall be
suspended until such Banks shall notify the Company and Administrative
Agent that the circumstances causing such suspension no longer exist, and
each Loan comprising such Borrowing, continuation or conversion shall be
made as a Prime Rate Loan.
(iii) If at any time any Bank determines (which determination
shall, absent manifest error, be conclusive and binding on all parties)
that the making, continuation or conversion of any Loan as a Eurodollar
Rate Loan has become unlawful or impermissible by reason of compliance by
that Bank with any law, governmental rule, regulation or order of any
Governmental Authority (whether or not having the force of law or would
result in costs or penalties), then, and in any such event, such Bank may
give notice of that determination, in writing, to the Company and the
Administrative Agent and the Administrative Agent shall promptly transmit
the notice to each other Bank. Until such Bank gives notice otherwise, the
right of the Company to select Eurodollar Rate Loans from that Bank shall
be suspended and each Eurodollar Rate Loan outstanding from that Bank shall
automatically and immediately convert to a Prime Rate Loan.
(iv) No Agent Advance shall be made as a Eurodollar Rate Loan.
(v) The right of the Company to select, continue or convert
Eurodollar Rate Loans shall not be effective during the continuance of any
Default or Event of Default unless otherwise agreed to by the Majority
Banks.
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(vi) There shall not be outstanding at any one time more than an
aggregate of five (5) Loans which consist of Eurodollar Rate Loans.
(d) Compensation.
(i) Each Notice of Continuation and Notice of Conversion shall be
irrevocable by and binding on the Company. In the case of any Borrowing,
continuation or conversion that the related Notice of Borrowing, Notice of
Continuation or Notice of Conversion specifies is to be comprised of
Eurodollar Rate Loans, the Company shall indemnify each Bank against any
loss, cost or expense incurred by such Bank as a result of any failure to
fulfill, on or before the date for such Borrowing, continuation or
conversion specified in such Notice of Borrowing, Notice of Continuation or
Notice of Conversion, the applicable conditions set forth in Article 5 or,
in the event such conditions are satisfied, the failure of the Company to
make such Borrowing, including, without limitation, in each case any loss
(excluding loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by
such Bank to fund the Loan to be made by such Bank as part of such
Borrowing, continuation or conversion.
(ii) If any payment of principal of, or conversion or continuation
of, any Eurodollar Rate Loan is made other than on the last day of the
Interest Period for such Loan as a result of a payment, prepayment,
conversion or continuation of such Loan or acceleration of the maturity of
the Notes pursuant to Article 9 of this Agreement or for any other reason,
the Company shall, upon demand by any Bank (with a copy of such demand to
the Administrative Agent), pay to the Administrative Agent for the account
of such Bank any amounts required to compensate such Bank for any
additional losses, costs or expenses which it may reasonably incur as a
result of such payment, including, without limitation, any loss (excluding
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Bank
to fund or maintain such Loan.
(iii) Calculation of all amounts payable to a Bank under this
Section 4.07(d) shall be made as though such Bank elected to fund all
Eurodollar Rate Loans by purchasing U.S. dollar deposits in its Eurodollar
Lending Office's interbank eurodollar market.
4.08 Indemnification in Certain Events.
(a) If after the Effective Date, either (i) any change in or in the
interpretation of any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to BT, any Bank or
any Affiliate controlling any Bank, or (ii) a Bank or an Affiliate controlling a
Bank complies with any future guideline or request from any central bank or
other Governmental Authority and in the case of any event described in clause
(i) or (ii) such event increases the cost to BT, of issuing, making or
maintaining the Letter of Credit or complying with its obligations under this
Agreement or reduces the amount receivable in respect thereof by BT or such
Affiliate, or (iii) a Bank or an Affiliate controlling a Bank determines that
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change
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therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below or, a Bank or an Affiliate controlling a Bank complies with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, and in the case of any
event set forth in this clause (iii), such adoption, change or compliance has or
would have the direct or indirect effect of reducing the rate of return on any
of the capital as a consequence of its obligations hereunder to a level below
that which a Bank or an Affiliate controlling a Bank could have achieved but for
such adoption, change or compliance (taking into consideration such Bank's or
Affiliate's policies as the case may be with respect to capital adequacy) by an
amount deemed by such Bank or such Affiliate controlling such Bank to be
material, then in any such case, the Company shall, upon demand by the Agent,
pay to the Administrative Agent, for the account of each applicable Bank, each
applicable Affiliate controlling a Bank or, each applicable Issuing Bank,
additional amounts sufficient to indemnify such Bank or the Affiliate
controlling such Bank against such increase in cost or reduction in amount
receivable. A certificate as to the amount of such increased cost or reduction
in amount and setting forth in reasonable detail the calculation thereof shall
be submitted to the Company by the Administrative Agent, or the applicable Bank
or the applicable Affiliate controlling such Bank, and shall be conclusive,
absent manifest error. Any party entitled to payment hereunder in respect of
such increased cost or reduction in amount shall use reasonable efforts to
designate a different Lending Office to the extent such designation could reduce
or eliminate such payment.
(b) It is understood that (i) Section 4.08(a) does not relate to any
changes in the rate of tax on the net income of the Issuing Bank, or any Bank,
or any Affiliate controlling such Bank imposed by the jurisdiction in which it
is organized, maintains a lending office or its principal office, or has any
other contacts or connections that would subject it to taxation therein
(excluding any connection or contact arising solely from the Issuing Bank, or
such Bank or such Affiliate having executed, delivered, performed its
obligations or received a payment under, or enforced this Agreement or any other
Loan Document) and (ii) any payment made under this Section 4.08 shall be made
without duplication for any item that is covered by Section 4.09.
4.09 Net Payments.
(a) All payments by the Company hereunder or under any other Loan
Document to or for the benefit of any Bank, any Issuing Bank, the Collateral
Agent or the Administrative Agent shall be made without set-off, counterclaim or
other defense and shall be made free and clear of, and without deduction or
withholding for, any Taxes. In addition, the Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless each Bank, the
Issuing Bank, the Collateral Agent and the Administrative Agent for the full
amount of Taxes or Other Taxes (including any additional Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 4.09(b)) paid
by any Bank, any Issuing Bank, the Collateral Agent or the Administrative Agent
in respect of any sum payable hereunder or under any other Loan Document
(including penalties, interest, additions to tax and any reasonable expenses).
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(c) Payment under this indemnification shall be made within 30 days after
the date any Bank, any Issuing Bank, the Collateral Agent or the Administrative
Agent makes written demand therefor.
(d) If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder (or under
any other Loan Document) to any Bank, any Issuing Bank, the Collateral Agent or
the Administrative Agent, then:
(i) the sum payable shall be increased as necessary so that after
making all such required deductions and withholdings of Taxes or Other
Taxes (including deductions and withholdings applicable to additional sums
payable under this Section 4.09), such Bank, such Issuing Bank, the
Collateral Agent or the Administrative Agent receives an amount equal to
the sum it would have received had no such deductions or withholdings been
made;
(ii) the Company shall make such deductions and withholdings; and
(iii) the Company shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with
applicable law.
(e) Within 30 days after the date of any payment by the Company of Taxes
or Other Taxes, the Company shall furnish to the Administrative Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Administrative Agent if available from
the appropriate taxing authority.
(f) If the Company would be required to pay additional amounts to any Bank
pursuant to paragraph (b) or (c) of this Section 4.09, then such Bank shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its lending office so as to eliminate the obligation of the
Company to pay any such additional amounts which may thereafter accrue or to
indemnify such Bank in the future, if such change in the reasonable judgment of
such Bank is not otherwise materially disadvantageous to such Bank.
(g) (i) Any Bank not organized under the laws of the United States shall
furnish to the Company or the Administrative Agent, two copies of IRS Form W-
8BEN or W-8ECI, or successor applicable form (which shall be accurate and
complete) as may be required to establish, as of the date of this Agreement, an
exemption from U.S. withholding taxes or backup withholding taxes in respect of
payments made under any Loan Document. In the event that a Bank assigns all or a
portion of its rights and obligations under this Agreement, pursuant to Section
11.07, each assignee shall furnish to the Company or the Administrative Agent
two copies of IRS Form W-8BEN or W-8ECI, or successor applicable form (which
shall be accurate and complete) as may be required to establish, as of the date
of the assignment, a full exemption from U.S. withholding taxes or back-up
withholding taxes in respect of payments made under this Agreement. The Company
and the Administrative Agent shall be entitled to rely upon the accuracy of any
such forms, documents or other information furnished to it by any Person and
shall have no obligation to make any additional payment or indemnify any Person
for any taxes,
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interest or penalties that would not have become payable by such Person had such
documentation been accurate.
(ii) Each Bank that is not organized under the laws of the United
States (including any assignee pursuant to Section 11.07 that is not
organized under the laws of the United States) shall also deliver to the
Company or the Administrative Agent two further copies of said Form W-8BEN
or W-8ECI, or successor applicable forms, as the case may be, when
requested to do so by the Company or the Administrative Agent on or before
the date that any such form expires or becomes obsolete or otherwise is
required to be resubmitted as a condition to obtaining an exemption from a
required withholding of U.S. federal income tax or after the occurrence of
any event requiring a change in the most recent form previously delivered
by it to the Administrative Agent or the Company, and such extensions or
renewals thereof as may reasonably be requested by the Company or the
Administrative Agent, certifying that such Bank is entitled to receive
payments hereunder or under any other Loan Documents without deduction or
withholding of any U.S. federal income taxes or at a reduced rate, unless
in any such case an event outside the control of such Bank (including,
without limitation, any change in treaty, law or regulation) has occurred
prior to the date on which any such delivery would otherwise be required
which renders all such forms inapplicable or which would prevent such Bank
from duly completing and delivering any such form with respect to it and
such Bank so advises the Company or the Administrative Agent. No Bank shall
be required to provide a form described in the preceding sentence unless it
is legally entitled to do so at the time such form is requested by the
Company.
(h) The Company shall not be required to pay any additional amounts
pursuant to this Section 4.09 to the extent that such additional amounts relate
to Taxes or Other Taxes (including obligations to deduct or withhold amounts
with respect thereto) for any period (i) that would not have been imposed but
for the failure of a Bank or any assignee thereof, to comply with Section
4.09(f) hereof (other than if such failure is due to a change in law, regulation
or treaty occurring after the date on which a form originally was required to be
provided) or (ii) that are attributable to U.S. withholding taxes imposed (x) on
the date the Bank becomes a Lender under this Agreement or (y) other than as a
result of a change in law, regulation or treaty. If a Bank becomes subject to
Taxes because of its failure to deliver a form required hereunder, the Company
shall take such steps as the Bank shall reasonably request to assist such Bank
to recover such Taxes.
4.10 Affected Banks. If the Company is obligated to pay to any Bank or an
Issuing Bank any amount under Section 4.08 or 4.09 or if any Bank is a
Defaulting Bank, the Company may, if no Default or Event of Default then exists,
replace such Bank with another bank or may replace such Issuing Bank with
another letter of credit issuer in each case acceptable to the Administrative
Agent and the Issuing Banks (other than such Issuing Bank), and such Bank or
such Issuing Bank, as applicable, hereby agrees to be so replaced subject to the
following:
(a) The obligations of the Company hereunder to the Bank or the Issuing
Bank to be replaced (including such increased or additional costs incurred from
the date of notice to the Company of such increase or additional costs through
the date such Bank or Issuing Bank
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is replaced hereunder) shall be paid in full in cash to such Bank or Issuing
Bank concurrently with such replacement;
(b) If such replacement is a result of increased costs under Section 4.08
or 4.09, the replacement Bank shall be a bank or other financial institution
acceptable to the Administrative Agent that is not subject to such increased
costs which caused the Company's election to replace any Bank hereunder, and
such replacement Bank shall execute and deliver to the Administrative Agent such
documentation satisfactory to the Administrative Agent pursuant to which such
replacement Bank is to become a party to this Agreement, conforming to the
provisions of Section 11.07, with a Commitment equal to that of the Bank being
replaced, shall make Loans in the aggregate principal amount equal to the
aggregate outstanding principal amount of the Loans of the Bank being replaced
and shall be deemed to have acquired a participation in L/C Obligations then
outstanding equal to the participation therein of the Bank being replaced;
(c) Upon such execution and delivery of such documents referred to in
clause (b) and payment of the amounts referred to in clause (a), the replacement
bank shall be a "Bank" with a Commitment as specified hereinabove and the Bank
being replaced shall cease to be a "Bank" hereunder, except with respect to
indemnification provisions under this Credit Agreement, which shall survive as
to such replaced Bank;
(d) The Administrative Agent shall reasonably cooperate in effectuating
the replacement of any Bank or any Issuing Bank under this Section 4.10, but at
no time shall the Administrative Agent be obligated to initiate any such
replacement;
(e) Any Bank or the Issuing Bank replaced under this Section 4.10 shall be
replaced at the Company's sole cost and expense and at no cost or expense to the
Administrative Agent or any of the Banks or the Issuing Bank; and
(f) If the Company proposes to replace any Bank pursuant to this Section
4.10 because the Bank seeks reimbursement under either Section 4.08 or 4.09,
then it must also replace any other Bank who seeks reimbursement on a
proportionate basis (based upon such Bank's Commitment to the combined
Commitments) under such Sections.
4.11 Sharing of Payments. If any Bank shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of set-off or
otherwise) on account of the Loans made by it or its participation in the L/C
Obligations in excess of its Pro Rata Share of payments on account of the Loans
or L/C Obligations obtained by all the Banks, such Bank shall forthwith purchase
from the other Banks such participations in the Loans made by them or in their
participation in Letters of Credit as shall be necessary to cause such
purchasing Bank to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Bank, such purchase (or corresponding portion
thereof) from each Bank shall be rescinded and each such Bank shall repay to the
purchasing Bank the purchase price to the extent of such recovery together with
an amount equal to such Bank's ratable share (according to the proportion of (i)
the amount of such Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect to the total
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amount so recovered. The Company agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section 4.11 may, to the full
extent permitted by law, exercise all of its rights of payment (including the
right of setoff) with respect to such participation as fully as if such Bank
were the direct creditor of the Company in the amount of such participation.
4.12 Calculations. All calculations of (i) interest with respect to
Eurodollar Rate Loans and per annum fees, shall be made by the Administrative
Agent, on the basis of a year of 360 days, or, if such computation would cause
the interest and fees chargeable hereunder to exceed the highest rate allowed by
applicable law, 365/366 days, and (ii) interest with respect to Prime Rate Loans
shall be made by the Administrative Agent on the basis of a year of 365/366
days, in each case to the extent applicable for the actual number of days
elapsed (including the first day but excluding the last day) occurring in the
period for which such interest or fees are payable. Each determination by the
Administrative Agent of an interest rate or payment hereunder shall be
conclusive and binding for all purposes, absent manifest error.
Article V.
CONDITIONS PRECEDENT
--------------------
5.01 Conditions of Effectiveness. The obligations of each Bank hereunder
and the effectiveness of this Agreement are subject to the fulfillment of the
following conditions precedent and the prior receipt by the Administrative Agent
of all of the following (and in the case of any agreements, documents, opinions
and certificates (other than those delivered pursuant to Sections 5.01(g) and
(h)), in sufficient copies for the Administrative Agent and each Bank) dated the
Effective Date or such other date as is satisfactory to the Administrative
Agent, in form and substance satisfactory to each of the Lead Banks:
(a) Credit Agreement and Notes. This Agreement and Notes drawn to the
order of each requesting Bank, executed by each party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors of the
Company authorizing the execution, delivery and performance of the Loan
Documents and any other documents, instruments and certificates required to
be executed by the Company in connection herewith or therewith and the
transactions contemplated hereby and thereby, certified as of the Effective
Date by the Secretary or an Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant Secretary of the
Company, certifying the names and true signatures of the officers of the
Company authorized to execute, deliver and perform the Loan Documents to be
delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the following
documents:
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(i) the certificate of incorporation of the Company, certified by
the Secretary of State of the State of Delaware dated as of a recent date
prior to the Effective Date, dated the Effective Date, and the bylaws of
the Company as in effect on the Effective Date, certified by the Secretary
or an Assistant Secretary of the Company as of the Effective Date; and
(ii) a good standing and tax good standing certificate for the
Company from the Secretary of State of the state of Delaware and each state
where the Company is qualified to do business as a foreign corporation as
of a recent date, together with a bring-down good-standing certificate for
the Company from the Secretary of State of the State of Delaware, by
facsimile, dated the Effective Date;
(d) Legal Opinions.
(i) an opinion of Simpson Thacher & Bartlett, counsel to the
Company, addressed to the Administrative Agent and the Banks, substantially
in the form of Exhibit F hereto; and
(ii) an opinion of Mayer Brown & Platt and an opinion of Thompson,
Hine & Flory, each addressed to the Administrative Agent and the Banks in
form and substance satisfactory to the Administrative Agent.
(iii) an opinion of Paul Hastings Janofsky & Walker LLP, special
counsel to the Administrative Agent, addressed to the Administrative Agent
and the Banks, substantially in the form of Exhibit G hereto.
(e) Payment of Fees and Expenses. Evidence of payment by the Company of
all accrued and unpaid Fees and Expenses to the extent then due and payable
on the Effective Date, together with any reasonable estimate of fees and
expenses of outside counsel incurred or to be incurred by it through the
closing proceedings (provided that such estimate shall not thereafter
preclude final settling of accounts between the Company and such Person);
including, without limitation, any such costs, fees, commissions and
expenses arising under or referenced in the Fee Letters, in Section 4.05 or
in Section 11.04;
(f) Collateral Documents.
(i) evidence that the Collateral Documents continue to be
effective and continue to grant to the Collateral Agent a perfected first
priority Lien on the Collateral;
(ii) lien searches which evidence the Collateral Agent's first
priority security interest in the Collateral and written advice relating to
such Lien searches as the Collateral Agent shall have requested, and such
termination statements or other documents as may be necessary to confirm
that the Collateral is subject to no other Liens in favor of any Persons
(other than Permitted Liens);
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(iii) on or before the Effective Date, a completed certificate of
the Company, substantially in the form of Exhibit E hereto (a "Perfection
Certificate") signed by a Responsible Officer of the Company;
(iv) funds sufficient to pay any filing or recording tax or fee in
connection with any and all UCC financing statements;
(v) evidence that the Collection Bank Agreement, the Concentration
Bank Agreement, the Collateral Account Agreement and each Commodities
Account Agreement are in full force and effect (including past delivery of
a written notice to the Collection Bank to the effect that the security
interest described in the Collection Bank Agreement has been granted and
that all other cash collection arrangements are in form and substance
satisfactory to the Lead Banks;
(vi) the Confirmation Agreement in the form of Exhibit P hereto,
executed by each party thereto;
(vii) evidence that all other actions necessary or desirable to
continue the first priority Lien created by the Collateral Documents, and
to enhance the Collateral Agent's ability to preserve its interests in and
access to the Collateral, have been taken;
(g) Certificate. A certificate signed by a Responsible Officer, dated
as of the Effective Date, stating that:
(i) the representations and warranties contained in Article VI are
true and correct on and as of such date, as though made on and as of such
date;
(ii) no Default or Event of Default exists on the Effective Date,
or would result from the execution and performance of the Loan Documents;
and
(iii) except as specifically disclosed in Schedule 6.25, there has
occurred since December 31, 1998, no event or circumstance that has
resulted or could reasonably be expected to result in a Material Adverse
Effect;
(h) Corporate Proceedings. Evidence satisfactory to each Lead Bank that
all corporate and other proceedings taken or to be taken in connection with the
transactions contemplated by the Loan Documents and all documents incidental to
this Agreement and thereto shall be in form and substance satisfactory to each
Lead Bank, and the Administrative Agent shall have received all counterpart
originals or certified copies of such documents;
(i) Consents, Approvals, Etc. All necessary orders, permits,
licenses, authorizations, approvals, consents and waivers by any
Governmental Authority or other Person (including, without limitation, the
consent of certain customers, if required, under any Material Contracts) in
connection with the transactions contemplated hereby and by any of the
other Loan Documents. Each of the aforementioned orders, permits, licenses,
authorizations, approvals, consents and waivers by Governmental Authorities
or other Persons shall be in full force and effect and shall be in form and
substance satisfactory to each Lead Bank;
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(j) Material Contracts and Other Documents. Copies of all Material
Contracts in effect as of the Effective Date, which are set forth on Schedule
5.01(j), copies of the Holdings Note Indenture and the Holdings Notes (in each
case including all schedules and exhibits thereto), which shall be in full force
and effect, and copies of all commodities account agreements in effect;
(k) No Litigation. A certificate signed by a Responsible Officer, dated
as of the Effective Date, satisfactory to each Lead Bank to the effect that (i)
there is no litigation, proceeding, inquiry or other action seeking an
injunction or other restraining order, damages or other relief, pending or
threatened, with respect to any Loan Document and (ii) there exists no judgment,
order, injunction, decree or other restraint or a hearing seeking injunctive
relief or other restraint pending or noticed with respect to any transaction
contemplated by any Loan Documents;
(l) Borrowing Base Certificate. A Borrowing Base Certificate, in form and
substance satisfactory to each Lead Bank which shall be prepared as of October
31, 1999;
(m) Financial Statements. (i) The financial statements referred to in
Section 6.11, each certified by the chief financial officer (or in the case of
his or her unavailability, by the treasurer or controller) of the Company; and
(ii) The documents required to be delivered by the Company as of the
Effective Date pursuant to Section 7.01 of the Existing Credit Agreement.
(n) No Material Adverse Effect. Since December 31, 1998, in the opinion
of each Lead Bank in its sole discretion, there shall have occurred no event or
circumstance that has resulted or could reasonably be expected to result in a
Material Adverse Effect;
(o) Other Documents. The certificates and other information required to
be delivered by the Company as of the Effective Date pursuant to Sections 7.02
and 7.03 of the Existing Credit Agreement and such other approvals, opinions,
documents or materials as the Administrative Agent or any Lead Bank may request.
5.02 Addition of Banks. Effective on the Effective Date, the following
financial institutions described on Schedule 5.02 shall each be added as a Bank
for all purposes and shall hereby become vested with all the rights, powers,
privileges and duties of a Bank under this Agreement and each of the other Loan
Documents. For purposes of this Agreement, the address of each of the Banks
listed above shall be as set forth under such Bank's name on the signature pages
hereof.
5.03 Reallocation of Pro Rata Shares. Effective on the Effective Date,
all references in this Agreement to Schedule 1.01(a) shall, unless specified
otherwise, refer to Schedule 1.01(a) attached to this Agreement and the Pro Rata
Shares of the Banks shall be adjusted to equal the respective percentages set
forth on Schedule 1.01(a) attached to this Agreement.
5.04 Outstanding Loans and L/C Obligations. On the Effective Date, the
Administrative Agent will calculate the appropriate adjustments to the account
of the Banks
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referred to in Section 2.02(a) of this Agreement to reflect the reallocation of
outstanding Revolving Loans and L/C Obligations in accordance with the Pro Rata
Shares of the Banks set forth in Schedule 1.01(a) to this Agreement, and will
(a) prior to 1:00 p.m. New York City Time on such date notify each Bank and the
Company of the amounts of such reallocation of Loans and notify each Bank of the
amount, representing the portion of principal amount of outstanding Loans, which
such Bank will either advance or receive as a result of such reallocation, and
(b) prior to the close of business in New York City on such date notify each
Bank and the Company of the amounts of such reallocation of L/C Obligations.
Immediately upon receipt of the notice from the Administrative Agent set forth
in clause (a) above, but no later than 2:00 p.m. New York City time on such
date, each Bank which is to make an advance as described above shall make such
amount available to the Administrative Agent in funds immediately available to
the Administrative Agent. Promptly upon receipt of funds from a Bank making an
advance as set forth above, the Administrative Agent shall remit such amount to
the Bank or Banks entitled to receive such amount, pro-rata in proportion to the
amounts to be received by them as determined above. The making of an advance by
a Bank as set forth above shall be deemed to be the making of a Loan to the
Company on the date such funds are transmitted to the Administrative Agent. The
receipt by a Bank of funds as set forth above shall be deemed to be a payment of
Loans by the Company on the date such payment is received.
5.05 Conditions to All Loans. The obligation of each Bank to make any
Loan to be made by it, to convert any Prime Rate Loan into a Eurodollar Rate
Loan under Section 2.04 or to continue a Eurodollar Rate Loan under 2.04 is
subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date or Conversion/Continuation Date; provided that only the
conditions set forth in Sections 5.05(a) and 5.05(c) need be satisfied in the
case of a continuation of a Eurodollar Rate Loan pursuant to Section 4.07:
(a) Notice of Borrowing or Conversion/Continuation. The Administrative
Agent shall have received a Notice of Borrowing, or a Notice of
Conversion/Continuation, as applicable;
(b) Continuation of Representations and Warranties. After giving effect
to such Borrowing, the representations and warranties in Article VI shall be
true and correct on and as of such Borrowing Date with the same effect as if
made on and as of such Borrowing Date (except to the extent such representations
and warranties expressly refer to an earlier date, in which case they shall be
true and correct as of such earlier date and except to the extent (x) the
representations and warranties set forth in Section 6.05 relate to any
litigation which has been specifically disclosed to the Banks and which has been
added to Schedule 6.05 with the written approval of the Majority Banks and (y)
the representation and warranty set forth in Section 6.25 relates to any event
or condition which has been specifically disclosed to the Banks and which has
been added to Schedule 6.25 with the written approval of the Majority Banks).
Each Notice of Borrowing and each Notice of Conversion/Continuation
relating to the conversion of any Prime Rate Loan into a Eurodollar Rate Loan
submitted by the Company hereunder shall constitute a representation and
warranty by the Company hereunder, as of the date of each such notice and as of
each Borrowing Date or Conversion/Continuation Date, as applicable, that the
conditions in this Section 5.05 are satisfied. Each Notice of
Conversion/Continuation relating to the continuation of any Eurodollar Rate Loan
submitted by
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the Company hereunder shall constitute a representation and warranty by the
Company hereunder, as of the date of each such notice and as of each
Conversion/Continuation Date that the conditions in Sections 5.05(a) and (c) are
satisfied;
(c) No Future Advance Notice. Neither the Administrative Agent nor any
Bank shall have received from the Company any notice that any Collateral
Document will no longer secure on a first priority basis future advances or
future Loans to be made or extended under this Agreement;
(d) Performance of Agreements. The Company shall have performed in all
material respects all agreements and satisfied all conditions which the Loan
Documents provide shall be performed or satisfied by it on or before the
relevant Borrowing Date or Conversion/Continuation Date;
(e) No Judgments. No order, judgment or decree of any arbitrator or
Governmental Authority shall purport to enjoin or restrain any Bank from making
or converting the Loans to be made or converted by it on the relevant Borrowing
Date or Conversion/Continuation Date;
(f) Regulation T, U and X. The making or converting of the Loans
requested on the relevant Borrowing Date or Conversion/Continuation Date shall
not violate any law including, without limitation, Regulation T, U or X of FRB;
and
(g) No Litigation. There shall not be pending or, to the knowledge of the
Company, threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting the Company or any of its Subsidiaries or any
property of the Company or any of its Subsidiaries that has not been disclosed
by the Company in writing pursuant to Section 7.03 prior to the making of the
last preceding Loans, and there shall have occurred no development not so
disclosed in any such action, suit, proceeding, governmental investigation or
arbitration so disclosed, that, in either event, would reasonably be expected to
have a Material Adverse Effect; and no injunction or other restraining order
shall have been issued and no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed with respect to any
action, suit or proceeding seeking to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a result of, the
transactions contemplated by any Loan Document or the making of any Loan.
5.06 Conditions to All Letters of Credit . The Issuance of any Letter of
Credit hereunder (whether or not the applicable Issuing Bank is obligated to
Issue such Letter of Credit) is subject to the following conditions precedent:
(a) Notice of Issuance of Letter of Credit. On or before the date of
Issuance of such Letter of Credit, the applicable Issuing Bank and the
Administrative Agent shall have received from the Company, in accordance with
the provisions of Sections 3.01 and 3.02, a Letter of Credit Request, together
with all other information specified in Article III and such other documents or
information as the applicable Issuing Bank and the Administrative Agent may
require in connection with the Issuance of such Letter of Credit.
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(b) Satisfaction of Other Conditions. On the date of Issuance of such
Letter of Credit, all conditions precedent described in Section 5.05 shall be
satisfied to the same extent as if the Issuance of such Letter of Credit were
the making of a Loan and the date of Issuance of such Letter of Credit were a
Borrowing Date.
Each Letter of Credit Request submitted by the Company hereunder shall
constitute a representation and warranty by the Company hereunder, as of the
date of each such Letter of Credit Request and as of the date on which the
Letter of Credit is Issued, that the conditions in this Section 5.06 are
satisfied.
Article VI.
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Administrative Agent and each
Bank that:
6.01 Corporate Existence and Power . The Company and each of its
Restricted Subsidiaries (in the case of clauses (a), (b) and (c)) and its
Subsidiaries (in the case of clause (d)):
(a) is a corporation (or other entity) duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation (or other entity) and is
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) is in compliance with all Requirements of Law and has all necessary
orders, authorizations, approvals, consents and waivers by any Governmental
Authority or other Person for the Company to own and operate its business;
except, in each case referred to in clause (c) or clause (d), to the extent that
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
6.02 Corporate Authorization; No Contravention . The execution,
delivery and performance by the Company and the Restricted Subsidiaries of each
Loan Document to which such Person is party, have been duly authorized by all
necessary corporate (or equivalent) action, and do not and will not:
(a) contravene the terms of any of that Person's Organization Documents;
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(b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any Contractual Obligation
to which such Person is a party or any order, injunction, writ or decree of any
arbitrator or Governmental Authority to which such Person or its property is
subject; or
(c) violate any Requirement of Law.
6.03 Governmental Authorization . No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority (except for filings in connection with the Liens granted
to the Administrative Agent under the Collateral Documents) is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, the Company or any of its Restricted Subsidiaries of any
Loan Document to which such Person is a party.
6.04 Binding Effect . Each Loan Document to which the Company or any of
its Restricted Subsidiaries is a party constitutes the legal, valid and binding
obligation of the Company and its Restricted Subsidiaries to the extent it is a
party thereto, enforceable against such Person in accordance with its respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles.
6.05 Litigation . Except as specifically disclosed in Schedule 6.05,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company, or its
Subsidiaries or any of their respective properties w hich:
(a) purport to affect or pertain to any Loan Document, or any of the
transactions contemplated hereby or thereby; or
(b) could reasonably be expected to have a Material Adverse Effect. No
injunction, writ, temporary restraining order or any order of any nature has
been issued by any arbitrator or Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of any Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.06 No Default . No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company or from the grant or
perfection or continued perfection of the Liens of the Collateral Agent, in
favor of the Administrative Agent and the Banks on the Collateral. As of the
Effective Date, neither the Company nor any of its Subsidiaries is in default
under or with respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably be expected to
have a Material Adverse Effect, or that would, if such default had occurred
after the Effective Date, create an Event of Default under Section 9.01(e).
6.07 ERISA Compliance.
(a) Each Plan is in compliance in all respects with the applicable
provisions of ERISA, the Code and other federal or state law, except for matters
which have not resulted and
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would not reasonably be expected to result in a Material Adverse Effect. Each
Plan which is intended to qualify under Section 401(a) of the Code has received,
or will timely file for, a favorable determination letter from the IRS and to
the best knowledge of the Company, nothing has occurred which would cause, or
would reasonably be expected to cause, the loss of such qualification. The
Company and each ERISA Affiliate has made all required contributions to all
Plans, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending or, to the best knowledge of the Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any material Unfunded Pension Liability; and(iii)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any material liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA), including but not limited to any material liability under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan and any material liability
that could reasonably be expected to result from the operation of Section 4069
or 4212(c) of ERISA.
6.08 Use of Proceeds; Margin Regulations . The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 7.11
and Section 8.07. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
6.09 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or
valid leasehold interests in, all real property necessary or used in the
ordinary conduct of their respective businesses, except for such defects in
title as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. As of the Effective Date, the property of the
Company and its Subsidiaries is subject to no Liens, other than Permitted Liens.
6.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any of its Subsidiaries that would, if made, reasonably be expected to have a
Material Adverse Effect.
6.11 Financial Condition. The audited consolidated financial statements
of the Company and its Subsidiaries dated December 31, 1998 and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date (including the notes thereto) and
the unaudited consolidated financial statements of the
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Company and its Subsidiaries dated June 30, 1999 and the related consolidated
statements of income or operations, shareholders' equity and cash flows for the
fiscal quarter ended on that date (including the notes thereto):
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, subject, in the case of such unaudited financial statements, to
ordinary, good faith year end audit adjustments;
(ii) fairly present the consolidated financial condition of the
Company and its Subsidiaries as of the date thereof and the consolidated
results of operations of the Company and its Subsidiaries for the period
covered thereby; and
(iii) except as specifically disclosed in Schedule 6.11, show all
material indebtedness and other material liabilities, direct or contingent, of
the Company and its consolidated Subsidiaries as of the date thereof,
including material liabilities for taxes, material commitments and material
Contingent Obligations.
6.12 Environmental Matters.
---------------------
(a) Except as specifically disclosed in Schedule 6.12 (as such schedule
may be amended with the approval of the Administrative Agent), the operations of
the Company and each of its Subsidiaries comply in all respects with all
Environmental Laws, except such non-compliance which would not (if enforced or
otherwise addressed in accordance with applicable law) result in liabilities
reasonably expected to require payments by the Company and its Subsidiaries
(whether to compensate for damages, to investigate and/or remediate
contamination or hazardous conditions, to make capital improvements or operating
changes, including reductions in throughput or production or otherwise) in an
aggregate amount, determined for any date upon which this representation or
warranty is made, exceeding $10,000,000 during the thirty-six month period
commencing on such date. Except as disclosed in Schedule 6.12 (as such schedule
may be amended with the approval of the Administrative Agent), no real property
owned, operated, used or controlled by the Company or any of its Subsidiaries is
listed or proposed for listing on the National Priority List or the
Comprehensive Environmental Response, Compensation, and Liability Information
System, both promulgated under CERCLA, or on any comparable state or local list,
and, except as disclosed in Schedule 6.12 (as such schedule may be amended with
the approval of the Administrative Agent), neither the Company nor any of its
Subsidiaries has received any notification of potential or actual liability or
request for information by any Governmental Authority under CERCLA or any
comparable state or local law.
(b) Except as specifically disclosed in Schedule 6.12 (as such schedule
may be amended with the approval of the Administrative Agent), the Company and
each of its Subsidiaries have obtained all licenses, permits, authorizations,
approvals, consents and registrations required under any Environmental Law
("Environmental Permits") and necessary for their respective ordinary course
operations, except where the failure to have such licenses, permits,
authorizations, approvals, consents and registrations could not reasonably be
expected to have a Material Adverse Effect, and all such Environmental Permits
are in good standing, and
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the Company and each of its Subsidiaries are in compliance with all material
terms and conditions of such Environmental Permits.
(c) Except as specifically disclosed in Schedule 6.12 (as such schedule
may be amended with the approval of the Administrative Agent), none of the
Company, any of its Subsidiaries or any of their respective present property or
operations, is subject to any outstanding written order from or agreement with
any Governmental Authority, nor subject to any judicial or docketed
administrative proceeding, respecting any Environmental Law, Environmental Claim
or Hazardous Material.
(d) Except as specifically disclosed in Schedule 6.12 (as such schedule
may be amended with the approval of the Administrative Agent), there are no
Hazardous Materials or other conditions or circumstances existing with respect
to any property of the Company or any of its Subsidiaries, or arising from their
operations that would reasonably be expected to give rise to Environmental
Claims requiring payments by the Company and its Subsidiaries (whether to
compensate for damages, to investigate and/or remediate contamination or
hazardous conditions, to make capital improvements or otherwise) in an aggregate
amount, determined for any date upon which this representation or warranty is
made, exceeding $10,000,000 during the thirty-six month period commencing on
such date. In addition, (i) neither the Company nor any of its Subsidiaries has
any underground storage tanks, above-ground storage tanks, storage ponds or
surface impoundments (x) that are not properly registered, permitted or
otherwise authorized under applicable Environmental Laws, or (y) that are
leaking or otherwise releasing Hazardous Materials (whether as fluids or vapors)
into the environment in a manner that may reasonably be expected to give rise to
Environmental Claims with a potential liability to the Company and its
Subsidiaries in excess of $5,000,000 in the aggregate, and (ii) the Company and
its Subsidiaries have notified all of their employees of the existence of any
health hazards arising from the conditions of their employment and have met all
notification requirements under Title III of CERCLA and all other Environmental
Laws.
(e) Except as set forth in Schedule 6.12 (as such schedule may be amended
with the approval of the Administrative Agent), none of the Company or any of
its Subsidiaries has any contingent liabilities under environmental indemnities
or other agreements whereby the Company or any such Subsidiary has agreed to
indemnify others against Environmental Claims which could reasonably be expected
to expose the Company and its Subsidiaries to liabilities exceeding $10,000,000
in the aggregate, and except as set forth in Schedule 6.12 (as such schedule may
be amended with the approval of the Administrative Agent), none of the Company
or its Subsidiaries has provided any bond or other form of financial assurance
with respect to any environmental liability, risks or remediation costs of
shippers, customers or other third-parties.
6.13 Collateral Documents.
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(a) The provisions of each of the Collateral Documents are effective to
create in favor of the Collateral Agent for the benefit of the Administrative
Agent, the Banks and the Bank Swap Parties, a legal, valid and enforceable first
priority security interest in all right, title and interest of the Company and
its Restricted Subsidiaries in the Collateral described therein and upon filing
of the UCC-1 financing statements in the offices in all of the jurisdictions
listed
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in the schedule to the Security Agreement, the Collateral Agent shall have a
legal, valid and enforceable first priority security interest in the Collateral
subject only to Permitted Liens.
(b) All representations and warranties of the Company and any of its
Restricted Subsidiaries party thereto contained in the Collateral Documents are
true and correct in all material respects.
(c) The Company has delivered to the Collateral Agent all commodities
account agreements in effect.
6.14 Regulated Entities. None of the Company, any Person controlling the
Company, or any Restricted Subsidiary, is an "Investment Company" within the
meaning of the Investment Company Act of 1940. The Company is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or any
other Federal or state statute or regulation limiting its ability to incur
Indebtedness.
6.15 No Burdensome Restrictions. Neither the Company nor any Restricted
Subsidiary is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.
6.16 Copyrights, Patents,The Company or its Restricted Subsidiaries own
or are licensed or otherwise have the right to Trademarks and Licenses, use all
of the patents, trademarks, service marks, trade names, copyrights, contractual
etc. franchises, authorizations and other rights that are reasonably necessary
for the operation of their respective businesses, without conflict with the
rights of any other Person except to the extent that such failure would not
reasonably be expected to have a Material Adverse Effect. To the best knowledge
of the Company, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Company or any Restricted Subsidiary infringes upon any rights
held by any other Person. Except as specifically disclosed in Schedule 6.05, no
claim or litigation regarding any of the foregoing is pending or threatened, and
no patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the Company,
proposed, which, in either case, could reasonably be expected to have a Material
Adverse Effect.
6.17 Subsidiaries. The Company has no Subsidiaries and has no equity
Investments in any other corporation or entity other than (a) those specifically
disclosed in Schedule 6.17, (b) Joint Ventures permitted under Section 8.09, (c)
the Pipeline Subsidiary, (d) when formed or designated, any Unrestricted
Subsidiary and (e) Investments permitted under Section 8.04.
6.18 Insurance. Except as specifically disclosed in Schedule 6.18, the
properties of the Company and its Restricted Subsidiaries are insured with
financially sound and reputable insurance companies not Affiliates of the
Company, in such amounts, with such deductibles and covering such risks as are
customarily carried by Persons engaged in similar
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businesses and owning similar properties in localities where the Company or
such Subsidiary operates.
6.19 Solvency. The Company is and each of its Restricted Subsidiaries are
Solvent.
6.20 Full Disclosure. None of the representations or warranties made by
the Company or any Restricted Subsidiary in the Loan Documents as of the date
such representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Restricted Subsidiary in connection with
the Loan Documents, when taken as a whole, contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading as of the time when made or
delivered.
6.21 Maintenance of Accounts. Neither the Company nor any of its
Subsidiaries has or maintains any bank or other account containing or receiving
proceeds of the Collateral except the Collection Deposit Account and the
Concentration Account disclosed in the Collection Bank Agreement and the
Concentration Bank Agreement (including the schedules thereto), and accounts in
connection with the granting of liens permitted under Section 8.01(u).
6.22 Receivables. Each Eligible Receivable pledged by the Company to the
Collateral Agent under the Collateral Documents represents a final sale and
delivery of merchandise or the rendition of services by the Company to customers
and is owned by the Company free and clear of all Liens in favor of any Person
other than the Administrative Agent on behalf of the Banks and the Bank Swap
Parties. Each such Eligible Receivable has a liquidated amount maturing on a
date specified in the invoice or other supporting data covering such sale, and
will not be subject to any deduction, offset, counterclaim, return privilege or
other condition, except in the ordinary course of business.
6.23 Inventory. Each of the Perfection Certificates of the Company
delivered to the Administrative Agent pursuant to Section 5.01(f) or Section
7.02(f), contains a true and complete list showing all states and counties where
the Company maintains Inventory at the time such Certificate is so delivered.
6.24 Holdings Note Indenture, 9 1/2% Note Indenture, 1997 Floating and
Fixed Rate Note Indentures, 1998 Fixed Rate Note Indenture and 1998 Floating
Rate Credit Agreement 1/2. The Indebtedness to be incurred by the Company under
this Agreement is (i) "Permitted Indebtedness" under the 1997 Floating and Fixed
Rate Note Indentures pursuant to the definition of such term contained therein
and "Senior Debt" under the 1997 Floating and Fixed Rate Note Indenture
described in clause (ii) of the definition of the 1997 Floating and Fixed Rate
Note Indentures pursuant to the definition of such term contained therein, (ii)
"Permitted Indebtedness" under the 1998 Fixed Rate Note Indenture and the 1998
Floating Rate Credit Agreement pursuant to the definition of such term contained
therein and (iii) "Permitted Indebtedness" under the 9 1/2% Note Indentures
pursuant to clause (ii) of the definition of such term contained therein as this
Agreement constitutes a refinancing, renewal, extension, refunding or
replacement of the Existing Credit Agreement (which constitutes the "Credit
Agreement" as
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defined in the 9 1/2% Note Indenture). The Loan Documents, when executed and
delivered by the parties thereto, are the "Credit Agreement" as such term is
used in clause (b) of Section 1016 of the 9 1/2% Note Indenture. The execution,
delivery and performance of the Loan Documents and the provisions contained
herein and therein do not contravene or conflict with, result in a breach or
violation of, or constitute a default under any of the terms, conditions or
provisions of the Holdings Note Indenture, the Holdings Notes, the 9 1/2% Note
Indenture, the 9 1/2% Notes, the 1997 Floating and Fixed Rate Note Indentures,
the 1997 Floating and Fixed Rate Notes, the 1998 Fixed Rate Note Indenture, the
1998 Fixed Rate Notes, the 1998 Floating Rate Loans or the 1998 Floating Rate
Credit Agreement.
6.25 Material Adverse Effect. Except as specifically disclosed in Schedule
6.25, since December 31, 1998, there has been no Material Adverse Effect.
6.26 Year 2000 Compliance. All Information Systems and Equipment are
either Year 2000 Compliant, or any reprogramming, remediation, or any other
corrective action, including the internal testing of all such Information
Systems and Equipment, has been completed except where the failure to be so
completed would not have a Material Adverse Effect. Further, to the extent that
such reprogramming/remediation and testing action is required, the cost thereof,
as well as the cost of the reasonably foreseeable consequences of failure to
become Year 2000 Compliant, to the Borrower and its Subsidiaries (including,
without limitation, reprogramming errors and the failure of other systems or
equipment) will not result in an Event of Default or a Material Adverse Effect.
Article VII.
AFFIRMATIVE COVENANTS
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So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding:
7.01 Financial Statements. The Company shall deliver to the Administrative
Agent with sufficient copies for each Bank, in form and detail satisfactory to
the Majority Banks:
(a) as soon as available, but not later than 90 days after the end of each
fiscal year, a copy of the audited consolidated and consolidating balance sheet
of the Company and its Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income or operations, shareholders'
equity and cash flows for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, and accompanied by the opinion of
Deloitte & Touche or another nationally-recognized independent public accounting
firm ("Independent Auditor"), which report shall state that such consolidated
financial statements present fairly the financial condition for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified or limited (including, without
limitation, as to the scope of audit) and shall be delivered to the
Administrative Agent pursuant to a reliance agreement between the Administrative
Agent (on behalf of itself and the Banks) and such Independent Auditor in form
and substance satisfactory to the Administrative Agent;
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(b) as soon as available, but not later than 45 days after the end of
each of the Company's fiscal quarters of each fiscal year, a copy of the
unaudited consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such quarter and the related consolidated and
consolidating statements of income, shareholders' equity and cash flows for the
period commencing on the first day and ending on the last day of such quarter
and, if such quarter is not the first fiscal quarter of the fiscal year, then
for the period commencing on the first day of such fiscal year and ending on the
last day of such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter for the previous fiscal year, and
certified by a Responsible Officer as fairly presenting, in accordance with GAAP
(subject to ordinary, good faith year-end audit adjustments), the consolidated
financial position and results of operations of the Company and its
Subsidiaries;
(c) as soon as available, but not later than 30 days after the end of
each of the calendar months of each calendar year or, if the end of any such
calendar month is the last day of a fiscal quarter, then 45 days after the end
of such calendar month, a copy of the unaudited consolidated and consolidating
balance sheet of the Company and its Subsidiaries as of the end of such month
and the related consolidated and consolidating statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such month and, if such month is not the first
month of the Company's fiscal year, then for the period commencing on the first
day of such fiscal year and ending on the last day of such month, setting forth
in each case in comparative form the figures for the corresponding month for the
previous fiscal year, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith year-end
audit adjustments), the consolidated financial position and results of
operations of the Company and its Subsidiaries; and
(d) as soon as available but not later than January 31 of each fiscal
year of the Company, the Company's operating budget, plans and financial
forecasts, prepared in accordance with its normal accounting procedures applied
on a consistent basis, for such fiscal year (prepared for each calendar month
and each fiscal quarter during such fiscal year) including, without limitation,
(i) forecasted consolidated statements of income, cash flows and financial
condition of the Company and its Subsidiaries for each such period and year-to-
date, (ii) the amount of forecasted Capital Expenditures, together with a
detailed description thereof, for each such period, and (iii) promptly upon
receipt thereof, copies of all reports submitted to the Company by the
Independent Auditor in connection with any annual, interim or special audit of
the books of the Company or any of its Subsidiaries made by the Independent
Auditor, including, without limitation, any so-called management letter
furnished to the Company or any of its Subsidiaries by its accountants.
7.02 Certificates; Other Information. The Company shall furnish to the
Administrative Agent and, except with respect to Sections 7.02(f) and 7.02(g),
with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements referred
to in Section 7.01(a), a certificate of the Independent Auditor stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
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(b) concurrently with the delivery of the financial statements referred
to in Sections 7.01(a), (b) and (c), a Compliance Certificate executed by a
Responsible Officer;
(c) promptly, copies of all financial statements and reports that
Holdings or the Company sends to their respective public securityholders, and
copies of all financial statements and regular, periodic or special reports
(including Forms 10-K, 10-Q and 8-K) that Holdings, the Company or any of their
respective Subsidiaries may make to, or file with, the SEC;
(d) promptly upon the effectiveness thereof, copies of each amendment,
modification or restatement of or replacement or substitution for any of the
Institutional Finance Documents;
(e) prior to the close of business on the tenth Business Day after (i) the
Sunday closest to the fifteenth day of each month, and (ii) the last Business
Day of each month, including the month in which the Effective Date occurs, a
certificate (the "Borrowing Base Certificate") substantially in the form of
Exhibit D to this Agreement, signed by a Responsible Officer, setting forth, on
an itemized basis, the Borrowing Base, as of the close of business on such
Sunday or month end (each a "Borrowing Base Measurement Date") and the Borrowing
Base computations based thereon, as well as certifications by a Responsible
Officer of the Company that the information set forth in such Borrowing Base
Certificate is true and correct and that from the date of the most recent
Borrowing Base Certificate previously delivered to the date of the new Borrowing
Base Certificate being delivered with such certification, no Default or Event of
Default has occurred and is continuing; provided, that if at any time the excess
of the Borrowing Base over the sum of (A) the Effective Amount of all Loans plus
(B) the Effective Amount of all L/C Obligations plus (C) the Effective Amount of
all Outstanding Eligible LOIs, is less than $50,000,000, the Company shall
deliver a Borrowing Base Certificate prior to the close of business on the tenth
Business Day after the Sunday of each week until such time as the excess of the
Borrowing Base over such sum is greater or equal to $50,000,000. Notwithstanding
the foregoing, the Borrower may deliver a Borrowing Base Certificate at any
time, setting forth, on an itemized basis, the Borrowing Base, as of the close
of business on any day (an "Interim Borrowing Base Measurement Date") following
the Borrowing Base Measurement Date in respect of the most recently delivered
Borrowing Base Certificate (it being understood that all items of the Borrowing
Base shall be itemized as of such Interim Borrowing Base Measurement Date and
such date shall be prior to the date of such Borrowing Base Certificate and the
next Borrowing Base Measurement Date) and otherwise in accordance with this
Section 7.02(e). Each Borrowing Base Certificate shall become effective upon the
Administrative Agent's receipt thereof and shall remain in effect until the
earlier of (A) the receipt by the Administrative Agent of the next Borrowing
Base Certificate to be delivered hereunder, and (B) the close of business on the
date on which the next Borrowing Base Certificate is required to be delivered
hereunder; provided, that if the Borrower certifies to the Administrative Agent
that it is not able to provide a Borrowing Base Certificate as of the Sunday
closest to the fifteenth day of any month due to circumstances beyond its
control, the Company may, with the consent of the Administrative Agent, provide
a Borrower Base Certificate in lieu of the Borrowing Base Certificate described
in clause (i) above, on such date, and dated as of a Sunday, reasonably
acceptable to the Administrative Agent;
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(f) no later than ten (10) days after the removal of any Inventory of the
Company from the states and counties listed on the then current Perfection
Certificates to a state or county not so listed, a revised Perfection
Certificate and UCC-1 financing statements, executed by the Company, in proper
form for filing to perfect the security interest of the Collateral Agent for the
benefit of the Administrative Agent and the Banks in such Inventory;
(g) promptly upon entering into a Swap Contract relating to interest
rates (or any amendments or modifications thereto) with any Bank Swap Party, a
copy of such Swap Contract (or such amendment or modification document);
(h) as soon as available, but not later than 30 days after the end of
each of the calendar months of each calendar year a report on payables and the
aging of receivables in a form satisfactory to the Administrative Agent; and
(i) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any of its Subsidiaries as the
Administrative Agent may from time to time request.
7.03 Notices. The Company shall promptly notify the Administrative Agent
and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that will foreseeably
become a Default or Event of Default;
(b) of (i) any breach or non-performance of, or any default under, any
Contractual Obligation of the Company or any of its Subsidiaries which could
reasonably be expected to result in a Material Adverse Effect; and (ii) any
dispute, litigation, investigation, proceeding or suspension which may exist at
any time between the Company or any of its Subsidiaries and any Governmental
Authority;
(c) of the commencement of, or any material development in, any
litigation or proceeding affecting the Company or any of its Subsidiaries (i) in
which the amount of damages claimed is $5,000,000 (or its equivalent in another
currency or currencies) or more, (ii) in which injunctive or similar relief is
sought and which, if adversely determined, would reasonably be expected to have
a Material Adverse Effect, or (iii) in which the relief sought is an injunction
or other stay of the performance of any Loan Document;
(d) upon, but in no event later than 10 days after, becoming aware of (i)
any and all enforcement, cleanup, removal or other governmental or regulatory
actions instituted, completed or threatened against the Company or any of its
Subsidiaries or any of their respective properties pursuant to any applicable
Environmental Laws that constitute Significant Environmental Issues, (ii) any
Environmental Claim in excess of $100,000, and (iii) any changes in
Environmental Laws which will require Capital Expenditures in excess of levels
assumed by the Company in the preparation of any financial models or projections
delivered to the Banks (including forecasts required by Section 7.01(d));
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(e) of any other litigation or proceeding affecting the Company or any
of its Subsidiaries which the Company would be required to report to the SEC
pursuant to the Exchange Act, within four days after reporting the same to the
SEC;
(f) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Administrative Agent and each Bank a copy of any
notice with respect to such event that is filed with a Governmental Authority
and any notice delivered by a Governmental Authority to the Company or any ERISA
Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability of any
Pension Plan;
(iii) the adoption of, or the commencement of contributions to, any
Plan subject to Section 412 of the Code by the Company or any ERISA Affiliate or
the adoption of any amendment to a Plan subject to Section 412 of the Code, if
such adoption or amendment results in a material increase in contributions or
Unfunded Pension Liability; and
(g) of any material change in accounting policies, financial reporting
practices or hedging practices by the Company or any of its consolidated
Subsidiaries.
Each notice under this Section 7.03 shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under Section 7.03(a) shall describe with particularity any and all clauses or
provisions of the relevant Loan Document that have been (or foreseeably will be)
breached or violated.
7.04 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Restricted Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence (or equivalent) and good standing under the laws of its state or
jurisdiction of incorporation or organization unless such failure would not have
a Material Adverse Effect;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except in connection with
transactions permitted by Section 8.03 and sales of assets permitted by Section
8.02;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
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(d) preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.05 Maintenance of Property . The Company shall maintain, and shall
cause each Restricted Subsidiary to maintain, and preserve all its property
which is used or useful in its business in good working order and condition,
ordinary wear and tear excepted and make all necessary repairs thereto and
renewals and replacements thereof except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect. The Company and each
Restricted Subsidiary shall use the standard of care typical in the industry in
the operation and maintenance of its Facilities.
7.06 Insurance. In addition to insurance requirements set forth in the
Collateral Documents, the Company shall maintain, and shall cause each of its
Restricted Subsidiaries to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons;
including workers' compensation insurance, public liability and property and
casualty insurance which amount shall not be reduced by the Company in the
absence of 30 days' prior written notice to the Administrative Agent. All
insurance policies listed on Schedule 7.06 shall name the Collateral Agent as
loss payee, in each case for the benefit of itself, the Banks and the Bank Swap
Parties, as its interests may appear. Each such policy listed on Schedule 7.06
shall require, among other things, that no cancellation or material modification
of such policy shall be effective until 30 days prior written notice thereof
shall have been provided to the Administrative Agent. The Company shall furnish
the Administrative Agent, with sufficient copies for each Bank, at reasonable
intervals (and in any event at least once per calendar year) a certificate of a
Responsible Officer of the Company and each insurance broker of the Company
setting forth the nature and extent of all insurance maintained by the Company
and its Restricted Subsidiaries in accordance with this Section or any
Collateral Documents (and which, in the case of a certificate of a broker, were
placed through such broker).
7.07 Payment of Obligations. The Company shall, and shall cause each of
its Restricted Subsidiaries to, pay and discharge as the same shall become due
and payable, all their respective material obligations and liabilities,
including:
(a) all tax liabilities, assessments and governmental charges or levies
upon it or its properties or assets, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves in accordance with GAAP
are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien upon
its property; and
(c) all Indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
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7.08 Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect. The Company shall, and shall cause each of its ERISA Affiliates to: (a)
maintain each Plan in compliance in all respects with the applicable provisions
of ERISA, the Code and other federal or state law, except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect; (b) cause each Plan which is qualified under Section 401(a) of the Code
to maintain such qualification, except to the extent that the failure to do so
could not reasonably be expected to have a Material Adverse Effect; and (c) make
all required contributions to any Plan subject to Section 412 of the Code.
7.09 Inspection of Property and. The Company shall maintain and shall
cause each Restricted Subsidiary to maintain proper Books and Records books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of the Company and such Restricted
Subsidiary. The Company shall permit, and shall cause each Restricted Subsidiary
to permit, representatives and independent contractors of the Administrative
Agent or any Bank to visit and inspect any of their respective properties, to
examine their respective corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and independent
public accountants, all at the expense of the Company and at such times during
normal business hours and as often as may be reasonably desired, upon any
advance notice to the Company; provided when an Event of Default exists the
Administrative Agent or any Bank may do any of the foregoing at the expense of
the Company at any time during normal business hours and without advance notice.
Without limiting the generality of the foregoing, the Company agrees that
semiannual Borrowing Base audit examinations on or about March 31 and September
30 of each year beginning in 2000 (or more frequently, as may be required by the
Administrative Agent acting alone or at the direction of the Lead Banks, in its
or their sole discretion) shall be conducted at the Company's cost and expense
in scope and detail satisfactory to the Administrative Agent or the Lead Banks,
utilizing, at the election of the Administrative Agent or the Lead Banks, in-
house personnel of the Administrative Agent or one or more Lead Banks, or one or
more outside appraisers selected by the Administrative Agent or the Lead Banks.
7.10 Environmental Laws.
(a) The Company shall, and shall cause each of its Subsidiaries to,
conduct its operations and keep and maintain its property in compliance with all
Environmental Laws, except that it will not be a breach of this covenant if
noncompliance could not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect.
(b) Upon the written request of the Administrative Agent or the Majority
Banks, the Company shall submit and cause each of its Subsidiaries to submit, to
the Administrative Agent with sufficient copies for each Bank, at the Company's
sole cost and expense, at reasonable intervals, a report prepared by an
environmental consultant approved by the Administrative Agent or the Lead Banks,
in form and substance satisfactory to the Lead
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Banks, providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue or matter disclosed on Schedule 6.12 or
identified in any notice or report required pursuant to Section 7.03(d), that
could reasonably be expected to, individually or in the aggregate, result in
liability in excess of $10,000,000.
(c) The Company shall perform all environmental remediation in respect
of the "Excluded Area" (as defined in the Port Arthur Purchase Agreement) in the
manner and at such times as are contemplated in the Company's remediation plan
as evidenced by the November 9, 1994 report of Black and Veatch Waste Science,
Inc. and RTM/Jones and Neuse, Inc. and the TNRCC, and, in addition, the Company
shall comply with any further Requirement of Law which becomes applicable to the
Excluded Area. In the event the Company revises its remediation plan in respect
to the "Excluded Area" (whether by reason of a further Requirement of Law or
otherwise), the Company shall promptly notify the Administrative Agent and the
Banks of such revision, in detail satisfactory to the Majority Banks, and shall
comply with such revised remediation plan.
7.11 Use of Proceeds. The Company shall use the Letters of Credit and
the proceeds of the Loans for working capital and general corporate purposes and
not (a) in contravention of any Requirement of Law or of any Loan Document or
any Institutional Finance Document or (b) in any manner that would result in the
credit extended under this Agreement being in violation of Regulation T, U or X
of the FRB.
7.12 Further Assurances.
(a) The Company shall ensure that all written information, exhibits and
reports furnished to the Administrative Agent or the Banks, when taken as a
whole, do not and will not contain any untrue statement of a material fact and
do not and will not omit to state any material fact or any fact necessary to
make the statements contained therein not misleading in light of the
circumstances under which they were made, and will promptly disclose to the
Administrative Agent and the Banks and correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgment
or recordation thereof.
(b) Promptly upon request by the Administrative Agent or the Majority
Banks, the Company shall (and shall cause any of the Restricted Subsidiaries to)
do, execute, acknowledge, deliver, record, re-record, file, re-file, register
and re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments the Administrative
Agent or such Banks, as the case may be, may require from time to time in order
(i) to carry out more effectively the purposes of any Loan Document, (ii) to
subject to the Liens created by any of the Collateral Documents any of the
properties, rights or interests covered by any of the Collateral Documents,
(iii) to perfect and maintain the validity, effectiveness and priority of any of
the Collateral Documents and the Liens intended to be created thereby, and (iv)
to better assure, convey, grant, assign, transfer, preserve, protect and confirm
to the Administrative Agent and the Banks the rights granted or now or hereafter
intended to be granted to the Administrative Agent or the Banks under any Loan
Document or under any other document executed in connection therewith.
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7.13 Account Customers.
(a) The Company shall, and shall cause each of the Restricted
Subsidiaries to, promptly notify in writing all future wholesale account
customers and debtors that any amounts with respect to wholesale accounts
receivable shall be paid directly into the Concentration Account specifying in
such notice the name of the Concentration Bank and the branch and account number
of such account.
(b) The Company shall, and shall cause each of the Restricted
Subsidiaries to, forward all funds received by the Company or such Restricted
Subsidiaries in respect of accounts receivable or any other Accounts (in each
case not otherwise deposited in a Collection Bank Account or the Concentration
Account) to the Concentration Account by wire transfer of immediately available
funds.
7.14 Accounts. The Company shall:
(a) promptly upon, but in no event later than three (3) Business Days
after, the Company's learning thereof, inform the Administrative Agent and each
Bank in writing of any material delay by any Account Debtor in the performance
of any of such Account Debtor's obligations to the Company and of any material
allowance, credit or other money granted by the Company to any Account Debtor
owing more than $500,000; and
(b) promptly upon, but in no event later than three (3) Business Days
after, the Company's receipt or learning thereof, furnish to and inform the
Administrative Agent and each Bank of all material information relating to the
adverse financial condition of any Account Debtor.
7.15 Transfer of Funds into the Collection Bank Account and Concentration
Account.
(a) The Company shall monitor daily the balances of the Lockbox and the
Company shall promptly initiate an Electronic Funds Transfer of the entire
available amount in such account or Lockbox to the Collection Deposit Account or
the Concentration Bank Account unless the balance in any such account or Lockbox
is less than $10,000.
(b) With respect to direct transfers from any wholesale customer who has
authorized the Company to initiate ACH Transfers or other debits directly from
such customer's accounts into the Collection Deposit Account or the
Concentration Account from time to time to settle such customer's account with
the Company, the Company shall promptly initiate or direct the Collection Bank
or the Concentration Bank to initiate such ACH Transfer in the ordinary course
of the Company's business, consistent with past practice.
(c) During the continuance of an Event of Default, the Administrative
Agent shall have the right, with full power of attorney in the place and stead
of the Company to initiate ACH Transfers from all wholesale customer accounts
that have been authorized for ACH Transfers, to the Collection Deposit Account
or the Concentration Bank Account, as applicable.
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7.16 Year 2000 Compliance. The Company shall ensure that its Information
Systems and Equipment are, at all times, Year 2000 Compliant, except insofar as
the failure to do so will not result in a Material Adverse Effect, and shall
notify the Administrative Agent and the Banks promptly upon detecting any
failure of the Information Systems and Equipment to be Year 2000 Compliant if
such failure would reasonably be expected to have a Material Adverse Effect.
ARTICLE VIII.
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in writing:
8.01 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Restricted Subsidiary to, directly or indirectly, make, create,
incur, assume or suffer to exist any Lien upon or with respect to any part of
its property, whether now owned or hereafter acquired, other than the following
("Permitted Liens"):
(a) any Lien (other than a Lien on the Collateral) existing on property
of the Company or any Restricted Subsidiary on the Effective Date and set forth
in Schedule 8.01 securing Indebtedness or other obligations outstanding on such
date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.07, provided that no notice
of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA and other than on the
Collateral) consisting of pledges or deposits required in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other social security legislation;
(f) Liens (other than Liens on the Collateral) on the property of the
Company or its Restricted Subsidiary securing (i) the non-delinquent performance
of bids, trade contracts (other than for borrowed money), leases, statutory
obligations, (ii) obligations on surety and appeal bonds, and (iii) other non-
delinquent obligations of a like nature; in each case, incurred in
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the ordinary course of business; provided all such Liens in the aggregate would
not (even if enforced) reasonably be expected to cause a Material Adverse
Effect;
(g) Liens consisting of judgment or judicial attachment liens, provided
that the enforcement of such Liens is effectively stayed and all such Liens in
the aggregate at any time outstanding for the Company and the Restricted
Subsidiaries do not exceed $5,000,000;
(h) easements, rights-of-way, restrictions and other similar encumbrances
(other than Liens on the Collateral) which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the businesses of the Company and the Restricted Subsidiaries;
(i) Liens on assets (other than assets of the same type as the
Collateral) of Persons which become Restricted Subsidiaries after the date of
this Agreement; provided that (i) such Liens existed at the time the respective
corporations became Restricted Subsidiaries and were not created in anticipation
thereof and (ii) the Indebtedness and other obligations secured by such Liens is
permitted under Section 8.05;
(j) purchase money security interests on any property (other than the
Collateral) acquired or held by the Company or any Restricted Subsidiary,
securing Indebtedness and other obligations incurred or assumed for the purpose
of financing all or any part of the cost of acquiring such property; provided
that (i) any such Lien attaches to such property concurrently with or within 60
days after the acquisition thereof, (ii) such Lien attaches solely to the
property so acquired in such transaction, (iii) the principal amount of the debt
secured thereby does not exceed 100% of the cost of such property, and (iv) the
principal amount of the Indebtedness secured by any and all such purchase money
security interests shall not at any time exceed $15,000,000;
(k) Liens (other than Liens on the Collateral) securing obligations in
respect of Capitalized Leases on assets subject to such leases; provided that
such Capitalized Leases are otherwise permitted hereunder;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that such deposit account is not a part of the
Collateral and is not subject to restrictions against access by the Company or
any Restricted Subsidiary, as the case may be, in excess of those set forth by
regulations promulgated by the FRB;
(m) Liens consisting of pledges of Cash, Cash Equivalents, Qualifying
Investments or Treasury Securities owned by the Company to secure, on a mark-to-
market basis, obligations under Swap Contracts of the Company or any Restricted
Subsidiary relating to commodity prices entered into in the ordinary course of
business as bona fide hedging transactions or to secure petroleum inventory
delivery requirements resulting therefrom; provided that (i) the counterparty to
such Swap Contract is an entity listed on Schedule 8.01(m) of this Agreement or
an Affiliate of such an entity, or such counterparty is under a similar
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requirement to deliver similar collateral from time to time to the Company and
the Restricted Subsidiary party thereto, and (ii) the aggregate value of such
collateral so pledged by the Company and the Restricted Subsidiaries together in
favor of all counterparties does not at any time exceed $50,000,000;
(n) Liens (other than Liens on the Collateral) (i) arising from
precautionary filings of UCC financing statements relating solely to operating
leases permitted by this Agreement and (ii) on equipment or intangible assets
purchased in connection with an operating lease permitted by this Agreement
granted to secure obligations under such operating lease;
(o) Liens on Cash or Qualifying Investments pledged in lieu of letters of
credit for bonding and performance requirements, insurance requirements and
workers' compensation requirements of the Company or any Restricted Subsidiary
so long as the aggregate amount of Cash and Qualifying Investments so pledged
does not exceed $10,000,000 at any time;
(p) Liens on Inventory under Section 9-319 of the UCC as in effect in the
State of Texas as of the Effective Date;
(q) Liens (other than Liens on the Collateral) on fixed assets of the
Company or any Restricted Subsidiary to secure tax-exempt industrial development
bonds permitted by Section 8.05(f);
(r) Liens on stock or assets of Unrestricted Subsidiaries;
(s) Liens on assets (other than assets of the same type as the Collateral)
securing Indebtedness and other obligations acquired in connection with the
acquisition of such assets; provided, that such Indebtedness is permitted to be
incurred under Section 8.05(j) hereof, and provided, further, that such liens
existed at the time of such acquisition and were not created in anticipation of
such acquisition;
(t) leases of and easements for access to ancillary equipment (other than
the Collateral) necessary to operate the PACC Coker Project, which do not in any
case interfere with the ordinary conduct of the Company and the Restricted
Subsidiaries;
(u) Liens on up to $20,000,000 plus the maximum amount which may be drawn
under the External FW Letter of Credit of Cash and/or Qualifying Investments at
any time plus investments thereof and income thereon to secure Indebtedness
permitted by Section 8.05(i); and
(v) other Liens securing Indebtedness of up to $2,000,000 at any time.
8.02 Disposition of Assets. The Company shall not, and shall not suffer or
permit any Restricted Subsidiary to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions and whether or not in a Sale-Leaseback Transaction) any property
(including accounts and notes receivable, with or without recourse) or enter
into any agreement to do any of the foregoing, except:
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(a) dispositions of inventory, or used, worn-out or surplus equipment,
all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is exchanged
for
credit against the purchase price of similar replacement equipment, or the
proceeds of such sale are promptly applied to the purchase price of such
replacement equipment;
(c) the sale of property pursuant to a Sale-Leaseback Transaction if the
resulting lease is permitted by Section 8.10;
(d) the sale or liquidation of Cash Equivalents or Qualifying
Investments in accordance with the terms of the Loan Documents;
(e) the sale of the assets set forth on Schedule 8.02;
(f) the sale of stock or assets of Unrestricted Subsidiaries;
(g) sell or otherwise dispose of all or part of its Terminal Business and
certain related assets thereto; provided that (i) the purchase price received
for any such sale shall be paid in cash upon the consummation of such sale, (ii)
the purchase price received shall not be less than $20,000,000, (iii) the
purchase agreement in connection with such sale shall provide for customary
environmental indemnities and (iv) the purchase agreement (including, without
limitation, provisions with respect to environmental indemnities) in connection
with such sale shall otherwise be in form and substance reasonably satisfactory
to the Administrative Agent.
(h) sell, assign and/or lease to Port Arthur Coker Company L.P.,
engineering, design and construction work in process relating to the PACC Coker
Project, together with all related crude oil purchase agreements, supply
agreements, and lease to Port Arthur Coker Company L.P. ancillary equipment in
accordance with Section 8.01(t) and grant to Port Arthur Coker Company L.P.
easements for access to ancillary equipment in accordance with Section 8.01(t)
and related assets thereto; provided that (i) the purchase price for the assets
described above is equal to or greater than the cost paid by the Company and the
Company has received fair market value for the assets which are being sold,
assigned or leased, (ii) the value received for any such sale, assignment or
lease shall be paid in cash upon the consummation of such sale, assignment or
lease and (iii) the agreements governing such sale, assignment or lease shall
otherwise be in form and substance reasonably satisfactory to the Administrative
Agent.
(i) the sale, assignment, lease, conveyance, transfer or other
disposition of other property not described in clauses (a)-(h), the aggregate
fair market value of which does not exceed $25,000,000 per calendar year;
provided however that to the extent any portion of such $25,000,000 basket is
not utilized in any calendar year, up to $12,500,000 of such unutilized amount
shall be added to the amount of the aggregate fair market value of the assets
which may be sold, assigned, leased, conveyed, transferred or otherwise disposed
of under this clause (i) in the following year.
8.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Restricted Subsidiary to, merge, consolidate with or into,
or convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or
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substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except:
(a) any Restricted Subsidiary may merge with the Company, provided that
the Company shall be the continuing or surviving corporation, or with any one or
more Restricted Subsidiaries; provided that if any transaction shall be between
a Restricted Subsidiary and a wholly-owned Restricted Subsidiary, the wholly-
owned Restricted Subsidiary shall be the continuing or surviving corporation;
(b) any Restricted Subsidiary may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to the Company or another
wholly-owned Restricted Subsidiary; and
(c) any Restricted Subsidiary may merge with any Person to effectuate an
acquisition of such Person whereafter the surviving corporation in such merger
is a Restricted Subsidiary; provided, that such acquisition is permitted
pursuant to Section 8.04.
8.04 Loans and Investments. The Company shall have no direct or indirect
Restricted Subsidiaries (other than the Pipeline Subsidiary and the Subsidiaries
listed on Schedule 6.17) without the prior written consent of the Majority Banks
unless such Restricted Subsidiary becomes a co-borrower or a guarantor hereunder
pursuant to an amendment to this Agreement and the other Loan Documents
(including if necessary, execution of a guarantee) in form and substance
satisfactory to the Administrative Agent to reflect such Restricted Subsidiary
becoming a co-borrower or guarantor hereunder (it being understood that upon
becoming such an obligor, exceptions to covenants which apply to the Company
shall apply to such Restricted Subsidiary and the assets of such Restricted
Subsidiary shall be included in the calculation of the Borrowing Base on the
same basis as are those of the Company and any amendments to this Agreement or
the other Loan Documents shall reflect the foregoing), it being understood that
reference herein to "Restricted Subsidiaries" is to the Pipeline Subsidiary, the
Subsidiaries listed on Schedule 6.17, and any other Restricted Subsidiary which
may be formed or acquired after the date of this Agreement after obtaining such
consent. The Company shall not make or commit to make any Investment in any
Person including any Affiliate of the Company other than a Restricted Subsidiary
which may be formed or acquired after the date of this Agreement that becomes a
co-borrower or guarantor under this Agreement pursuant to an amendment to this
Agreement and the other Loan Documents (including if necessary, execution of a
guarantee) in form and substance satisfactory to the Administrative Agent to
reflect such Restricted Subsidiary becoming a borrower hereunder (it being
understood that upon becoming such an obligor, exceptions to covenants which
apply to the Company shall apply to such Restricted Subsidiary and the assets of
such Restricted Subsidiary shall be included in the calculation of the Borrowing
Base on the same basis as are those of the Company and any amendments to this
Agreement or the other Loan Documents shall reflect the foregoing), except: (a)
Investments in Cash Equivalents and Qualifying Investments in which the
Collateral Agent has a valid, perfected first priority Lien upon under the
Collateral Account Agreement;
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(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
(c) Investments in Joint Ventures to the extent permitted under Section
8.09 in an aggregate amount not to exceed $20,000,000;
(d) Investments in publicly traded stocks in an aggregate amount not
exceeding at any time $100,000;
(e) promissory notes received as consideration in connection with any sale
permitted under Sections 8.02(e) and 8.02(f) or in settlement of claims;
(f) Investments in respect of securities of another Person received by the
Company or any of its Subsidiaries in connection with a plan of reorganization
of such Person or a readjustment of its debts;
(g) Investments in Treasury Securities, in Cash Equivalents and Qualifying
Investments pledged pursuant to Section 8.01(m) and in Qualifying Investments
pledged pursuant to Section 8.01(o);
(h) Investments in marketable securities other than those described in
clauses (a), (d), (f) and (g) in an aggregate amount not to exceed $5,000,000;
(i) acquisitions made solely with (i) one or more equity issuances of,
and/or capital contributions to, the Company (or the net cash proceeds
therefrom) and/or (ii) existing cash of the Company in an aggregate amount not
exceeding $25,000,000, (provided that after giving effect to any such
acquisition, the Company and its Restricted Subsidiaries have not incurred any
additional Indebtedness, other than acquired Indebtedness otherwise permitted
under Section 8.05); provided that (a) the seller with respect to such
acquisition has provided an environmental indemnity (including with respect to
costs and expenses) satisfactory to the Administrative Agent, and (b) an
independent consultant, acceptable to the Agents, in their sole discretion,
projects in writing that after giving effect to any debt service requirements
applicable to any acquired indebtedness in respect of any such acquisition, the
earnings before interest, tax, depreciation and amortization less capital
expenditures required for maintenance purposes with respect to the assets being
acquired shall be greater than zero for the two years immediately succeeding
such acquisition; and
(j) Investments other than those described in clauses (a), (b) and
(d)-(i) in an aggregate amount not exceeding $25,000,000, less the aggregate
amount of Investments outstanding that are described in Section 8.04(c).
8.05 Limitation on Indebtedness . The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
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(b) Indebtedness consisting of Contingent Obligations permitted pursuant
to Section 8.08;
(c) Indebtedness existing on the Effective Date and set forth in
Schedule 8.05;
(d) Indebtedness of the Company secured by Liens permitted by Sections
8.01(i), (j) and (m);
(e) Indebtedness of the Company incurred in connection with leases
permitted pursuant to Section 8.10;
(f) Indebtedness of the Company with respect to tax-exempt industrial
development bonds in an aggregate amount not to exceed $75,000,000;
(g) Indebtedness incurred to refinance in whole or in part the 9 1/2%
Notes, the 1997 Floating and Fixed Rate Notes and/or the 1998 Fixed Rate Notes
and/or the 1998 Floating Rate Loans and to pay any applicable premiums and
expenses; provided, that the terms of such Indebtedness are no less favorable,
in the aggregate (as determined by the Agents, in their sole discretion), to the
Company or the Banks than are contained in the 9 1/2% Note Indenture and/or the
applicable 1997 Floating and Fixed Rate Note Indenture and/or the 1998 Fixed
Rate Note Indenture and/or the 1998 Floating Rate Credit Agreement;
(h) Indebtedness incurred by Unrestricted Subsidiaries to the extent
permitted under the 9 1/2% Note Indenture, the Holdings Note Indenture, the 1997
Floating and Fixed Rate Note Indentures, the 1998 Fixed Rate Note Indenture and
the 1998 Floating Rate Credit Agreement;
(i) Indebtedness consisting of letters of credit issued for the account
of the Company and reimbursement obligations in connection therewith in an
aggregate principal amount outstanding at any time not exceeding $20,000,000
plus the maximum amount which may be drawn under the External FW Letter of
Credit; and
(j) additional unsecured Indebtedness incurred by the Company in a total
amount outstanding at any time not exceeding $75,000,000; provided, that the
Company shall notify the Administrative Agent of the incurrence of such
Indebtedness on or before the date it is incurred and that at the time of
incurrence of any Indebtedness pursuant to this clause (j), not more than
$25,000,000 of all Indebtedness outstanding under this clause (j) matures
concurrently with or before the scheduled final maturity of the Obligations
owing hereunder; and provided, further that Indebtedness incurred in accordance
with this clause (j) may be secured if the liens securing such Indebtedness are
permitted under Section 8.01(i) or (s) hereof.
8.06 Transactions with Affiliates . The Company shall not, and shall not
suffer or permit any Restricted Subsidiary to, enter into any transaction, or
enter into or suffer to exist any agreement, with any Affiliate of the Company,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than the Company or such Restricted Subsidiary would
obtain in a comparable arm's-length transaction with a Person not an Affiliate
of the Company or such Restricted Subsidiary; provided, that (a) this Section
8.06 shall not prohibit payments by the Borrower which have been approved by a
majority of the board of
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directors of the Borrower, to the Fund Affiliates or any advisor thereof in
connection with any underwriting or placement services or in respect of other
investment banking activities, including without limitation, acquisitions or
divestitures and (b) so long as no Event of Default has occurred or would occur
as a result of such payment, the Company may make payment to the Fund Affiliates
of monitoring and management fees not to exceed $1,000,000 in each twelve month
period (which fees may be paid at any time if not paid in the period accrued)
plus reasonable expenses in connection therewith.
8.07 Use of Proceeds. The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds or any Letter of
Credit, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to
repay or otherwise refinance indebtedness of the Company or others incurred to
purchase or carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock, or (iv) to acquire any security in any
transaction that is subject to Section 13 or 14 of the Exchange Act.
8.08 Contingent Obligations . The Company shall not, and shall not
suffer or permit any Restricted Subsidiary to, create, incur, assume or suffer
to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Swap Contracts of the Company relating to commodity prices entered
into in the ordinary course of business as bona fide hedging transactions;
(c) Swap Contracts of the Company relating to interest rates entered into
in the ordinary course of business as bona fide hedging transactions with Bank
Swap Parties; provided, that the aggregate notional amount of all such Swap
Contracts at any time outstanding shall not exceed $100,000,000; and provided,
further that no such Swap Contract shall have a term greater than five years;
(d) Contingent Obligations of the Company and its Restricted Subsidiaries
existing as of the Effective Date and listed in Schedule 8.08;
(e) Contingent Obligations with respect to the Letters of Credit;
(f) Contingent Obligations with respect to Outstanding Eligible LOIs in an
aggregate Effective Amount at any time not exceeding $40,000,000;
(g) Contingent Obligations of the Company in an amount not exceeding
$300,000 with respect to the limited guaranty by the Company of a working
capital facility for Polymer Asphalt Products, L.C., a Missouri limited
liability company;
(h) Contingent Obligations constituting Investments permitted by Section
8.04; and
(i) Other Contingent Obligations in an aggregate amount not to exceed
$2,000,000 at any time.
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8.09 Joint Ventures and Pipeline Subsidiary.
(a) The Company shall not, and shall not suffer or permit any Restricted
Subsidiary to, enter into or at any time be a party to any Joint Venture;
provided that the Company or any Restricted Subsidiary may enter into and be a
party to any Joint Venture so long as (i) such Joint Venture is engaged in the
same line of business or in a related line of business as the line of business
engaged in by the Company, (ii) the sum of (A) the aggregate amount of all
Investments made by the Company and its Restricted Subsidiaries in any Joint
Venture on a cumulative basis (other than the aggregate amount of Investments
made by the Company in the Joint Venture relating to the Port Arthur Products
Station (the "PAPS Joint Venture")) and (B) the aggregate amount of all
Contingent Obligations incurred by the Company and its Restricted Subsidiaries
with respect to any Indebtedness of all Joint Ventures, shall not exceed in the
aggregate $20,000,000, and (iii) the aggregate amount of all Investments made by
the Company and its Restricted Subsidiaries in the PAPS Joint Venture on a
cumulative basis shall not exceed the amount that is required to be made by the
Company pursuant to the Port Arthur Purchase Agreement as in effect on April 19,
1995 or which is otherwise required in order to repair and maintain, in the
ordinary course of business, tanks and other equipment in which the Company has
an interest.
(b) The Company will not permit the Pipeline Subsidiary to engage in any
business or conduct any activity other than owning and operating all or a
portion of the Port Arthur Facilities. Without limiting the foregoing, the
Company will not permit the Pipeline Subsidiary to (i) incur or remain liable
with respect to any Indebtedness or Contingent Obligation, (ii) suffer to exist
any Lien other than Permitted Liens described in Sections 8.01(c), (d), (e),
(f), (g), (h) and (n), or (iii) make any loan, investment or capital
contribution to any Person.
8.10 Lease Obligations. The Company shall not, and shall not suffer or
permit any Restricted Subsidiary to, create or suffer to exist any obligations
for the payment of rent for any property under lease or agreement to lease,
except for:
(a) leases of the Company and of Restricted Subsidiaries in existence on
the Effective Date and any renewal, extension or refinancing thereof; and
(b) Capitalized Leases and operating leases entered into by the Company
after the Effective Date in the ordinary course of business; provided that as of
any date of determination the aggregate annual rental payments for all such
Capitalized Leases and operating leases together with the leases permitted by
Section 8.10(a) for the four fiscal quarters following such date of
determination (and not including the fiscal quarter in which such date of
determination occurs) shall not exceed the greater of (i) $35,000,000, and (ii)
15% of EBITDA for the four fiscal quarters immediately preceding (or ending on,
if such date of determination is the end of a fiscal quarter) such date of
determination; provided that if EBITDA decreases after one or more leases have
been entered into in compliance with this Section 8.10(b) and as a result of
such decrease in EBITDA the limitations of clauses (i) and (ii) above are then
exceeded, the Company shall not be deemed to have breached this Section 8.10 by
reason of such decrease in EBITDA, provided that the Company shall not enter
into any new lease until such time as such new lease is then permitted by this
Section 8.10(b).
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8.11 Restricted Payments. The Company shall not, and shall not suffer or
permit any Subsidiary to, (i) declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of the Company's capital stock, (ii)
purchase, redeem or otherwise acquire for value any shares of the Company's
capital stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding or (iii) make any payment (other than a refinancing
thereof permitted under this Agreement) of principal, or interest on, the 9 1/2%
Notes or the 1997 Floating and Fixed Rate Notes or the 1998 Fixed Rate Notes
prior to the applicable regularly scheduled principal and interest payment
dates; provided, that so long as no Default or Event of Default shall have
occurred and be continuing or would result from such declaration or payment, the
Company may: (a) declare and simultaneously make cash payments and distributions
to Holdings for the sole purpose of making payments of interest on the Holdings
Notes and/or cash taxes which are due in accordance with the terms of the Tax
Sharing Agreement, (b) in addition to clauses (a) and (f) of Section 8.11,
declare and simultaneously make cash payments and distributions to Parent and/or
Holdings, in an aggregate amount not exceeding $25,000,000, (c) prepay or redeem
out of cash on hand up to $100,000,000 in aggregate principal amount of 9 1/2%
Notes, the 1997 Floating and Fixed Rate Notes; the 1998 Fixed Rate Notes prior
to the regularly scheduled payment date thereof, provided, that, the Company
shall, prior to the making of any such prepayment or redemption, deliver to the
Administrative Agent a certificate of a Responsible Officer demonstrating pro
forma compliance with Section 8.16, (d) in addition to (c) above, prepay or
redeem not more than 35% of the aggregate principal amount of the 1997 Floating
and Fixed Rate Notes originally issued, with the proceeds received from the
issuance of Capital Stock of the Company, Parent or Holdings in accordance with
the terms of such Notes as in effect on the dates of their respective indentures
or credit agreements, (e) in addition to clauses (c) and (d) above, prepay or
redeem not more than 35% of the aggregate principal amount of the 1998 Fixed
Rate Notes originally issued, with the proceeds received from the issuance of
Capital Stock of the Company, Parent or Holdings in accordance with the terms of
such Notes as in effect on the date of the indenture relating thereto and (f)
the Company may declare and pay dividends or make other distributions to
Holdings and Parent in respect of overhead, tax liabilities, legal, accounting
and other reasonable professional fees and expenses and other reasonable fees
and expenses in connection with the maintenance of their existence and their
ownership of Holdings and the Borrower and in order to permit Holdings and
Parent to make payments permitted by the proviso set forth in Section 8.06.
8.12 Change in Business. The Company shall not, and shall not suffer or
permit any Restricted Subsidiary to, engage in any material line of business
substantially different from those lines of business carried on by the Company
and the Restricted Subsidiaries on the date of this Agreement.
8.13 Accounting Changes. The Company shall not, and shall not suffer or
permit any of its Subsidiaries to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company or of any such Subsidiary.
8.14 ERISA. The Company shall not, and shall not suffer or permit any of
its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan which has resulted
or could reasonably be expected
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to result in liability of the Company in an aggregate amount in excess of
$2,000,000; or (b) engage in a transaction that could reasonably be expected to
be subject to Section 4069 or 4212(c) of ERISA.
8.15 Collection Banks and Concentration Banks; Cash, Cash Equivalents and
Qualifying Investments
(a) The Company and each of its Restricted Subsidiaries will not (i)
establish or maintain any additional Collection Deposit Accounts or any banking
or other account for the deposit of proceeds of the Collateral, or close any
Collection Deposit Account, except in accordance with the terms of the
Concentration Bank Agreement, (ii) close the Concentration Account or establish
any new accounts for the transfer of funds from Collection Deposit Accounts,
except in accordance with the terms of the Concentration Bank Agreement or (iii)
without the prior written consent of the Administrative Agent, establish,
appoint, arrange for or enter into any kind of agreement or understanding with
any entity (other than BT) with respect to such entity's acting as the
Concentration Bank.
(b) The Company and each of its Restricted Subsidiaries will not at any
time have any Cash, Cash Equivalents, Qualifying Investments, proceeds of the
Collateral or any other monies, investments, instruments, securities or cash
equivalents in any banking, investment or other account or in any other place
other than in the Concentration Account, or the Collateral Account; provided
that the Company may (i) have Cash and other proceeds of the Collateral received
by the Company on any day in the Lockbox in connection with its wholesale
operations so long as such Cash and such other proceeds of the Collateral in the
Lockbox are deposited into the Collection Deposit Account in accordance with
reasonable business practices and consistent with the Company's past practices,
(ii) have Cash and other proceeds of the Collateral received by the Company on
any day in the Collection Deposit Account so long as such Cash and such other
proceeds of the Collateral are deposited into the Concentration Account on such
day or the next day in accordance with the Collection Bank Agreement, (iii) have
Cash in its operating accounts described in Section 4(a) of the Concentration
Account Agreement so long as the Company disburses such Cash from such operating
accounts for valid business purposes promptly after such Cash is deposited into
such operating accounts, and (iv) pledge Cash or Qualifying Investments to the
extent permitted by Section 8.01(m), Section 8.01(o) or 8.01(u).
(c) The Company and each of its Restricted Subsidiaries will not at any
time establish or maintain any commodities accounts other than the "Accounts"
(as defined in the Commodities Account Agreements) in which the Collateral
Agent, on behalf of the Administrative Agent, the Banks and the Bank Swap
Parties, has a perfected security interest.
8.16 Financial Covenants.
(a) The Company shall not permit Working Capital to be less than
$150,000,000.
(b) The Company shall not permit the aggregate amount of its Cash, Cash
Equivalents and Qualifying Investments to be less than $50,000,000 or less than
$75,000,000 on the last day of any calendar month.
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(c) The Company shall not permit the Tangible Net Worth of the Company
and the Restricted Subsidiaries, on a consolidated basis among them, to be less
than $150,000,000.
(d) The Company shall not permit Cumulative Cash Flow to be less than or
equal to zero.
8.17 Speculative Trading. The Company shall not, and shall not permit any
Subsidiary to (a) engage in transactions in futures contracts and options to
purchase or sell futures contracts for speculative purposes other than as part
of normal business operations as a risk-management strategy and/or a hedge
against changes resulting from market conditions, or (b) enter into any Swap
Contract or any other similar agreement other than to protect the Company
against fluctuations in interest rates, currency exchange rates or commodity
prices.
8.18 Amendments of Certain Documents. The Company shall not, and shall not
permit any of its Subsidiaries to, amend or otherwise change the terms of, or
waive any rights under, any of the 9 1/2% Notes, any of the 1997 Floating and
Fixed Rate Notes, any of the 1998 Fixed Rate Notes, any of the 1998 Foating Rate
Loans, any debt instrument entered into in connection with any refinancing
thereof permitted under this Agreement, the 9 1/2% Note Indenture, the 1997
Floating and Fixed Rate Note Indentures, the 1998 Fixed Rate Note Indenture, the
1998 Floating Rate Credit Agreement, the Tax Sharing Agreement, the Port Arthur
Purchase Agreement or the documents executed in connection therewith, if the
effect of such amendment, change or waiver is to increase materially the
obligations of the Company thereunder or is otherwise materially adverse to the
Company or the Banks; provided, that the foregoing restriction shall not apply
to any Unrestricted Subsidiary in respect of any debt instrument entered into in
connection with any refinancing described above.
Article IX.
EVENTS OF DEFAULT
-----------------
9.01 Event of Default. Any of the following shall constitute an "Event of
Default":
(a) Non-Payment. The Company fails to pay, (i) when and as required to
be paid herein, any amount of principal of any Loan, or (ii) within three days
after the same becomes due, any interest, fee or any other amount payable under
any Loan Document, or the Company fails to Cash Collateralize any Letter of
Credit or Outstanding Eligible LOI when and as required to be Cash
Collateralized herein; or
(b) Representation or Warranty. Any representation or warranty by the
Company or any of its Restricted Subsidiaries made or deemed made, in any Loan
Document, or which is contained in any certificate, document or financial or
other written statement by the Company, any such Restricted Subsidiary, or any
Responsible Officer or any other officer or employee, furnished at any time
under any Loan Document, is incorrect in any material respect on or as of the
date made or deemed made; or
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(c) Specific Defaults. The Company fails to perform or observe any term,
covenant or agreement contained in any of Sections 7.03(a) or 7.09 or Article
VIII; or
(d) Other Defaults. The Company or any Subsidiary party thereto fails to
perform or observe (i) any term, covenant or agreement contained in Sections
7.01(c), 7.02 (e) or 7.03 (other than Section 7.03(a)) and such default shall
continue unremedied for a period of three (3) days or (ii) any other term or
agreement contained in this Agreement or any other Loan Document and such
default shall continue unremedied for a period of 20 days, in each case after
the earlier of (x) the date upon which a Responsible Officer knew or reasonably
should have known of such failure and (y) the date upon which written notice
thereof is given to the Company by the Administrative Agent or any Bank; or
(e) Cross-Default. Holdings, the Company or any of their respective
Subsidiaries (other than an Unrestricted Subsidiary) (i) fails to make any
payment in respect of any Indebtedness or Contingent Obligation having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $5,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (ii) fails to perform or
observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure if the effect of such failure, event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof to
be demanded; or
(f) Insolvency; Voluntary Proceedings. Holdings, the Company or any of
their respective Subsidiaries (other than any Restricted Subsidiary with total
assets of less than $1,000,000 and other than any Unrestricted Subsidiary) (i)
ceases or fails to be Solvent, or generally fails to pay, or admits in writing
its inability to pay, its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise; (ii) voluntarily
ceases to conduct its business in the ordinary course; (iii) commences any
Insolvency Proceeding with respect to Holdings, the Company or any Restricted
Subsidiary with total assets of at least $1,000,000; or (iv) takes any action to
effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is
commenced or filed against Holdings, the Company or any of their respective
Subsidiaries (other than any Restricted Subsidiary with total assets of less
than $1,000,000 and other than any Unrestricted Subsidiary), or any writ,
judgment, warrant of attachment, execution or similar process, is issued or
levied against a substantial part of Holdings', the Company's or such Restricted
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) Holdings, the Company or any of their
respective Subsidiaries (other than any Restricted Subsidiaries with
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total assets of less than $1,000,000 and other than any Unrestricted Subsidiary)
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-US. law) is
ordered in any Insolvency Proceeding; or (iii) Holdings, the Company or any of
their respective Subsidiaries (other than any Restricted Subsidiaries with total
assets of less than $1,000,000 and other than any Unrestricted Subsidiary)
acquiesces in the appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other similar Person
for itself or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension Plan
or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC; (ii) there exists any Unfunded Pension Liability
among Pension Plans; or (iii) the Company or any ERISA Affiliate shall fail to
pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan; in each case, which individually or in the
aggregate would reasonably be expected to result in a Material Adverse Effect;
or
(i) Monetary Judgments. One or more non-interlocutory judgments, non-
interlocutory orders, decrees or arbitration awards is entered against the
Company or any Restricted Subsidiary involving in the aggregate a liability (to
the extent not covered by independent third-party insurance as to which Company
or any Restricted Subsidiary involving in the aggregate a liability the insurer
does not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $5,000,000 or more, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of 10 days after
the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or decree is
entered against the Company or any Restricted Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Change of Control. There occurs any Change of Control; or
(l) Loss of Licenses. Any Governmental Authority revokes or fails to
renew any license, permit or franchise of the Company or any Restricted
Subsidiary, or the Company or any Restricted Subsidiary for any reason loses any
license, permit or franchise, or the Company or any Restricted Subsidiary
suffers the imposition of any restraining order, escrow, suspension or impound
of funds in connection with any proceeding (judicial or administrative) with
respect to any license, permit or franchise, in each case to the extent that
such revocation, such failure of renewal, such loss, or such imposition could
reasonably be expected to have a Material Adverse Effect; or
(m) Collateral.
(i) any provision of any Collateral Document shall for any reason
cease to be valid and binding on or enforceable against the Company or any
Subsidiary
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party thereto and the effect thereof is to prevent the Collateral Agent on
behalf of the Administrative Agent, the Banks and the Bank Swap Parties
from realizing the practical benefits afforded by or purported to be
afforded by such Collateral Document or the Company or any Subsidiary shall
so state in writing or bring an action to limit its obligations or
liabilities thereunder; or
(ii) any Collateral Document shall for any reason (other than
pursuant to the terms thereof) cease to create a valid security interest in
the Collateral purported to be covered thereby or such security interest
shall for any reason cease to be a perfected and first priority security
interest subject only to Permitted Liens (other than solely due to the
action or inaction of the Collateral Agent with respect to matters
involving priority or perfection); or
(n) Holdings amends or otherwise changes the terms of, or waives any
rights under, any of the Holdings Note Indenture or the Holdings Notes, and the
effect of such amendment, change or waiver, together with any other amendments,
changes or waivers thereto previously made, is to increase materially the
obligations of Holdings or the Company or is otherwise materially adverse to
Holdings, the Company or the Banks; or
(o) Holdings incurs on or after the Effective Date any secured or
unsecured Indebtedness in the aggregate in excess of $25,000,000; provided that
the incurrence of Indebtedness by Holdings to refinance in whole the Holdings
Notes and to pay any applicable premiums and expenses, which indebtedness shall
be on terms no less favorable, in the aggregate (as determined by the Agents in
their sole discretion), to the Banks, Holdings or the Company than the terms of
the Holdings Notes shall not be an Event of Default under clause (n) or (o)
above.
9.02 Remedies.
If any Event of Default occurs, the Administrative Agent shall, at the
request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans and any obligation
of any Issuing Bank to Issue Letters of Credit to be terminated, whereupon such
commitments and such obligations shall be terminated;
(b) declare an amount equal to the maximum aggregate amount that is or
at any time thereafter may become available for drawing under any outstanding
Letters of Credit (whether or not any beneficiary shall have presented, or shall
be entitled at such time to present, the drafts or other documents required to
draw under such Letters of Credit) and any Outstanding Eligible LOIs to be
immediately due and payable, and declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company;
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(c) require the Company to immediately deposit with the Administrative
Agent for each Letter of Credit then outstanding, Cash or Cash Equivalents in an
amount equal to 100% of the greatest amount drawable thereunder; and
(d) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in Section
(f) or (g) of Section 9.01 (in the case of clause (i) of Section (g) upon the
expiration of the 60- day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of any Issuing Bank to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Administrative Agent, any Issuing
Bank or any Bank.
9.03 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
Article X.
THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
-------------------------------------------------
10.01 Appointment of Agent.
(a) Each Bank hereby designates BT as Administrative Agent to act as
herein specified. Each Bank hereby irrevocably authorizes, and each holder of
any Note or participation in any Letter of Credit by the acceptance of a Note or
participation shall be deemed irrevocably to authorize, the Administrative Agent
to take such action on its behalf under the provisions of this Agreement and the
Notes and any other instruments and agreements referred to herein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Administrative Agent by the terms
of this Agreement and thereof and such other powers as are reasonably incidental
thereto. The Administrative Agent shall designate the Collateral Agent to hold
all Collateral and shall itself hold all payments of principal, interest, fees,
charges and expenses received pursuant to any Loan Document for the benefit of
itself and the Banks to be distributed as provided herein. The Administrative
Agent may perform any of its duties hereunder by or through its agents or
employees.
(b) The provisions of this Article X are solely for the benefit of the
Administrative Agent, the Collateral Agent and the Banks, and the Company shall
not have any rights as a third party beneficiary of any of the provisions of
this Article X (other than Section 10.09). In performing its functions and
duties under this Agreement, the Administrative Agent and the Collateral Agent
shall act solely as agent of the Banks and do not assume and shall not be deemed
to have assumed any obligation toward or relationship of agency or trust with or
for the Company or any of its Subsidiaries.
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10.02 Nature of Duties of Administrative Agent. The Administrative Agent
shall have no duties or responsibilities except those expressly set forth in the
Loan Documents. Neither the Administrative Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or in connection herewith, unless caused by its or their
gross negligence or willful misconduct. The duties of the Administrative Agent
shall be mechanical and administrative in nature; the Administrative Agent shall
not have by reason of the Loan Documents a fiduciary relationship in respect of
any Bank; and nothing in the Loan Documents, expressed or implied, is intended
to or shall be so construed as to impose upon the Administrative Agent any
obligations in respect of the Loan Documents except as expressly set forth
herein or therein.
10.03 Lack of Reliance on Agent Related Persons.
(a) Independently and without reliance upon any Agent-Related Persons each
Bank, to the extent it deems appropriate, has made and shall continue to make
(i) its own independent investigation of the financial or other condition and
affairs of the Company and its Subsidiaries in connection with the taking or not
taking of any action in connection herewith and (ii) its own appraisal of the
creditworthiness of each of the Company and its Subsidiaries, and, except as
expressly provided in this Agreement, no Agent-Related Person shall have any
duty or responsibility, either initially or on a continuing basis, to provide
any Bank with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or the issuance of any
Letter of Credit or at any time or times thereafter.
(b) No Agent-Related Person shall be responsible to any Bank for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of any Loan Document or the financial or
other condition of the Company or its Subsidiaries. No Agent-Related Person
shall be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of any Loan Document,
or the financial condition of the Company or any of its Subsidiaries, or the
existence or possible existence of any Default or Event of Default, unless
specifically requested to do so in writing by any Bank.
(c) For purposes of determining compliance with the conditions specified
in Section 5.01, each Bank shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
such Bank unless an officer of the Administrative Agent responsible for the
transactions contemplated by the Loan Documents shall have received written
notice from such Bank prior to the Effective Date specifying its objection
thereto and either such objection shall not have been withdrawn by written
notice to the Administrative Agent to that effect or such Bank shall not have
made available to the Administrative Agent the Bank's ratable portion of the
outstanding Loans.
10.04 Certain Rights of the Administrative Agent. The Administrative
Agent shall have the right to request instructions from the Majority Banks at
any time. If the Administrative Agent shall request instructions from the
Majority Banks or Banks, as applicable, with respect to any act or action
(including the failure to act) in connection with any Loan
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Document, the Administrative Agent shall be entitled to refrain from such act or
taking such action unless and until the Administrative Agent shall have received
instructions from the Majority Banks, and the Administrative Agent shall not
incur liability to any Person by reason of so refraining. Without limiting the
foregoing, no Bank shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Majority Banks.
10.05 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other documentary,
teletransmission or telephone message believed by it to be genuine and correct
and to have been signed, sent or made by the proper person. The Administrative
Agent may consult with legal counsel (including counsel for the Company with
respect to matters concerning the Company), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
10.06 Indemnification of Agent-Related Persons. To the extent any
Agent-Related Person is not reimbursed and indemnified by the Company, each Bank
will reimburse and indemnify such Agent-Related Person, in proportion to its
respective Commitment, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including attorney costs) or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against such Agent-Related
Person in performing its duties hereunder, in any way relating to or arising out
of this Agreement, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of such Agent-Related Person.
10.07 Administrative Agent in Individual Capacity. With respect to its
obligation to lend under this Agreement, the Loans made by it and the Notes
issued to it, and its participation in Letters of Credit issued hereunder, BT
shall have the same rights and powers hereunder as any other Bank or holder of a
Note or participation interests and may exercise the same as though it was not
performing the duties specified herein; and the terms "Banks," "Majority Banks,"
"holders of Notes," or any similar terms shall, unless the context clearly
otherwise indicates, include the Administrative Agent in its individual
capacity. BT may accept deposits from, lend money to, acquire equity interests
in, and generally engage in any kind of banking, trust, financial advisory or
other business with the Company or any Affiliate of the Company as if it were
not performing the duties specified herein, and may accept fees and other
consideration from the Company for services in connection with the Loan
Documents and otherwise without having to account for the same to the Banks .
10.08 Holders of Notes. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes of the Loan Documents
unless and until a written notice of the assignment or transfer thereof shall
have been filed with the Administrative Agent. Any request, authority or consent
of any Person who, at the time of making such request or giving such authority
or consent, is the holder of any Note, shall be
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conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
10.09 Successor Administrative Agent.
(a) The Administrative Agent may, upon thirty (30) Business Days' notice
to the Banks and the Company, resign at any time (effective upon the appointment
of a successor Administrative Agent pursuant to the provisions of this Section
10.09) by giving written notice thereof to the Banks and the Company. Such
resignation of the Administrative Agent shall also operate as a resignation of
BT as an Issuing Bank (in respect of any Letters of Credit to be issued after
such resignation) and as Collateral Agent. Upon any such resignation, the
Majority Banks shall have the right, upon five (5) days' notice and approval by
the Company (which approval shall not be unreasonably withheld or delayed), to
appoint a successor Administrative Agent which shall also serve as a successor
Issuing Bank and successor Collateral Agent. If no successor Administrative
Agent (i) shall have been so appointed by the Majority Banks, and (ii) shall
have accepted such appointment, within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation then, upon five (5) days
notice, the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, which shall also serve as a successor Issuing
Bank and successor Collateral Agent.
(b) Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Administrative Agent's resignation hereunder
as Administrative Agent, the provisions of this Article 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
(c) In the event of a material breach by the Administrative Agent of its
duties hereunder, the Administrative Agent may be removed by the Majority Banks
(other than the Administrative Agent in its individual capacity and without
giving effect to any Loans or Commitments made by the Administrative Agent in
its individual capacity) for cause and the provisions of this Section 10.09
shall apply to the appointment of a successor Administrative Agent. Removal of
BT as Administrative Agent shall also operate as a removal of BT as an Issuing
Bank and Collateral Agent.
10.10 Collateral Matters.
(a) Each Bank authorizes and directs the Collateral Agent to enter into
the Collateral Documents for the benefit of the Banks. Each Bank hereby agrees,
and each holder of any Note by the acceptance thereof will be deemed to agree,
that, except as otherwise set forth herein, any action taken by the Majority
Banks in accordance with the provisions of this Credit Agreement or the
Collateral Documents, and the exercise by the Majority Banks of the powers set
forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Banks. The
Administrative Agent and the Collateral Agent are hereby authorized on behalf of
all of the Banks, without the necessity of any
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notice to or further consent from any Bank, from time to time prior to an Event
of Default, to take any action with respect to any Collateral or Collateral
Documents which may be necessary to perfect and maintain perfected the security
interest in and liens upon the Collateral granted pursuant to the Collateral
Documents.
(b) The Banks hereby authorize the Administrative Agent and the Collateral
Agent, at their option and in their discretion, to release any Lien granted to
or held by the Collateral Agent upon any Collateral (i) upon termination of the
Commitments and payment in full in cash and satisfaction of all of the
Obligations (other than those expressly stated to survive termination of this
Agreement, the repayment of the Loans and the termination of the Commitments) at
any time arising under or in respect of this Agreement or the Loan Documents or
the transactions contemplated hereby or thereby (including any required Cash
Collateralization), (ii) constituting property being sold or disposed of upon
receipt of the proceeds of such sale required (if applicable) to be delivered to
the Administrative Agent if the Company certifies to the Administrative Agent
that the sale or disposition is made in compliance with Section 8.02 (and the
Administrative Agent may rely conclusively on any such certificate, without
further inquiry), (iii) if approved, authorized or ratified in writing by the
Majority Banks, unless such release is required to be approved by all of the
Banks hereunder or (iv) constituting Cash, Cash Equivalents or Qualifying
Investments used for the purposes set forth in Section 8.01(u); provided that at
the time of such release no Default or Event of Default shall have occurred and
be continuing. Upon request by the Administrative Agent at any time, the Banks
will confirm in writing the Administrative Agent's and the Collateral Agent's
authority or to release particular types or items of Collateral pursuant to this
Section 10.10.
(c) Upon any sale and transfer of Collateral which is expressly permitted
pursuant to the terms of this Agreement, or consented to in writing by the
Majority Banks or all of the Banks, as applicable and upon at least five (5)
Business Days, prior written request by the Company, the Collateral Agent shall
(and is hereby irrevocably authorized by the Banks to) execute such documents as
may be necessary to evidence the release of the Liens granted to the Collateral
Agent for the benefit of the Administrative Agent and the Banks herein or
pursuant to this Agreement upon the Collateral that was sold or transferred;
provided that (i) the Collateral Agent shall not be required to execute any such
document on terms which, in the Collateral Agent's opinion, would expose the
Collateral Agent to liability or create any obligation or entail any consequence
other than the release of such Liens without recourse or warranty and (ii) such
release shall not in any manner discharge, affect or impair the Obligations or
any Liens upon (or obligations of the Company or any of its Restricted
Subsidiaries in respect of) all interests retained by the Company or any of its
Restricted Subsidiaries, including (without limitation) the proceeds of the
sale, all of which shall continue to constitute part of the Collateral. In the
event of any sale or transfer of collateral, or any foreclosure with respect to
any of the collateral, the Administrative Agent and the Collateral Agent shall
be authorized to deduct all of the expenses reasonably incurred from the
proceeds of any such sale, transfer or foreclosure.
(d) The Administrative Agent and the Collateral Agent shall have no
obligation whatsoever to the Banks or to any other Person to assure that the
Collateral exists or is owned by the Company or any of its Subsidiaries or is
cared for, protected or insured or that the Liens granted to the Collateral
Agent herein or pursuant to this Agreement have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular
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priority, or to exercise or to continue exercising at all or in any manner or
under any duty of care, disclosure or fidelity any of the rights, authorities
and powers granted or available to the Administrative Agent and the Collateral
Agent in this Section 10.10 or to the Collateral Agent in any of the Collateral
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, the Administrative Agent and the
Collateral Agent may act in any manner they may deem appropriate in their sole
discretion, given the Administrative Agent's and the Collateral Agent's own
interest in the Collateral as one of the Banks and that the Administrative Agent
and the Collateral Agent shall have no duty or liability whatsoever to the
Banks, except for their gross negligence or willful misconduct; provided that
the Administrative Agent has prepared for the Company's execution financing
statements on form UCC-1 or UCC-3 in each jurisdiction in which the Company has
advised the Administrative Agent that it has Collateral and has arranged for
appropriate recordation thereof in each such jurisdiction.
10.11 Actions with Respect to Default. In addition to the Administrative
Agent's right to take actions on its own accord as permitted under this
Agreement, the Administrative Agent shall take such action with respect to a
Default or Event of Default as shall be directed by the Majority Banks; provided
that until the Administrative Agent shall have received such directions, the
Administrative Agent shall (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable and in the best interests of the Banks.
10.12 Delivery of Information. The Administrative Agent shall not be
required to deliver to any Bank originals or copies of any documents,
instruments, notices, communications or other information received by the
Administrative Agent from the Company, Holdings, any of their respective
Subsidiaries, the Majority Banks, any Bank or any other Person under or in
connection with any Loan Document except (i) as specifically provided in any
Loan Document and (ii) as specifically requested from time to time in writing by
any Bank with respect to a specific document, instrument, notice or other
written communication received by and in the possession of the Administrative
Agent at the time of receipt of such request and then only in accordance with
such specific request.
10.13 Liability of Agent-Related Persons. None of the Agent-Related
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with any Loan Document or the transactions
contemplated thereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Banks for any
recital, statement, representation or warranty made by the Company or any of its
Subsidiaries or Affiliates, or any officer thereof, contained in any Loan
Document, or in any certificate, report, statement or other document referred to
or provided for in, or received by any Agent-Related Person under or in
connection with any Loan Document, or for the value of or title to any
Collateral, or the validity, effectiveness, genuineness, enforceability or
sufficiency of any Loan Document, or for any failure of the Company or any other
party to any Loan Document to perform its obligations hereunder or thereunder.
No Agent-Related Person shall be under any obligation to any Bank to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, any Loan Document, or to inspect the properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
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10.14 Agents Other Than Administrative Agent. Unless expressly provided for
herein, none of the Banks identified on the facing page or signature pages of
this Agreement as the Syndication Agent or as the Documentation Agent shall have
any obligation, liability, responsibility or duty under this Agreement other
than, in the case of the Documentation Agent and the Syndication Agent, those
applicable to all Banks as such. Each Bank acknowledges that it has not relied,
and will not rely, on any of the Banks so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.
Article XI.
MISCELLANEOUS
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11.01 Amendments and Waivers. Except as otherwise expressly permitted
herein no amendment or waiver of any provision of any Loan Document, and no
consent with respect to any departure by the Company or any of its Subsidiaries
therefrom, shall be effective unless the same shall be in writing and signed by
the Majority Banks (or by the Administrative Agent at the written request of the
Majority Banks) and the Company and acknowledged by the Administrative Agent,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided that no such
waiver, amendment, or consent shall, unless in writing and signed by all the
Banks and the Company and acknowledged by the Administrative Agent, do any of
the following:
(a) increase the maximum Effective Amount of Loans permitted to be
outstanding at any time hereunder to an amount greater than $50,000,000;
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or (subject to clause (iv) below) any fees or other amounts payable
hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder; or
(e) amend this Section, or Section 4.11, or any provision herein
providing for consent or other action by all Banks;
(f) release a material portion of the Collateral except as otherwise
may be provided in the Collateral Documents;
(g) increase the percentages set forth in the definition of "Borrowing
Base" above the percentages set forth therein on the Effective Date;
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and provided further, that (i) no amendment, waiver or consent shall increase or
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extend the Commitment of any Bank (or reinstate any Commitment terminated
pursuant to Section 9.02(a)) unless such amendment, waiver or consent is in
writing and signed by such Bank, (ii) no amendment, waiver or consent shall,
unless in writing and signed by the applicable Issuing Bank in addition to the
Majority Banks or all the Banks, as the case may be, affect the rights or duties
of the applicable Issuing Bank under this Agreement or any L/C-Related Document
relating to any Letter of Credit Issued or to be Issued by it, (iii) no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Majority Banks or all the Banks, as the
case may be, affect the rights or duties of the Administrative Agent under any
Loan Document, (iv) the Fee Letters may be amended, or rights or privileges
thereunder waived, in a writing executed by the parties thereto and (v) no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent, the Syndication Agent, the Documentation Agent and Banks
holding at least 66 2/3% of the aggregate Commitments, have the effect of
otherwise increasing the Borrowing Base (other than any increase that is solely
the result of an action taken unilaterally by the Administrative Agent that
reverses a prior action unilaterally taken by the Administrative Agent (so long
as the taking of such first action was permitted under this Agreement) or an
action which is expressly permitted to be taken by the Administrative Agent or
the Agents unilaterally). Notwithstanding the foregoing, amendments to the Loan
Documents entered into to give effect to any increase in the Commitments
pursuant to Section 2.11 need not be approved by the Majority Banks.
11.02 Notices.
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(a) All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission) or, in the case of Letters of Credit, electronically, provided
that any matter transmitted by the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on the
signature page of such Bank attached to this Agreement, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed, faxed
or delivered, to the address or facsimile number specified for notices on the
signature page of such Bank attached to this Agreement; or, as directed to the
Company or the Administrative Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Administrative Agent.
(b) All such notices, requests and communications shall, when transmitted
by overnight delivery or electronically, or faxed, be effective when delivered
for overnight (next-day) delivery, transmitted electronically or transmitted in
legible form by facsimile machine, respectively, or if mailed, upon the third
Business Day after the date deposited into the U.S. mail, or if delivered, upon
delivery; except that notices pursuant to Article II, III or X shall not be
effective until actually received (by overnight delivery, electronically, fax or
mail) by the Administrative Agent or the Collateral Agent, as the case may be,
and notices pursuant to Article III to any Issuing Bank shall not be effective
until actually received (by overnight delivery, electronically, fax or mail) by
such Issuing Bank and the Administrative Agent at the address specified for such
"Issuing Bank" and the Administrative Agent on the applicable signature page of
this Agreement.
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(c) Any agreement of the Administrative Agent, the Collateral Agent and
the Banks herein to receive certain notices by telephone or facsimile is solely
for the convenience and at the request of the Company. The Administrative Agent,
the Collateral Agent and the Banks shall be entitled to rely on the authority of
any Person purporting to be a Person authorized by the Company to give such
notice and the Administrative Agent, the Collateral Agent and the Banks shall
not have any liability to the Company or other Person on account of any action
taken or not taken by the Administrative Agent, the Collateral Agent or the
Banks in reliance upon such telephonic or facsimile notice. The obligation of
the Company to repay the Loans and L/C Obligations shall not be affected in any
way or to any extent by any failure by the Administrative Agent, the Collateral
Agent and the Banks to receive written confirmation of any telephonic or
facsimile notice or the receipt by the Administrative Agent, the Collateral
Agent and the Banks of a confirmation which is at variance with the terms
understood by the Administrative Agent, the Collateral Agent and the Banks to be
contained in the telephonic or facsimile notice.
11.03 No Waiver: Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of the Administrative Agent, the Collateral Agent or
any Bank, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.
11.04 Indemnity.
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(a) Whether or not the transactions contemplated hereby are consummated,
the Company shall indemnify, defend and hold the Agent-Related Persons, each
Issuing Bank and each Bank and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including fees and expenses of any law firm or external counsel) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Commitments and the Letters of
Credit and the termination, resignation or replacement of the Administrative
Agent or replacement of any Bank) be imposed on, incurred by or asserted against
any such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of any Loan Document or the Loans or
Letters of Credit or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided that the Company shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities
resulting primarily from the gross negligence or willful misconduct of such
Indemnified Person. The agreements in this Section shall survive payment of all
other Obligations.
(b) (i) The Company shall indemnify, defend and hold harmless each
Indemnified Person, from and against any and all claims, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including
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reasonable (giving due regard to prevailing circumstances) fees and expenses of
any law firm or external counsel and the allocated cost of internal
environmental audit or review services), which may be incurred by or asserted
against such Indemnified Person in connection with or arising out of any pending
or threatened investigation, litigation or proceeding, or any action taken by
any Person, with respect to any Environmental Claim arising out of or related to
any property subject to a mortgage in favor of the Collateral Agent or any Bank.
No action taken by legal counsel chosen by the Administrative Agent, the
Collateral Agent or any Bank in defending against any such investigation,
litigation or proceeding or requested remedial, removal or response action shall
vitiate or in any way impair the Company's obligation and duty hereunder to
indemnify and hold harmless the Administrative Agent, the Collateral Agent and
each Bank.
(ii) In no event shall any site visit, observation, or testing by the
Administrative Agent, the Collateral Agent or any Bank (or any contractee of
the Administrative Agent, the Collateral Agent or any Bank) be deemed a
representation or warranty by the Administrative Agent, the Collateral Agent
or any Bank that Hazardous Materials are or are not present in, on, or under,
the site, or that there has been or shall be compliance with any Environmental
Law. Neither the Company nor any other Person is entitled to rely on any site
visit, observation, or testing by the Administrative Agent, the Collateral
Agent or any Bank. Neither the Administrative Agent, the Collateral Agent nor
any Bank owes any duty of care to protect the Company or any other Person
against, or to inform the Company or any other party of, any Hazardous
Materials or any other adverse condition affecting any site or property.
Neither the Administrative Agent, the Collateral Agent nor any Bank shall be
obligated to disclose to the Company or any other Person any report or
findings made as a result of, or in connection with, any site visit,
observation, or testing by the Administrative Agent, the Collateral Agent or
any Bank. The Company hereby acknowledges, represents and warrants that the
Company and its Subsidiaries are solely responsible for the management and
operation of the Facilities and that the financial covenants and capital
expenditure covenants set forth herein have been set, by mutual agreement
based upon financial information provided by the Company, at levels the
Company has determined, based on information known to the Company at this
time, will permit the expenditure of such amounts as are necessary to insure
that the Facilities comply with applicable Environmental Laws at all times.
Notwithstanding such covenants, but without in any way limiting the rights and
remedies of the Banks hereunder, the Company and its Subsidiaries shall have
the sole responsibility for ensuring that the Facilities comply with
applicable Environmental Laws and shall remain obligated to make all
expenditures necessary to ensure such compliance.
(c) Survival; Defense. The obligations in this Section shall survive
-----------------
payment of all other Obligations. At the election of any Indemnified Person, the
Company shall defend such Indemnified Person using legal counsel satisfactory to
such Indemnified Person in such Person's sole discretion, at the sole cost and
expense of the Company. All amounts owing under this Section shall be paid
within 30 days after demand.
11.05 Marshaling; Payments Set Aside. Neither the Administrative Agent,
------------------------------
the Collateral Agent, nor the Banks shall be under any obligation to marshal any
assets in favor of the Company or any other Person or against or in payment of
any or all of the Obligations. To the extent that the Company makes a payment to
the Administrative Agent or the Banks, or the
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Administrative Agent or the Banks exercise their right of set-off, and such
payment or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Administrative Agent
or such Bank in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any Insolvency Proceeding or otherwise, then (a) to
the extent of such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such set-off had not occurred, and (b) each
Bank severally agrees to pay to the Administrative Agent upon demand its pro
rata share of any amount so recovered from or repaid by the Administrative
Agent.
11.06 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns subject to Section 11.07.
11.07 Assignments, Participations, etc.
(a) Company Assignment. The Company shall not assign this Agreement, or
any rights or obligations hereunder, without the prior written consent of the
Administrative Agent and the Banks; any assignment in violation of the foregoing
shall be void.
(b) Bank Assignments. Each Bank may assign to one or more banks or other
financial institutions all or a portion of its rights and obligations under this
Agreement, the Notes and the other Loan Documents, with the consent of the
Administrative Agent, the Issuing Banks, and, so long as there is no Default or
Event of Default, the Company, which consent shall not be unreasonably withheld,
and upon execution and delivery to the Administrative Agent, for its acceptance
and recording in the Register (as defined below), of an agreement in
substantially the form of Exhibit H (an "Assignment and Assumption Agreement"),
together with surrender of any Note or Notes subject to such assignment and a
processing and recordation fee of $3,000 payable to the Administrative Agent for
its account. No such assignment shall be for less than $5,000,000 of the
combined Commitments unless it is to another Bank. (This Section does not apply
to branches and Affiliates of a Bank, it being understood that a Bank may make,
carry or transfer Loans at or for the account of any of its branch offices or
Affiliates without consent of the Administrative Agent.) Nothing in this Section
11.07 shall prevent or prohibit any Bank from pledging its rights under this
Agreement and/or its Loans, Notes and/or Letters of Credit hereunder to a
Federal Reserve Bank in support of borrowings made by such Bank from such
Federal Reserve Bank, provided that no such pledge shall at any time release
such Bank from any of its obligations under the Loan Documents.
(c) Agent's Register. The Administrative Agent shall maintain a
register of the names and addresses of the Banks, their Commitments, and the
principal amount of their Loans (the "Register"). The Agent shall also maintain
a copy of each Assignment and Assumption Agreement delivered to and accepted by
it and modify the Register to give effect to each Assignment and Assumption
Agreement. Upon its receipt of each Assignment and Assumption Agreement and
surrender of the affected Note or Notes in accordance with Section 11.07(b), the
Agent will give prompt notice thereof to the Company and deliver to the Company
a copy of the Assignment and Assumption Agreement and the surrendered Note or
Notes.
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Within five (5) Business Days after its receipt of such notice, the Company
shall execute and deliver to the Administrative Agent a new Note or Notes to the
order of the assignee in the amount of the Commitment or Commitments assumed by
it and to the assignor in the amount of the Commitment or Commitments retained
by it, if any. Such new Note or Notes shall re-evidence the Indebtedness
outstanding under the surrendered Note or Notes and shall be dated as of the
Effective Date. The Administrative Agent shall be entitled to rely upon the
Register exclusively for purposes of identifying the Banks hereunder.
(d) Bank Participations. Each Bank may sell participations (without the
consent of the Administrative Agent, the Company or any other Bank) to one or
more parties in or to all or a portion of its rights and obligations under this
Agreement, the Notes and the other Loan Documents. Notwithstanding a Bank's sale
of a participation interest, its obligations hereunder shall remain unchanged.
The Company, the Agent, and the other Banks shall continue to deal solely and
directly with such Bank. No participant shall have rights to approve any
amendment or waiver of this Agreement except to the extent such amendment or
waiver would (i) increase the commitment of the Bank from whom the participant
purchased its participation interest, (ii) reduce the principal of, or rate or
amount of interest on the Loans subject to such participation, (iii) postpone
any date fixed for any payment of principal of, or interest on, the Loans
subject to the participation interest, and (iv) release all or a substantial
portion of the Collateral, other than, in each case, when otherwise permitted
hereunder.
(e) Disclosure of Information. In connection with their efforts to
assign or sell participations pursuant to Sections 11.8(b) and (d), the
Administrative Agent or the Banks may disclose any information they have, now or
in the future, with respect to the business of the Company and its Subsidiaries
to prospective assignees or purchasers, provided that such prospective assignees
or purchasers agree in writing to be bound by the provisions of Section 11.08.
11.08 Confidentiality. Except as otherwise provided in this Section 11.08,
each Bank agrees that it will not disclose without the prior consent of the
Company, any information with respect to the Company or any of its Subsidiaries
which is furnished pursuant to this Agreement and which is designated by the
Company to the Banks in writing as confidential, provided, that any Bank may
disclose any such information (a) to its Affiliates, employees, auditors or
counsel, or to another Bank if the disclosing Bank or such disclosing Bank's
holding or parent company in its reasonable discretion determines that any such
party should have access to such information, provided that each such person
will be advised of the confidential nature of such information, (b) as has
become generally available to the public, (c) as may be required or appropriate
in any report, statement or testimony submitted to any Governmental Authority
having or claiming to have jurisdiction over such Bank, (d) as may be required
or appropriate in response to any summons or subpoena or in connection with any
litigation, and (e) in order to comply with any Requirement of Law.
11.09 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
full extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held by, and other
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indebtedness at any time owing by, such Bank to or for the credit or the account
of the Company against any and all Obligations owing to such Bank, now or
hereafter existing, irrespective of whether or not the Administrative Agent or
such Bank shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured or fully secured. Each
Bank agrees promptly to notify the Company and the Administrative Agent after
any such set-off and application made by such Bank; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application.
11.10 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Administrative Agent in writing of any changes in the address to
which notices to the Bank should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.
11.11 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.12 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
11.13 No Third Parties Benefitted. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Administrative Agent and the Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
11.14 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE
ADMINISTRATIVE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL
LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO ANY LOAN DOCUMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT, THE ISSUING BANKS AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-
EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE ADMINISTRATIVE
AGENT, THE ISSUING BANKS AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT
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MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED TO THIS
AGREEMENT. THE COMPANY, THE ADMINISTRATIVE AGENT, THE ISSUING BANKS AND THE
BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
11.15 Waiver of Jury Trial. THE COMPANY, THE ISSUING BANKS, THE BANKS AND
THE ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THE
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
COMPANY, THE BANKS, THE ISSUING BANKS AND THE ADMINISTRATIVE AGENT EACH AGREE
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THE LOAN DOCUMENTS OR ANY
PROVISION THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN DOCUMENTS.
11.16 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Administrative Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons (other than that
certain Commitment Letter, dated as of September 27, 1999, among the Company and
the Agents), verbal or written, relating to the subject matter of this Agreement
and thereof.
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
CLARK REFINING & MARKETING, INC.
By:
---------------------------------
Name:
Title:
Address for notices:
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Telephone: (314) 854-1469
Fax: (314) 854-1570
104
<PAGE>
AGENTS
------
BANKERS TRUST COMPANY
as Administrative Agent
and Collateral Agent
By:
-------------------------------
Name:
Title:
Address for notices:
Jerome Goodridge
Bankers Trust Company
14 Wall Street, 3rd Floor
New York, New York 10005
Telephone: (212) 618-2141
Fax: (212) 618-2117
With a copy to:
Marcus M. Tarkington
Bankers Trust Company
130 Liberty Street
Mailstop 2344
New York, NY 10006
Telephone: (212) 250-7684
Fax: (212) 250-8693
105
<PAGE>
THE TORONTO DOMINION BANK
as Syndications Agent
By:
----------------------------
Name:
Title:
Address for notices:
Toronto Dominion (Texas), Inc.
909 Fannin Street
Houston, TX 77010
Telephone: (713) 653-8248
Fax: (713) 951-9921
BANKBOSTON, N.A.
as Documentation Agent
By:
----------------------------
Name:
Title:
Address for notices:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
Telephone: (617) 434-4067
Fax: (617) 434-3652
106
<PAGE>
LENDERS
-------
ABN AMRO BANK
as a Bank
By:
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
Address for notices:
ABN AMRO Bank
135 South LaSalle Street
Chicago, IL 60674-9135
Telephone: (312) 904-5215
Fax: (312) 606-8425
107
<PAGE>
ARAB BANKING CORPORATION (B.S.C.)
as a Bank
By:
--------------------------------
Name:
Title:
Address for notices:
ARAB BANKING CORP.
277 Park Avenue, 32nd Floor
New York, NY 10172-3299
Telephone: (___) _________
Fax: (___) _________
108
<PAGE>
BANKBOSTON, N.A.
as a Bank
By:
-----------------------------
Name:
Title:
Address for notices:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
Telephone: (617) 434-4067
Fax: (617) 434-3652
109
<PAGE>
BANKERS TRUST COMPANY
as a Bank
By:
--------------------------------
Name:
Title:
Address for notices:
Marcus M. Tarkington
Bankers Trust Company
130 Liberty Street
Mailstop 2344
New York, New York 10005
Telephone: (212) 250-7684
Fax: (212) 250-8693
110
<PAGE>
COAST BUSINESS CREDIT
as a Bank
By: /s/ Robert D. Peters
----------------------------------
Name: Robert D. Peters
Title: Vice President
Address for notices:
12121 Wilshire Boulevard
Suite 1400
Los Angeles, CA 90025
Telephone: (310) 820-6681
Fax: (310) 979-5828
111
<PAGE>
COMERICA BANK
as a Bank
By:
-------------------------------
Name:
Title:
Address for notices:
Comerica Bank
500 Woodward Avenue
23rd Floor
Detroit, Michigan 48226-3329
Telephone: (313) 222-3002
Fax: (313) 222-3377
112
<PAGE>
CONGRESS FINANCIAL CORPORATION
as a Bank
By:
--------------------------------
Name:
Title:
Address for notices:
Congress Financial Corporation
1133 Avenue of the Americas
New York, NY 10036
Telephone: (212) 840-2000
Fax: (212) 545-4283
113
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
as a Bank
By:
--------------------------------
Name:
Title:
Address for notices:
Credit Lyonnais,
Houston Representative Office
1000 Louisiana
Suite 5360
Houston, Texas 77002
Telephone: (713) 753-8723
Fax: (713) 751-0307
114
<PAGE>
THE FUJI BANK, LIMITED
as a Bank
By:
-------------------------------
Name:
Title:
Address for notices:
The Fuji Bank, Limited
225 West Wacker Drive, Suite 2000
Chicago, Illinois 60606
Telephone: (312) 621-0397
Fax: (312) 621-0539
115
<PAGE>
GMAC COMMERCIAL CREDIT LLC
as a Bank
By:
----------------------------------
Name:
Title:
Address for notices:
GMAC Commercial Credit LLC
1290 Avenue of the Americas
3rd Floor
New York, NY 10104
Attn: Frank Imperato
Telephone: (212) 408-7026
Fax: (212) 408-7162
116
<PAGE>
HELLER FINANCIAL, INC.
a Bank
By:
------------------------------
Name:
Title:
Address for notices:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Accounts Manager, Corporate Finance Group
Telephone: (312) 441-7500
Fax: (312) 441-7367
with a copy to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Legal Department, Corporate Finance Group
Telephone: (312) 441-7500
Fax: (312) 441-7367
117
<PAGE>
HIBERNIA NATIONAL BANK
as a Bank
By:
-----------------------------
Name:
Title:
Address for notices:
Hibernia National Bank
313 Carondolet Street
Energy & Maritime Department
New Orleans, Louisiana 70130
Telephone: (504) 533-3513
Fax: (504) 533-5434
118
<PAGE>
MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION
as a Bank
By:
--------------------------------
Name:
Title:
Address for notices:
Mercantile Bank of St. Louis National Association
Mercantile Center
7th & Washington
St. Louis, Missouri 63101
Telephone: (314) 425-1967
Fax: (314) 425-2162
117
<PAGE>
SIEMENS CREDIT CORP.
as a Bank
By:
----------------------------------
Name:
Title:
Address for notices:
Siemens Credit Corp
991 U.S. Highway 22
Bridgewater, New Jersey 08807-2956
Telephone: ( )
Fax: ( )
120
<PAGE>
SOVEREIGN BANK
as a Bank
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Address for notices:
Sovereign Bank
50 Rose Wharf
Boston, Massachusetts 02110
Telephone: (617) 478-6710
Fax: (617) 478-6799
121
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY
as a Bank
By:
---------------------------------------
Name:
Title:
Address for notices:
Societe Generale, Southwest Agency
Trammell Crow Center
2001 Ross Avenue - Suite 4800
Dallas, Texas 75201
Telephone: (214) 979-2769
Fax: ( 214) 979-1104
122
<PAGE>
TORONTO DOMINION(TEXAS), INC.
as a Bank
By:
--------------------------------------
Name:
Title:
Address for notices:
Toronto Dominion (Texas), Inc.
909 Fannin Street
Houston, Texas 77010
Telephone: (713) 653-8248
Fax: (713) 951-9921
123
<PAGE>
TRANSAMERICA BUSINESS CREDIT CORPORATION
as a Bank
By:
-------------------------------------
Name:
Title:
Address for notices:
Transamerica Business Credit Corporation
555 Theodore Fremd Avenue, Suite C-301
Rye, New York 10580
Telephone: (914) 925-7230
Fax: (914) 921-5883
124
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
-------------------------------------
Name:
Title:
Address for notices:
Union Bank of California, N.A. Energy Capital
Services
445 South Figueroa Street
Los Angeles, CA 90071
Telephone: (213) 236-5772
Fax: (213) 236-4096
125
<PAGE>
WELLS FARGO BANK (TEXAS), N.A.
as a Bank
By:
-------------------------------------
Name:
Title:
Address for notices:
Wells Fargo Bank (Texas), N.A.
Energy Department
1445 Ross Avenue, LB 224
Suite 450, 4th Floor
Dallas, Texas 75202-0291
Telephone: (214) 777-4026
Fax: (214) 777-4044
126
<PAGE>
ISSUING BANKS
-------------
BANKERS TRUST COMPANY
as Issuing Bank
By:
-------------------------------
Name:
Title:
Address for notices:
Bankers Trust Company
14 Wall Street
New York, New York 10005
Attention: Kathleen Rondon
Telephone: (212) 618-2127
Fax: (212) 618-2428
THE TORONTO DOMINION BANK
as Issuing Bank
By:
-------------------------------
Name:
Title:
Address for notices:
Toronto Dominion (Texas), Inc.
909 Fannin Street
Houston, TX 77010
Telephone: (713) 653-8248
Fax: (713) 951-9921
127
<PAGE>
BANKBOSTON, N.A.
as Issuing Bank
By:
-------------------------------
Name:
Title:
Address for notices:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
Telephone: (617) 434-4067
Fax: (617) 434-3652
128
<PAGE>
SCHEDULE 1.01(a)
----------------
Allocation
------------------
Bankers Trust Company $ 73,333,334
Toronto Dominion (Texas), Inc. $ 58,333,333
BankBoston, N.A. $ 58,333,333
ABN AMRO Bank $ 20,000,000
Arab Banking Corporation (B.S.C.) $ 15,000,000
Coast Business Credit $ 25,000,000
Comerica Bank $ 25,000,000
Congress Financial Corporation $ 50,000,000
Credit Lyonnais New York Branch $ 20,000,000
The Fuji Bank, Limited $ 15,000,000
GMAC Commercial Credit LLC $ 50,000,000
Heller Financial, Inc. $ 20,000,000
Hibernia National Bank $ 10,000,000
Siemens Credit Corp. $ 15,000,000
Societe Generale Southwest Agency $ 25,000,000
Sovereign Bank $ 20,000,000
Transamerica Business Credit Corporation $ 15,000,000
Wells Fargo Bank (Texas), N.A. $ 25,000,000
------------------
TOTAL: $540,000,000
==================
129
<PAGE>
Clark Refining & Marketing, Inc.
Pricing Grid(1), (2)
Applicable LC and Eurodollar Rate Margin:
<TABLE>
<CAPTION>
The Lower of Average Cash as % of Avg. Outstandings(4)
- --------------------------------------------- ---------------------------------------------------------
S&P Rating(3) Moody's Rating(3) *** 33% 33% - 66% * 66%
- --------------------- ---------------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
* BB+ * Ba1 225 200 175
BB Ba2 250 225 200
BB- Ba3 275 250 225
B+ B1 300 275 250
** B *** B2 325 300 275
</TABLE>
* Greater than or equal to
** Less than or equal to
*** Less than
Applicable Prime Rate Margin:
<TABLE>
<CAPTION>
The Lower of Average Cash as % of Avg. Outstandings(4)
- --------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C>
S&P Rating(3) Moody's Rating(3) *** 33% 33% - 66% * 66%
- --------------------- ---------------------- ---------------- ---------------- -----------------
* BB+ * Ba1 125 100 75
BB Ba2 150 125 100
BB- Ba3 175 150 125
B+ B1 200 175 150
** B *** B2 225 200 175
</TABLE>
* Greater than or equal to
** Less than or equal to
*** Less than
Applicable Commitment Fee:
<TABLE>
<CAPTION>
Average Utilization(5)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
*** 33% 33% - 66% *** 66%
- ---------------------------------- ------------------------------------------- ------------------
75 62.5 50
</TABLE>
* Greater than or equal to
** Less than or equal to
*** Less than
1 All rates expressed as basis points per annum.
2 If Total Debt/LTM EBITDA Less than 4.0, each rate in this Pricing Grid will
be reduced by 25 basis points. Pricing on the Indebtedness/LTM EBITDA option
will be determined (a) using, as the numerator, Indebtedness that would
appear as a line item on a consolidated balance sheet of the Company and its
Restricted Subsidiaries as of the last day of the relevant month and (b)
using, as the denominator ("LTM EBITDA"), EBITDA of the Company and its
Restricted Subsidiaries for the consecutive 12-month period ending on such
last day.
3 Based on Senior Unsecured Debt Rating of Clark Refining & Marketing, Inc.
4 Pricing on the Average Cash as percentage of Average Outstandings will be
determined (a) using, as the numerator, the average daily amount of Cash
Collateral during the relevant month and (b) using, as the denominator (i.e.,
"Outstandings"), the sum of (i) the daily average undrawn stated amount of
all Letters of Credit outstanding during such month and (ii) the daily
average of all Loans outstanding during such month, with such fraction being
calculated as a percentage. Cash Collateral means, the sum, without
duplication, of Eligible Cash, Eligible Cash Equivalents and 95% of Eligible
Investments (in each case as reflected in the books and records of the
Administrative Agent on such date of determination).
5 "Average Utilization" on any day means a fraction (a) the numerator of which
is the Effective Amount of all L/C Obligations under clauses (i), (iii) and
(iv) of the definition thereof plus the Effective Amount of all Loans on such
day and (b) the denominator of which is the aggregate Commitments on such
day, expressed as a percentage.
<PAGE>
EXHIBIT 10.20
CLARK REFINING HOLDINGS INC.
1999 STOCK INCENTIVE PLAN
1. OBJECTIVES.
This Clark Refining Holdings Inc. 1999 Stock Incentive Plan is designed to
attract and retain executives and other selected employees whose skills and
talents are important to the operations of Clark Refining Holdings Inc. and its
subsidiaries (together, as more fully defined herein, the "Company") and reward
them for making major contributions to the success of the Company. These
objectives are accomplished by making awards under the Plan, thereby providing
Participants with a proprietary interest in the growth and performance of the
Company.
2. DEFINITIONS.
"Award" - The grant of a Stock Option to a Plan Participant pursuant to
such terms, conditions, requirements and limitations as the Board may establish
in order to fulfill the objectives of the Plan.
"Award Agreement" - Any agreement or agreements between the Company and a
Participant that sets forth terms, conditions, requirements and limitations
applicable to or in connection with an Award.
"Blackstone" means The Blackstone Group, Blackstone Capital Partners III
Merchant Banking Fund L.P, Blackstone Offshore Partners III L.P. and Blackstone
Family Investment Partnership III L.P., and their respective affiliates,
subsidiaries and general partners.
"Board" - The Board of Directors of Clark Holdings.
"Capital Stock" or "stock" - The Common Stock, $.01 par value per share, of
Clark Holdings.
"Change in Control" - A change in control shall be deemed to have occurred
if any "person" (as such term is used in Sections 13(d) and 14(d) of the 1934
Act), other than Blackstone, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of Clark
Holdings representing 50% or more of the combined voting power of its then
outstanding securities entitled to vote in the election of directors.
"Clark Holdings" - Clark Refining Holdings Inc., a Delaware corporation.
"Code" - The Internal Revenue Code of 1986, as amended from time to time.
"Committee" - The Compensation Committee of the Board (if any) or such
other committee as may be designated by the Board to administer the Plan;
provided, however, that the Committee (a) shall be composed solely of two or
more non-employee directors, as defined in Rule 16(b)-3(b)(3) under the 1934
Act, and (b) shall be constituted to permit Awards under the Plan to qualify for
exemption under the 1934 Act.
"Company" - Clark Holdings and its subsidiaries including subsidiaries of
subsidiaries and partnerships and other business ventures in which it has a
significant equity interest, as determined in the sole discretion of the Board.
"Disability" - A long-term disability as determined pursuant to the
Company's Long-Term Disability Plan.
<PAGE>
"Fair Market Value" - With respect to Capital Stock, Awards or other
property, the fair market value of such Capital Stock, Awards or other property
as determined from time to time by the Board in good faith. Unless otherwise
determined by the Board, (a) if the Capital Stock is traded on NASDAQ, the Fair
Market Value of Capital Stock as of any date shall be the closing sale price on
that date of a share of Capital Stock as reported in the NASDAQ National Market
Issues quotations of the Midwest Edition of the Wall Street Journal, or (b) if
the Capital Stock is traded on the New York Stock Exchange, the Fair Market
Value of Capital Stock as of any date shall be the closing sale price on that
date of a share of Capital Stock as reported on the New York Stock Exchange
Composite Tape (or, if the Capital Stock is not traded on NASDAQ or the New York
Stock Exchange, as applicable, on such date, on the next following date on which
it is so traded).
"Net Stock Option Value" means, with respect to any shares of Capital Stock
subject to a Stock Option, an amount equal to the excess of (a) the Fair Market
Value of such shares over (b) the exercise price of such Stock Option with
respect to such shares.
"1934 Act" - The Securities Exchange Act of 1934, as amended from time to
time.
"Plan" - This Clark Refining Holdings Inc. 1999 Stock Incentive Plan, as
amended from time to time.
"Participant" - An employee of the Company to whom an Award has been made
under the Plan.
"Qualified Performance-Based Award" means an Award designated as such by
the Board at or prior to the time of grant, based upon a determination that the
Committee intends for such Award to qualify for the Section 162(m) Exemption.
"Rule 16b-3" means Rule 16b-3, as from time to time amended and applicable
to Participants, promulgated by the SEC under Section 16 of the 1934 Act.
"Stock Option" means the right to purchase a specified number of shares of
Capital Stock, granted pursuant to Section 7(a) of the Plan.
"Stock Option Shares" means shares of Capital Stock acquired pursuant to
Stock Options.
"SEC" means the United States Securities and Exchange Commission.
"Section 162(m) Exemption" means the exemption from the limitation on
deductibility imposed by Section 162(m) of the Code that is set forth in Section
162(m)(4)(C) of the Code.
3. ELIGIBILITY.
Executives and other employees of the Company eligible for an Award under
the Plan are those who hold positions of responsibility and whose performance,
in the judgment of the Board or the management of the Company, can have a
significant effect on the success of the Company.
4. CAPITAL STOCK AVAILABLE FOR AWARDS.
The number of shares of Capital Stock that may be issued or delivered under
the Plan for Awards granted during the term of the Plan is 2,215,250 shares.
Such shares may consist of Capital Stock which is authorized and unissued and
has been authorized by the Board to be issued under the Plan or Capital Stock
which is authorized and issued and has been acquired by or on behalf of the
Company or the Plan and is available for Awards under the Plan. Capital Stock
related to Awards that are forfeited, terminated, expire unexercised, settled in
cash in lieu of stock or in such manner that all or some of the shares covered
by an Award are not issued or delivered to a Participant shall become available
for Awards, upon determination of such availability by the Board following
consultation with the Chief Executive Officer of the Company.
-2-
<PAGE>
5. ADMINISTRATION.
The Plan shall be administered by the Board, which shall have full and
exclusive power to interpret the Plan, to grant waivers of Award restrictions
and to adopt such rules, regulations and guidelines for carrying out the Plan as
it may deem necessary or proper, all of which powers shall be executed in the
best interest of the Company and in keeping with the objectives of the Plan.
These powers include, but are not limited to, the adoption of modifications,
amendments, procedures, subplans and the like as are necessary to comply with
provisions of the laws and regulations of the jurisdictions in which the Company
operates in order to assure the viability of Awards granted under the Plan and
to enable Participants regardless of where employed to receive advantages and
benefits under the Plan and such laws and regulations.
6. DELEGATION OF AUTHORITY.
The Board may delegate to the Committee or to the Chief Executive Officer
or other senior officers of the Company its duties under the Plan pursuant to
such conditions or limitations as the Board may establish, except (a) that only
the Board or the Committee may select, and grant Awards to, Participants who are
subject to Section 16 of the 1934 Act and (b) to the extent that the grant or
exercise of such authority would cause any Award or transaction to fail to
qualify for exemption under Rule 16b-3.
7. AWARDS.
The Board shall determine who may participate in the Plan and the number
and type of Awards to be made to each Participant and shall set forth in the
related Award Agreement or other appropriate manner the terms, conditions,
requirements and limitations applicable to each Award. Awards may be granted
singly or in combination. Awards may also be made in combination or in tandem
with, in replacement of, or as alternatives to, grants or rights under any other
employee plan of the Company, including the plan of any acquired entity. The
Board may make the following type of Awards: stock options; i.e., rights to
purchase a specified number of shares of Capital Stock the purchase price of
which shall be determined by the Board. No Stock Option shall be exercisable
more than ten years after the date of its grant.
No Award shall confer on any Participant any of the rights of a shareholder
of the Company unless and until shares of Capital Stock are duly issued or
transferred to the Participant in accordance with the terms of the Award.
No Participant, officer, employee or director shall have any claim to be
granted any Award under the Plan, and there is no obligation for uniformity of
treatment of Participants or any other persons. Nothing contained in the Plan
or any Award Agreement shall confer, and no grant of an Award shall be construed
as conferring, upon any employee any right to continue in the employ of the
Company or to interfere in any way with the right of the Company to terminate
the employee's employment at any time or increase or decrease the employee's
compensation from the rate in existence at the time of granting of an Award.
The maximum number of shares of Capital Stock with respect to which Stock
Options may be granted to any one Participant under the Plan during any calendar
year is 1,000,000 shares.
The Board may, at or prior to the time of grant, designate any Award as a
Qualified Performance-Based Award, in which event it shall take such action with
respect to such Award and the terms thereof (including the imposition of
additional requirements not otherwise required by the terms of the Plan), and
the provisions of the Plan or any Award Agreement shall be construed or deemed
amended, as shall be necessary to cause such Award to qualify for the Section
162(m) Exemption.
-3-
<PAGE>
8. STOCK OPTION EXERCISE.
The price at which shares of Capital Stock may be purchased under a Stock
Option shall be paid in full at the time of the exercise in cash.
9. AWARDS - CERTAIN RIGHTS AND OBLIGATIONS.
Awards and all other benefits under the Plan (including Stock Option
Shares) shall include and be subject to such obligations and rights as may be
set forth in or pursuant to the related Award Agreement including, without
limitation, registration rights, tag-along rights, drag-along rights and
restrictions on transfer.
10. TAXES.
The Company shall have the right to deduct applicable taxes from any Award
payment and withhold, at the time of delivery or vesting of shares under the
Plan, an appropriate number of shares for payment of taxes required by law, to
require a Participant to pay to the Company in cash any amounts required to be
withheld or to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for withholding of such taxes.
11. CHANGES TO THE PLAN AND AWARDS.
(a) Changes to the Plan. The Board may amend, alter, suspend, discontinue
or terminate the Plan without the consent of shareholders or Participants,
except as is required by any federal or state law or regulation or the rules of
any stock exchange on which the Capital Stock may be listed, or if the Board in
its discretion determines that obtaining such shareholder approval is for any
reason advisable; provided, however, that, without the consent of an affected
Participant, no amendment, alteration, suspension, discontinuation or
termination of the Plan may impair the rights of such Participant under any
Award theretofore granted to such Participant.
(b) Changes to Awards. The Board may waive any conditions or rights under,
or amend, alter, accelerate, suspend, discontinue or terminate, any Award
theretofore granted and any Award Agreement relating thereto; provided, however,
that, without the consent of an affected Participant, no such amendment,
alteration, suspension, discontinuation or termination of any Award may impair
the rights of such Participant under such Award.
12. TERMINATION OF EMPLOYMENT.
If the employment of a Participant by the Company terminates, all Awards
and other benefits under the Plan (including Stock Option Shares) held by such
Participant shall be governed by, and shall be subject to, the terms and
conditions set forth below.
(a) Death or Disability.
(i) If the employment of any Participant is terminated as a result of
death or Disability, all Stock Options held by such Participant (A) which are
not then exercisable shall terminate and (B) which are then exercisable shall
terminate at the close of business in St. Louis, Missouri on the date which is
the first anniversary of such Participant's termination of employment. In
addition, the Company shall have the right to purchase (A) from time to time so
long as they are exercisable, all or any portion of such exercisable Stock
Options at a price equal to the Net Stock Option Value of the shares of Capital
Stock subject to such Stock Options on the purchase date and (B) any or all of
the Stock Option Shares held by such Participant at a price per share equal to
their Fair Market Value.
-4-
<PAGE>
(ii) In the event of a Participant's death, any remaining rights
with respect to any outstanding Award shall be exercised by the Participant's
estate or beneficiaries under such terms as may be specified in the applicable
Award Agreement. Any such remaining rights to outstanding Awards shall pass by
will or the laws of descent and distribution in the following order: (A) to
beneficiaries so designated by the Participant; if none, then (B) to a legal
representative of the Participant; if none, then (C) to the persons entitled
thereto as determined by a court of competent jurisdiction. Subject to
subparagraph (iv) below, Awards so passing shall be exercised or paid out at
such times and in such manner as if the Participant were living.
(iii) In the event a Participant is deemed by the Company to be
Disabled, Awards and rights to any such Awards which are payable or exercisable
may be paid to or exercised by the Participant, if legally competent, or a
conservator or other legally designated agent or representative if the
Participant is legally incompetent by virtue of such Disability.
(iv) After the death or Disability of a Participant, the Board may
in its sole discretion at any time (A) terminate restrictions in Award
Agreements, (B) accelerate any or all installments and rights, and (C) instruct
the Company to pay the total of any accelerated payments in a lump sum to the
Participant, the Participant's estate, beneficiaries or representative -
notwithstanding that, in the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due under the Awards might
ultimately have become payable to other beneficiaries.
(b) Cause.
(i) If the employment of any Participant is terminated for Cause,
all Stock Options held by such Participant shall terminate. In addition, the
Company shall have the right to purchase, from time to time for a period of 30
days following such termination, any or all of the Stock Option Shares held by
such Participant at a price per share equal to the lower of its cost (the
exercise price) or its Fair Market Value. For purposes of the foregoing, "Cause"
shall have the same meaning as in the Participant's written employment agreement
with the Company or, if the Participant has not entered into a written
employment agreement, shall mean (A) gross neglect of or wilful and continuing
refusal to substantially perform the Participant's duties (other than due to
death or Disability), (B) breach of any material policy of the Company
(including, without limitation, any policy regarding confidentiality), (C)
willfully engaging in conduct which is demonstrably injurious to Blackstone or
the Company, or (D) commission of or the entering of a plea of guilty or nolo
contendere to (1) a felony or (2) a misdemeanor involving moral turpitude.
(ii) Termination of a Participant for Cause shall be effected by a
majority vote of the Board at a meeting at which such Participant (and such
Participant's counsel) shall have had the opportunity to be heard, provided that
such Participant shall have received written notice of such termination at least
30 days prior to such meeting and such Participant shall have failed to cure
such Cause (if curable) within 15 days of such notice to the reasonable
satisfaction of the Board.
The foregoing provisions of this subsection (b) are applicable solely for
purposes of the Plan and shall not affect in any way the right of the Company to
terminate any employee or (except regarding the Plan) the consequences thereof.
-5-
<PAGE>
(c) Other Termination.
(i) If the employment of any Participant is terminated for any reason
other than death or Disability or Cause, as described in subsections (a) and (b)
above, all Stock Options held by such Participant (A) which are not then
exercisable shall terminate and (B) which are then exercisable shall terminate
at the close of business in St. Louis, Missouri on the date which is 90 days
after such Participant's termination of employment. In addition, the Company
shall have the right to purchase (A) from time to time so long as they are
exercisable, all or any portion of such exercisable Stock Options at a price
equal to the Net Stock Option Value of the shares subject to such Stock Options
on the purchase date and (B) any or all of the Stock Option Shares held by such
Participant at a price per share equal to their Fair Market Value.
The right of the Company to purchase exercisable Stock Options and
Stock Option Shares pursuant to this Section 12 shall be exercisable upon 30
days written notice to the Participant specifying the purchase date.
Any provision of the Plan to the contrary notwithstanding, the Company
shall not have the right to purchase any exercisable Stock Options or Stock
Option Shares pursuant to this Section 12 following the establishment (in the
reasonable judgment of the Board) of a public market for the Capital Stock.
In the event of uncertainty as to interpretation of or controversies
concerning this Section 12, the Board's determinations shall be binding and
conclusive.
13. CANCELLATION AND RESCISSION OF AWARDS.
Unless the Award Agreement specifies otherwise, the Board may cancel any
unexpired, unpaid or deferred Awards at any time if the Participant is not in
compliance with all other applicable provisions of the Award Agreement, the Plan
and with the following conditions:
(a) A Participant shall not render services for any organization or engage
directly or indirectly in any business which, in the judgment of the Chief
Executive Officer of the Company or other senior officer designated by the
Board, is or becomes competitive with the Company, or which organization or
business, or the rendering of services to such organization or business, is or
becomes otherwise prejudicial to or in conflict with the interests of the
Company. For a Participant whose employment has terminated, the judgment of the
Chief Executive Officer shall be based on the Participant's position and
responsibilities while employed by the Company, the Participant's post-
employment responsibilities and position with the other organization or
business, the extent of past, current and potential competition or conflict
between the Company and the other organization or business, the effect on the
Company's customers, suppliers and competitors of the Participant's assuming the
post-employment position, and such other considerations as are deemed relevant
given the applicable facts and circumstances. A Participant who has retired
shall be free, however, to purchase, as an investment or otherwise, stock or
other securities of such organization or business so long as they are listed
upon a recognized securities exchange or traded over-the-counter, and such
investment does not represent a substantial investment to the Participant or a
greater than 5% equity interest in the organization or business.
(b) A Participant shall not, without prior written authorization from the
Company, disclose to anyone outside the Company, or use in other than the
Company's business, any confidential information or material relating to the
business of the Company, acquired by the Participant either during or after
employment with the Company.
-6-
<PAGE>
(c) Failure to comply with the provisions of paragraph (a) or (b) of this
Section 13 prior to or during the six months after any exercise, payment or
delivery pursuant to an Award shall cause such exercise, payment or delivery to
be rescinded. The Company shall notify the Participant in writing of any such
rescission within two years after such exercise, payment or delivery. Within
ten days after receiving such a notice from the Company, the Participant shall
pay to the Company the amount of any gain realized or payment received as a
result of the rescinded exercise, payment or delivery pursuant to an Award.
Such payment shall be made either in cash or by returning to the Company the
number of shares of Capital Stock that the Participant received in connection
with the rescinded exercise, payment or delivery.
14. NONASSIGNABILITY.
Unless otherwise provided by the Board, no Award or any other benefit
under the Plan (including Stock Option Shares) shall be assignable or
transferable, or payable to or exercisable by anyone other than the Participant
to whom it was granted , except (a) pursuant to subparagraph (a) of Section 12
and (b) that Stock Option Shares shall be assignable and transferrable subject
to such limitations and conditions as may be set forth in a stockholder or
similar agreement entered into in connection therewith.
15. MERGERS, REORGANIZATIONS AND OTHER CORPORATE TRANSACTIONS; CHANGE IN
CONTROL.
(a) General. In the event of any change in the outstanding Capital Stock
by reason of any stock dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination or exchange of Capital Stock or
other corporate exchange, or any distribution to shareholders of Capital Stock
other than regular cash dividends, the Board in its sole discretion and without
liability to any person may make such substitutions or adjustments, if any, as
it deems to be equitable, as to (i) the number or kind of Capital Stock or other
securities issued or reserved for issuance pursuant to the Plan or pursuant to
outstanding Awards, (ii) the Stock Option price and/or (iii) any other affected
terms of such Awards.
(b) Change in Control. Except as may otherwise be provided in the related
Award Agreement, in the event of a Change in Control, the Board in its sole
discretion and without liability to any person may take such actions, if any, as
it deems necessary or desirable with respect to any Award (including, without
limitation, (i) the acceleration of an Award, (ii) the payment of a cash amount
in exchange for the cancellation of an Award and/or (iii) the requiring of the
issuance of substitute Awards that will substantially preserve the value, rights
and benefits of any affected Awards previously granted under the Plan) as of the
date of the consummation of the Change in Control.
(c) Pooling of Interest Accounting. Notwithstanding the foregoing, in the
event that the implementation of any provision of the Plan would cause a Change
in Control transaction that was intended to be eligible for pooling-of-interests
accounting not to be so eligible, the Board may take any steps that it deems
necessary to preserve pooling treatment.
16. NOTICE.
Any notice to the Company required by any of the provisions of the Plan
shall be addressed to the Legal Department of Clark Holdings in writing, and
shall become effective when it is received.
-7-
<PAGE>
17. LEGAL REQUIREMENTS.
(a) General. The Plan, the granting and exercising of Awards thereunder
and the other obligations of the Company under the Plan shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any regulatory or governmental agency as may be required. The Company, in
its discretion, may postpone the granting and exercising of Awards, the issuance
or delivery of Capital Stock under any Award or any other action permitted under
the Plan to permit the Company, with reasonable diligence, to complete such
stock exchange listing or registration or qualification of such Capital Stock or
other required action under any federal or state law, rule or regulation and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Capital Stock in compliance with applicable laws, rules and
regulations. The Company shall not be obligated by virtue of any provision of
the Plan to recognize the exercise of any Award or to otherwise sell or issue
Capital Stock in violation of any such laws, rules, or regulations; and any
postponement of the exercise or settlement of any Award under this provision
shall not extend the term of such Award, and neither the Company nor its
directors or officers shall have any obligation or liability to the Participant
with respect to any Award (or stock issuable thereunder) that shall lapse
because of such postponement.
(b) Rule 16b-3. It is the intent of the Company that any Award granted to
a person who is subject to Section 16 of the 1934 Act qualify for exemption
under Rule 16b-3. Accordingly (i) if any provision of the Plan or any Award
Agreement would cause such an Award to fail to qualify for such exemption, such
provision shall be construed or deemed amended to the extent necessary to enable
such Award to qualify for such exemption, and (ii) any provision of the Plan
which is intended solely to cause an Award to qualify for exemption under Rule
16b-3 shall apply only to the extent that such Award would otherwise be subject
to such Rule.
18. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of Delaware and construed accordingly.
19. EFFECTIVE AND TERMINATION DATES.
The Plan shall become effective on September 28, 1999; provided that the
Plan shall not become effective and no initial Awards shall be effective unless
and until Clark Holdings obtains the affirmative vote of more than seventy-five
percent of all shareholders who (a) are not receiving any initial Awards or (b)
are not lineally related to, or the spouse of, any individual who would receive
the initial Awards. The Board shall have the authority to grant Awards prior to
such approval; provided that the effectiveness of such Awards shall be subject
to such shareholder approval of the Plan. The Plan shall terminate ten years
after its effective date, subject to earlier termination by the Board pursuant
to Section 11, after which no Awards may be made under the Plan, but any such
termination shall not affect Awards then outstanding or the authority of the
Board to continue to administer the Plan.
<PAGE>
CLARK REFINING HOLDINGS INC.
Stock Option Certificate And Agreement
(Time Vesting)
Name of Optionee: ((Name)) Date of Option: ((Date))
Number of Shares: ((Shares)) Option Price: $9.90 per Share
CLARK REFINING HOLDINGS INC., a Delaware Corporation ("Clark Holdings"),
hereby enters into this Stock Option Certificate and Agreement with the optionee
named above (the "Optionee") under the Clark Refining Holdings Inc. 1999 Stock
Incentive Plan (the "Plan").
SECTION 1. GRANT. Pursuant to authorization of the Board of Directors of
Clark Holdings (the "Board") under the Plan, Clark Holdings hereby grants to the
Optionee the right and option (the "Option") to purchase all or any part of the
number of shares of its Common Stock, $.01 par value per share (the "Capital
Stock"), set forth above on the terms and conditions set forth herein.
SECTION 2. TERM AND VESTING. The Option is exercisable, to the extent
vested, in full or in part at any time prior to expiration. The Option shall
expire in full to the extent not exercised on September 30, 2008. The Option
shall vest as to the shares of Capital Stock covered by the Option as follows:
50% on the Date of Option and 25% on each January 1 thereafter, so that the
Option share be fully vested on January 1, 2001.
SECTION 3. DATE OF GRANT. The Option was granted by the Board on the Date
of Option set forth above.
SECTION 4. PURCHASE PRICE. The purchase price per share of the shares of
Capital Stock covered by the Option shall be the Option Price set forth above.
SECTION 5. RIGHT TO EXERCISE. The Optionee may exercise the Option only
(a) if the Optionee is an employee of the Company (as defined in the Plan) on
the date of exercise (and it is otherwise then exercisable), or (b) if the
employment of the Optionee is terminated as a result of death or disability (and
the Option is otherwise exercisable on the date of termination), prior to the
date which is the first anniversary of the Optionee's termination of employment,
or (c) if the employment of the Optionee is terminated for any reason other than
death or disability or Cause (and the Option is otherwise exercisable on the
date of termination), prior to the date which is 90 days after the Optionee's
termination of employment. If the employment of the Optionee is terminated for
Cause, the Option shall terminate.
The Option shall not be affected by any change of duties or position of the
Optionee so long as the Optionee continues to be an employee of the Company.
Neither the Option nor this Agreement shall be deemed to confer upon the
Optionee any right to continue in the employment of the Company.
<PAGE>
SECTION 6. TERMINATION OF EMPLOYMENT. If the employment of the Optionee
terminates, the Option and any Stock Option Shares acquired pursuant to the
Option shall be governed by, and shall be subject to, the terms and conditions
with respect to termination of employment set forth in the Plan.
SECTION 7. CERTAIN RIGHTS AND OBLIGATIONS. The Option and any Stock
Option Shares acquired pursuant to the Option shall include and be subject to
such obligations and rights (including, without limitation, registration
rights, tag-a-long rights, drag-a-long rights and restrictions on transfer) as
may be set forth in any stock or similar agreement entered into by the Company
and the Optionee with respect thereto.
SECTION 8. METHOD OF EXERCISE. The Option may be exercised (in whole or
in part) by delivering to the Legal Department of Clark Holdings a written
notice of exercise signed by the Optionee (a) designating the number of shares
to be purchased and (b) either (i) accompanied by payment of the full amount of
the purchase price of the shares of Capital Stock with respect to which the
Option is exercised or (ii) specifying a date (not less than 5 nor more than 10
business days after the date of such notice) for the payment of such purchase
price. The date of delivery of such notice of exercise shall be the date the
written notice is actually received by the Legal Department. The purchase price
of shares of Capital Stock purchased under the Option (together with any
applicable withholding taxes) shall be paid in cash.
SECTION 9. MERGERS, REORGANIZATIONS AND OTHER CORPORATE TRANSACTIONS;
CHANGE IN CONTROL. In the event of (a) any change in the outstanding Capital
Stock by reason of any stock dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
Stock or other corporate exchange, or any distribution to shareholders of
Capital Stock other than regular cash dividends, the Board may make certain
substitutions or adjustments, if any, as it deems to be equitable with respect
to the Plan or any Award or (b) a Change in Control, the Board may take such
actions, if any, as it deems necessary or desirable with respect to any Award,
all as provided in the Plan. Such substitutions, adjustments or actions may be
made or taken by the Board in its sole discretion and without liability to any
person.
SECTION 10. CHANGE IN CONTROL. In the event of a Change in Control, the
Option shall become exercisable in full.
SECTION 11. CANCELLATION AND RESCISSION. The Board may cancel any
unexercised portion of the Option at any time if the Optionee is not in
compliance with this Agreement and the Plan, [including certain conditions
specified in the Plan relating to (a) activities which are competitive with the
Company or prejudicial to or in conflict with the interests of the Company or
(b) the unauthorized disclosure of confidential information relating to the
Company. In addition, failure to comply with such conditions prior to or during
the six months after any delivery of Capital Stock pursuant to the Option shall
cause such delivery to be rescinded, as provided in the Plan.
SECTION 12. LEGAL REQUIREMENTS. The Optionee agrees to make such
representations, furnish such information and take such other action as the
Board may consider necessary or appropriate in connection with the granting of
the Option and the issuance and delivery of Capital Stock pursuant thereto in
compliance with applicable laws, rules and regulations. Such action may
include, without limitation, the representation and agreement by the Optionee
that the Optionee is acquiring such Capital Stock for the Optionee's own account
for investment and not with a view to the resale or other distribution of such
Capital Stock.
SECTION 13. LIMITATION OF RIGHTS. The Optionee shall have none of the
rights of a shareholder with respect to shares of Capital Stock covered by the
Option until shares are issued to the Optionee upon exercise of the Option.
<PAGE>
SECTION 14. NON-ASSIGNABILITY. Unless otherwise provided by the Board,
the Option and any Stock Option Shares acquired pursuant to the Option shall not
be assignable or transferable by the Optionee (voluntarily or involuntarily, by
operation of law or otherwise) and the Option may be exercised only by the
Optionee, except (a) as otherwise provided in the Plan in the event of the
Optionee's death or disability and (b) that the Stock Option Shares may be
assigned or transferred subject to such limitations and conditions as may be set
forth in a stockholder or similar agreement entered into in connection
therewith.
SECTION 15. INTERPRETATION. It is intended that the Option shall be
subject to and governed by the provisions of the Plan. The Option shall be so
interpreted and construed as to be consistent with such intention. Terms
capitalized in this Stock Option Certificate and Agreement shall have the
meanings given to them in the Plan unless otherwise defined herein or some other
meaning is clearly indicated. The Optionee represents that the Optionee has
received and reviewed a copy of the Plan.
SECTION 16. STOCKHOLDER AGREEMENT. The exercise of the Option shall be
subject to the execution and delivery by the Optionee of a Stockholder Agreement
in substantially the form attached as Appendix I hereto, and the Optionee hereby
agrees to execute and deliver such Agreement prior to such exercise and to
comply with the terms thereof.
SECTION 17. OPTIONS UNDER 1995 PLAN. If the Optionee is a participant in
the Clark USA, Inc. 1995 Long-Term Performance Plan, as a condition to the grant
of the Option the Optionee has surrendered to Clark Holdings for cancellation
stock option(s) granted (or the right to receive stock options) under such Plan
covering an aggregate of ((NumberofShares)) shares of Capital Stock of Clark USA
(constituting all of such option(s) granted to the Optionee or which the
Optionee may have the right to receive), which cancellation is hereby confirmed.
SECTION 18. COMPLETE AGREEMENT. This Stock Option Certificate and
Agreement, together with the Plan and any related Stockholder Agreement,
constitute the entire agreement of the parties with regard to the subject matter
hereof, and contain all the covenants, promises and agreements between the
parties with respect to the treatment of all time vesting Stock Options and
Stock Option shares held by the Optionee and supersede all prior option
agreements and any other agreements which may contain provisions pertaining to
Stock Options and Stock Option Shares held by the Optionee.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Certificate and Agreement as of _________________, the date of grant of the
Option.
OPTIONEE CLARK REFINING HOLDINGS INC.
___________________________ By: ______________________
Printed Name: ________________ Its: ______________________
Social Security No.: _________
<PAGE>
CLARK REFINING HOLDINGS INC.
Stock Option Certificate And Agreement
(Performance Vesting)
Name of Optionee: ((Name)) Date of Option: ((Date))
Number of Shares: ((Shares)) Option Price: $9.90 per Share
CLARK REFINING HOLDINGS INC., a Delaware Corporation ("Clark Holdings"),
hereby enters into this Stock Option Certificate and Agreement with the optionee
named above (the "Optionee") under the Clark Refining Holdings Inc. 1999 Stock
Incentive Plan (the "Plan").
SECTION 1. GRANT. Pursuant to authorization of the Board of Directors of
Clark Holdings (the "Board") under the Plan, Clark Holdings hereby grants to the
Optionee the right and option (the "Option") to purchase all or any part of the
number of shares of its Common Stock, $.01 par value per share (the "Capital
Stock"), set forth above on the terms and conditions set forth herein.
SECTION 2. TERM AND VESTING. The Option is exercisable, to the extent
vested, in full or in part at any time prior to expiration. The Option shall
expire in full to the extent not exercised on September 30, 2008. The Option
shall vest as to the shares of Capital Stock covered by the Option as follows:
The Option shall be exercisable on and after the seventh anniversary of the Date
of Option; provided, however, that following any Public Offering or upon a
Change in Control the Option shall be accelerated and may be exercised in
advance of such anniversary date upon the achievement of certain per share
prices of the Capital Stock, in accordance with the schedule set forth below.
For purposes of such schedule, "Change in Control Price" means the highest price
per share received by any holder of Capital Stock from the purchaser(s) in a
transaction or series of transactions that result in a Change in Control.
Average Closing Price Per
Share of % of Shares With
Capital Stock for Any Respect to
180 Consecutive Days; or Which Option
Change in Control Price is Exercisable
--------------------------- ----------------
Below $12.00 0%
$12.00 - $14.99 10%
$15.00 - $17.99 20%
$18.00 - $19.99 30%
$20.00 - $24.99 50%
$25.00 - $29.99 75%
Above $29.99 100%
<PAGE>
SECTION 3. DATE OF GRANT. The Option was granted by the Board on the Date
of Option set forth above.
SECTION 4. PURCHASE PRICE. The purchase price per share of the shares of
Capital Stock covered by the Option shall be the Option Price set forth above.
SECTION 5. RIGHT TO EXERCISE. The Optionee may exercise the Option only
(a) if the Optionee is an employee of the Company (as defined in the Plan) on
the date of exercise (and it is otherwise then exercisable); or (b) if the
employment of the Optionee is terminated as a result of death or disability (and
the Option is otherwise exercisable on the date of termination), prior to the
date which is the first anniversary of the Optionee's termination of employment,
or (c) if the employment of the Optionee is terminated for any reason other than
death or disability or Cause (and the Option is otherwise exercisable on the
date of termination), prior to the date which is 90 days after the Optionee's
termination of employment. If the employment of the Optionee is terminated for
Cause, the Option shall terminate.
The Option shall not be affected by any change of duties or position of the
Optionee so long as the Optionee continues to be an employee of the Company.
Neither the Option nor this Agreement shall be deemed to confer upon the
Optionee any right to continue in the employment of the Company.
SECTION 6. TERMINATION OF EMPLOYMENT. If the employment of the Optionee
terminates, the Option and any Stock Option Shares acquired pursuant to the
Option shall be governed by, and shall be subject to, the terms and conditions
with respect to termination of employment set forth in the Plan.
SECTION 7. CERTAIN RIGHTS AND OBLIGATIONS. The Option and any Stock
Option Shares acquired pursuant to the Option shall include and be subject to
such obligations and rights (including, without limitation, registration rights,
tag-a-long rights, drag-a-long rights and restrictions on transfer) as may be
set forth in any stock or similar agreement entered into by the Company and the
Optionee with respect thereto.
SECTION 8. METHOD OF EXERCISE. The Option may be exercised (in whole or
in part) by delivering to the Legal Department of Clark Holdings a written
notice of exercise signed by the Optionee (a) designating the number of shares
to be purchased and (b) either (i) accompanied by payment of the full amount of
the purchase price of the shares of Capital Stock with respect to which the
Option is exercised or (ii) specifying a date (not less than 5 nor more than 10
business days after the date of such notice) for the payment of such purchase
price. The date of delivery of such notice of exercise shall be the date the
written notice is actually received by the Legal Department. The purchase price
of shares of Capital Stock purchased under the Option (together with any
applicable withholding taxes) shall be paid in cash.
SECTION 9. MERGERS, REORGANIZATIONS AND OTHER CORPORATE TRANSACTIONS;
CHANGE IN CONTROL. In the event of (a) any change in the outstanding Capital
Stock by reason of any stock dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
Stock or other corporate exchange, or any distribution to shareholders of
Capital Stock other than regular cash dividends, the Board may make certain
substitutions or adjustments, if any, as it deems to be equitable with respect
to the Plan or any Award or (b) a Change in Control, the Board may take such
actions, if any, as it deems necessary or desirable with respect to any Award,
all as provided in the Plan. Such substitutions, adjustments or actions may be
made or taken by the Board in its sole discretion and without liability to any
person.
<PAGE>
SECTION 10. CANCELLATION AND RESCISSION. The Board may cancel any
unexercised portion of the Option at any time if the Optionee is not in
compliance with this Agreement and the Plan, including certain conditions
specified in the Plan relating to (a) activities which are competitive with the
Company or prejudicial to or in conflict with the interests of the Company or
(b) the unauthorized disclosure of confidential information relating to the
Company. In addition, failure to comply with such conditions prior to or during
the six months after any delivery of Capital Stock pursuant to the Option shall
cause such delivery to be rescinded, as provided in the Plan.
SECTION 11. LEGAL REQUIREMENTS. The Optionee agrees to make such
representations, furnish such information and take such other action as the
Board may consider necessary or appropriate in connection with the granting of
the Option and the issuance and delivery of Capital Stock pursuant thereto in
compliance with applicable laws, rules and regulations. Such action may
include, without limitation, the representation and agreement by the Optionee
that the Optionee is acquiring such Capital Stock for the Optionee's own account
for investment and not with a view to the resale or other distribution of such
Capital Stock.
SECTION 12. LIMITATION OF RIGHTS. The Optionee shall have none of the
rights of a shareholder with respect to shares of Capital Stock covered by the
Option until shares are issued to the Optionee upon exercise of the Option.
SECTION 13. NON-ASSIGNABILITY. Unless otherwise provided by the Board,
the Option and any Stock Option Shares acquired pursuant to the Option shall not
be assignable or transferable by the Optionee (voluntarily or involuntarily, by
operation of law or otherwise) and the Option may be exercised only by the
Optionee, except (a) as otherwise provided in the Plan in the event of the
Optionee's death or disability and (b) that the Stock Option Shares may be
assigned or transferred subject to such limitations and conditions as may be set
forth in a stockholder or similar agreement entered into in connection
therewith.
SECTION 14. INTERPRETATION. It is intended that the Option shall be
subject to and governed by the provisions of the Plan. The Option shall be so
interpreted and construed as to be consistent with such intention. Terms
capitalized in this Stock Option Certificate and Agreement shall have the
meanings given to them in the Plan unless otherwise defined herein or some other
meaning is clearly indicated. The Optionee represents that the Optionee has
received and reviewed a copy of the Plan.
SECTION 15. STOCKHOLDER AGREEMENT. The exercise of the Option shall be
subject to the execution and delivery by the Optionee of a Stockholder Agreement
in substantially the form attached as Appendix I hereto, and the Optionee hereby
agrees to execute and deliver such Agreement prior to such exercise and to
comply with the terms thereof.
SECTION 16. OPTIONS UNDER 1995 PLAN. No stock options granted under the
Clark USA, Inc. 1995 Long-Term Performance Plan have been surrendered or
canceled as a condition to, in exchange for or in consideration of the grant of
the Option.
SECTION 17. COMPLETE AGREEMENT. This Stock Option Certificate and
Agreement, together with the Plan and any related Stockholder Agreement,
constitute the entire agreement of the parties with regard to the subject matter
hereof, and contain all the covenants, promises and agreements between the
parties with respect to the treatment of all performance vesting Stock Options
and Stock Option shares held by the Optionee and supersede all prior option
agreements and any other agreements which may contain provisions pertaining to
Stock Options and Stock Option shares held by the Optionee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Certificate and Agreement as of ___________________________, the date of grant
of the Option.
OPTIONEE CLARK REFINING HOLDINGS INC.
__________________________________ By: ________________________________
Printed Name: ____________________ Its: ______________________________
Social Security No.: _____________
<PAGE>
Appendix I
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT, dated as of __________, 1999 (the "Agreement"),
---------
among CLARK REFINING HOLDINGS INC., a Delaware corporation (the "Company" or
-------
"Clark"), Blackstone Capital Partners III Merchant Banking Fund L.P., a Delaware
- ------
limited partnership (together with its affiliates, "Blackstone"); and
----------
_____________, an individual ("Holder").
------
WHEREAS, as used in this Agreement, the term "Share" shall mean any
outstanding share of the common stock of the Company;
WHEREAS, Blackstone holds a majority of the outstanding Shares; and
WHEREAS, on the date hereof, Holder is acquiring Shares pursuant to
the Company's stock incentive plan;
NOW, THEREFORE, in consideration of the mutual covenants and
conditions as hereinafter set forth, the parties hereto do hereby agree as
follows:
I. REPRESENTATIONS AND WARRANTIES
------------------------------
I.1 Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Holder as follows:
(a) the Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of Delaware and has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery by the
Company of this Agreement, the performance by the Company of its obligations
hereunder, and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all requisite corporate action. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the Holder and Blackstone,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms;
(b) the execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby do not and will not, with or without the giving of notice or the passage
of time or both, (i) violate the provisions of any law, rule or regulation
applicable to the Company or its assets, (ii) violate the provisions of the
certificate of incorporation or bylaws of the Company, as amended, or (iii)
violate any judgment, decree, order or award of any court, governmental or
quasi-governmental agency or arbitrator applicable to the Company or its assets;
and
(c) no consent, approval, exemption or authorization is required to be
obtained from, no notice is required to be given to and no filing is required to
be obtained from any third party (including, without limitation, governmental
and quasi-governmental agencies, authorities and instrumentalities of competent
jurisdiction) by the Company, in order for this Agreement to constitute a legal,
valid and binding obligation of the Company.
I.2 Representations and Warranties of the Holder. The Holder
--------------------------------------------
represents and warrants to the Company that:
(a) this Agreement has been duly executed and delivered by the Holder
and, assuming the due authorization, execution and delivery thereof by the
Company and Blackstone, constitutes a legal, valid and binding obligation of the
Holder, enforceable against the Holder in accordance with its terms;
<PAGE>
17
(b) the execution, delivery and performance by the Holder of this
Agreement and the consummation by the Holder of the transactions contemplated
hereby do not and will not, with or without the giving of notice or the passage
of time or both, (i) violate the provisions of any law, rule or regulation
applicable to the Holder or its assets, or (ii) violate any judgment, decree,
order or award of any court, governmental or quasi-governmental agency or
arbitrator applicable to the Holder or its assets;
(c) no consent, approval, exemption or authorization is required to
be obtained from, no notice is required to be given to, and no filing is
required to be obtained from, any third party (including, without limitation,
governmental and quasi-governmental agencies, authorities and instrumentalities
of competent jurisdiction) by the Holder in order for this Agreement to
constitute a legal, valid and binding obligation of the Holder;
(d) Holder is acquiring the Shares for investment solely for its own
account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof;
[(e) the Holder is an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from
time to time ("Securities Act");]*
--------------
[(f) the Holder's financial situation is such that it can afford to
bear the economic risk of holding the Shares for an indefinite period of time,
has adequate means for providing for its current needs and contingencies, and
can afford to suffer a complete loss of its investment in the Shares;]*
[(g) the Holder's knowledge and experience in financial and business
matters are such that it is capable of evaluating the merits and risks of the
investment in the Shares;]*
(h) the Holder understands that the Shares are a speculative
investment which involves a high degree of risk of loss of Holder's investment
therein, there are substantial restrictions on the transferability of the
Shares, and, on the date hereof and for an indefinite period following the date
hereof, there will be no public market for the Shares and, accordingly, it may
not be possible for the Holder to liquidate its investment in case of emergency,
if at all;
(i) the Holder understands and has taken cognizance of all the risk
factors related to the purchase of the Shares, and, other than as set forth in
this Agreement, no representations or warranties have been made to the Holder or
its representatives concerning the Shares or the Company or their prospects or
other matters;
(j) the Holder has relied upon independent investigations made by it
and, to the extent believed by the Holder to be appropriate, its
representatives, including its own professional, financial, tax and other
advisors;
(k) the Holder has received information about the Company and been
given the opportunity to examine all documents and to ask questions of, and to
receive answers from, the Company and its representatives concerning the Company
and the terms and conditions of the purchase of the Shares and to obtain any
additional information which the Holder deems necessary; and
_____________________________
* If applicable to the Holder.
<PAGE>
18
(i) all information which the Holder has provided to the Company
and its representatives concerning the Holder and its financial position is
complete and correct as of the date of this Agreement.
II. TRANSFERS
---------
II.1 Limitations on Transfer. (a) Holder hereby agrees that,
-----------------------
except for any transfer, sale, assignment, exchange, mortgage, pledge,
hypothecation or other disposition of any Shares or any interest therein
"Transfer") effected pursuant to an effective registration statement filed under
--------
the Securities Act, no Transfer shall occur unless the Company has been
furnished with an opinion in form and substance reasonably satisfactory to the
Company of counsel reasonably satisfactory to the Company that such Transfer is
exempt from the provisions of Section 5 under the Securities Act.
(b) Holder hereby agrees that, except for Transfers in connection
with a sale of shares of Common Stock to the public pursuant to an effective
registration statement filed under the Securities Act ("Public Offering"),
---------------
Transfers pursuant to Rule 144 (other than Rule 144(k)) under the Securities Act
and Transfers pursuant to Section 2.5 or 2.6, no Transfer shall occur unless the
transferee shall agree to become a party to, and be bound to the same extent as
its transferor by the terms of, Articles II and III of this Agreement.
(c) Notwithstanding anything contained herein to the contrary, but
subject to Section 2.2, Holder hereby agrees that, in addition to the limitation
on transfer set forth in Section 2.8(a), no Transfer shall occur until eighteen
months after the date of Clark's initial underwritten Public Offering or such
earlier date after such initial Public Offering on which an underwritten
registered secondary offering involving shares of Common Stock occurs.
Notwithstanding the foregoing, in the event Blackstone sells shares for its own
account in such initial Public Offering, Holder may transfer Shares in such
offering in accordance with Section 2.7 hereof, except that in such circumstance
clause (ii) of Section 2.7(b) shall be deemed to read as follows: (ii) second,
to the extent that the number of shares of Common Stock which are proposed to be
sold in such offering is less than the number of shares of Common Stock which
the Company has been advised can be sold in such offering without having the
adverse effect referred to above, the number of shares of Common Stock
Blackstone intends to dispose of in such offering shall have priority.
II.2 Transfers to Affiliates. Notwithstanding anything contained
-----------------------
herein to the contrary, Holder shall be entitled from time to time to Transfer
any or all of the Shares beneficially owned by Holder to Holder's spouse or
descendants, or to a trust in favor of Holder's spouse or descendants, or to any
other entity the owners of which consist exclusively of Holder, Holder's spouse,
Holder's descendants or such trusts ("Permitted Affiliate"), who, in each such
-------------------
case, agree in a writing satisfactory in form and substance to the Company to
become a party to, and be bound to the same extent as its transferor by the
terms of, Articles II and III of this Agreement.
II.3 Effect of Void Transfers. In the event of any purported
------------------------
Transfer of any shares of Common Stock in violation of the provisions of this
Agreement, such purported Transfer shall be void and of no effect and the
Company shall not give effect to such Transfer.
II.4 Legend on Securities. Each certificate representing shares of
--------------------
Common Stock issued to Holder shall bear the following legend on the face
thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDER AGREEMENT BETWEEN CLARK REFINING HOLDINGS INC. (THE "COMPANY"),
AND __________________, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES
<PAGE>
19
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SUCH STOCKHOLDER AGREEMENT AND (A) PURSUANT TO A REGISTRATION
STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF
THE COMPANY HAS BEEN FURNISHED WITH AN OPINION IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH
STOCKHOLDER AGREEMENT."
II.5 Tag-Along Rights. (a) So long as this Agreement shall remain
----------------
in effect and Blackstone beneficially owns on a fully diluted basis an aggregate
number of shares of Common Stock not less than one-fourth (1/4) of the Common
Stock owned by Blackstone on the date hereof, with respect to any proposed
Transfer by Blackstone (in such capacity, a "Transferring Stockholder") of 25%
------------------------
or more of the shares of Common Stock held by Blackstone, other than a Transfer
(i) to any affiliate of Blackstone or any stockholder, partner or other equity
owner of any such affiliate or Blackstone or (ii) pursuant to a Public Offering,
the Transferring Stockholder shall have the obligation, and Holder and the
Permitted Affiliates shall have the right, to require the proposed transferee to
purchase from Holder and the Permitted Affiliates (in such capacity, a "Tagging
-------
Stockholder") a number of the Shares up to the product (rounded up to the
- -----------
nearest whole number) of (i) the quotient determined by dividing (A) the
aggregate number of Shares owned by Blackstone to be included in the
contemplated Transfer by (B) the aggregate number of Shares owned by Blackstone
immediately prior to the contemplated Transfer, and (ii) the total number of
Shares owned by the Tagging Stockholder, and at the same price per share of
Common Stock and upon the same terms and conditions (including without
limitation time of payment and form of consideration) applicable to the
Transferring Stockholder; provided, that in order to be entitled to exercise its
--------
right to sell shares of Common Stock to the proposed transferee pursuant to this
Section 2.5, the Tagging Stockholder must agree to make to the transferee the
same representations, warranties, covenants, indemnities and agreements that the
Transferring Stockholder agrees to make in connection with the proposed Transfer
of the shares of Common Stock of the Transferring Stockholder; and provided
--------
further, that all representations and warranties shall be made by the Tagging
- -------
Stockholder and the Transferring Stockholder severally and not jointly and that
the liability of the Transferring Stockholder and the Tagging Stockholder
(whether pursuant to a representation, warranty, covenant, indemnification
provision or agreement) for liabilities in respect of the Company shall be
evidenced in writings executed by them and the transferee and shall be borne by
each of them on a pro rata basis.
(b) The Transferring Stockholder shall give notice to Holder of each
proposed Transfer giving rise to the rights of the Tagging Stockholder set forth
in the first sentence of Section 2.5(a) at least 15 business days prior to the
proposed consummation of such Transfer, setting forth the number of shares of
Common Stock proposed to be so transferred, the name and address of the proposed
transferee, the proposed amount and form of consideration and the other terms
and conditions offered by the proposed transferee, and a representation that the
proposed transferee has been informed of the tag-along rights provided for in
this Section 2.5 and has agreed to purchase shares of Common Stock in accordance
with the terms hereof. The tag-along rights provided by this Section 2.5 must
be exercised by the Tagging Stockholder within 5 business days following receipt
of the notice required by the preceding sentence, by delivery of a written
notice to the Transferring Stockholder indicating such Tagging Stockholder's
desire to exercise its rights and specifying the number of shares of Common
Stock it desires to sell.
<PAGE>
20
(c) If the Tagging Stockholder exercises its rights under Section
2.5(a), the closing of the purchase of Shares with respect to which such rights
have been exercised shall take place concurrently with the closing of the sale
of the Transferring Stockholder's Shares.
II.6 Drag-Along Rights. So long as this Agreement shall remain in
-----------------
effect and Blackstone beneficially owns on a fully diluted basis an aggregate
number of shares of Common Stock not less than one-fourth (1/4) of the Common
Stock owned by Blackstone on the date hereof, if Blackstone receives an offer
from a person other than Holder or any of its affiliates (a "Third Party") to
-----------
purchase 25% or more of the shares of Common Stock owned by Blackstone and such
offer is accepted by Blackstone, then Holder hereby agrees that it will Transfer
the Applicable Number (as defined below) of Shares owned by it to such Third
Party upon the terms and conditions of the offer (including without limitation
time of payment and form of consideration) applicable to Blackstone, provided
--------
that Holder must agree to make to the Third Party the same representations,
warranties, covenants, indemnities and agreements that Blackstone agrees to make
in connection with the proposed Transfer; and provided further, that all
-------- -------
representations and warranties shall be made by Holder and Blackstone severally
and not jointly and that the liability of Holder and Blackstone (whether
pursuant to a representation, warranty, covenant, indemnification provision or
agreement) for liabilities in respect of the Company shall be evidenced in
writings executed by them and the Third Party and shall be borne by each of them
on a pro rata basis. The "Applicable Number" shall mean a number (rounded up to
the nearest whole number) equal to the product of (i) the quotient determined by
dividing (A) the aggregate number of shares owned by Blackstone to be included
in the contemplated Transfer by (B) the aggregate number of shares owned by
Blackstone immediately prior to the contemplated Transfer, and (ii) the total
number of shares owned by Holder.
II.7 Piggyback Rights. (a) Each time the Company is planning to
----------------
file a registration statement under the Securities Act in connection with the
proposed offer and sale of Common Stock by the Company and/or Blackstone (other
than under Form S-8 or Form S-4 or a similar successor form), the Company will
give prompt written notice thereof to Holder regarding Holder's rights under
this Section 2.7, at least 15 business days prior to the anticipated filing date
of such registration statement; provided, that Holder and its affiliates shall
--------
have no rights pursuant to this Section 2.7 with respect to the first Public
Offering of Common Stock if the Company is the only person including shares of
Common Stock in such registration statement. Upon the written request of Holder
or the Permitted Affiliates made within 5 business days after the receipt of any
such notice from the Company, which request shall specify the number of Shares
(the "Holder Piggy-Back Shares") intended to be disposed of by Holder or the
------------------------
Permitted Affiliates in such offering, the Company will use its reasonable
efforts to effect the registration under the Securities Act of all Holder Piggy-
Back Shares which the Company has been so requested to register by Holder, to
the extent required to permit the disposition of the Holder Piggy-Back Shares to
be registered; provided, that (i) if, at any time after giving written notice of
--------
its intention to register any Common Stock and prior to the effective date of
the registration statement filed in connection with such registration, the
Company or Blackstone shall determine for any reason not to proceed with the
proposed registration, the Company may at its election give written notice of
such determination to the holder of Holder Piggy-Back Shares and thereupon shall
be relieved of its obligation to register any Holder Piggy-Back Shares in
connection with such registration and (ii) if such registration involves an
underwritten offering, the holder of Holder Piggy-Back Shares requesting to be
included in the registration must sell its shares to the underwriters on the
same terms and conditions as apply to the Company and/or Blackstone.
(b) If a registration pursuant to this Section 2.7 involves an
underwritten offering and the managing underwriter or underwriters in good faith
advise the Company in writing that, in their opinion, the number of shares of
Common Stock which the Company, Blackstone and the holder of Holder Piggy-Back
Shares intend to include in such registration exceeds the number of shares of
Common Stock which can be sold in such offering without having an adverse effect
on such offering (including the price at which the shares of Common Stock can be
sold), then the Company will include in such registration (i) first, 100% of the
shares the Company proposes to sell for its own account, if any, and 100% of the
shares of
<PAGE>
21
any person exercising demand registration rights (other than Blackstone), if
any, and (ii) second, to the extent that the number of shares described under
clause (i) is less than the number of shares of Common Stock which the Company
has been advised can be sold in such offering without having the adverse effect
referred to above, the number of shares Blackstone intends to dispose of in such
offering, the Holder Piggy-Back Shares and shares of any other person exercising
similar piggy-back registration rights, on a pro rata basis.
II.8 Other Registration-Related Matters.
----------------------------------
(a) Holder agrees that it shall not effect any direct or indirect
Transfer of Com mon Stock during the 14 days prior to or the 180 day period
beginning on the effective date of a registration statement (whether pursuant to
Section 2.7 or otherwise, except as part of such registration) if and to the
extent reasonably requested in writing by the managing underwriter of the
underwritten public offering.
(b) The Company agrees not to effect any direct or indirect Transfer
of Common Stock during the 14 days prior to and the 180 day period beginning on
the effective date of any registration statement in which Holder is
participating pursuant to Section 2.7 in connection with an underwritten public
offering of Common Stock, if and to the extent reasonably requested in writing
by the managing underwriter of the underwritten public offering.
(c) The Company may require any person that is selling shares of
Common Stock in a Public Offering to furnish to the Company such information
regarding such person and the distribution of the shares of Common Stock which
are included in a Public Offering as may from time to time reasonably be
requested in writing in order to comply with the Securities Act.
2.9 Call Options.
------------
(a) If Holder's employment with the Company or its subsidiaries
terminates for any reason, the Company (or any of its assignees) shall have the
right and option to purchase, for a period of 30 days following the date of such
termination of employment of Holder, and Holder shall be required to sell to the
Company (or to any such assignee), any or all of the shares of Common Stock
(including any fractional shares) then owned by Holder, at a price per share
equal to the applicable purchase price determined pursuant to paragraph (c) of
this Section 2.9.
(b) If the Company desires to exercise its option to purchase any
shares pursuant to paragraph (a) of this Section 2.9, the Company shall, not
later than 30 days after the date of termination of employment, send written
notice to Holder of its intention to purchase shares, specifying the number of
shares to be purchased. The closing of the purchase shall take place at the
principal office of the Company on a date specified by the Company no earlier
than the tenth and no later than the thirtieth day after the giving of such
notice.
(c) In the event of a purchase by the Company pursuant to paragraph
(a) of this Section 2.9, the purchase price shall be:
(i) if Holder's employment was terminated for Cause (as defined
below), a price per share equal to the lower of (x) the price per share
paid by Holder (as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalizations) and (y) Fair Market
Value (as defined below); or
(ii) if Holder's employment was terminated for any other reason, Fair
Market Value.
(d) For purposes of this Section 2.9:
<PAGE>
22
"Cause" shall have the meaning set forth in Holder's employment
agreement with the Company or its subsidiaries; or, if there is no employment
agreement or such employment agreement does not define the term "cause," shall
mean (i) gross neglect of or willful and continuing refusal substantially to
perform one's duties (other than due to disability), (ii) breach of any material
policy of the Company or, if Holder is employed by a subsidiary of the Company,
such subsidiary, (iii) willful engaging in conduct that is demonstrably
injurious to Blackstone, the Company or the Company's subsidiaries or affiliates
or (iv) commission or plea of guilty or nolo contendere to a felony or
misdemeanor involving moral turpitude; and
"Fair Market Value" shall mean, with respect to shares of Common
Stock, the fair market value of such shares as determined from time to time by
the Company's board of directors in good faith. Unless otherwise determined by
the Board, (a) if the Common Stock is traded on NASDAQ, the fair market value of
such shares as of any date shall be the closing date sale price on that date of
a share of Common Stock as reported in the NASDAQ National Market Issues
quotations of the Midwest Edition of the Wall Street Journal, or (b) if the
Common Stock is traded on the New York Stock Exchange, the Fair Market Value of
such shares as of any date shall be the closing sale price on that date of a
share of Common Stock as reported on the New York Stock Exchange Composite Tape
(or, if the Common Stock is not traded on NASDAQ or the New York Stock Exchange,
as applicable, on such date, on the next following date on which it is so
traded).
III. OTHER
-----
III.1 Additional Securities Subject to Agreement. Holder agrees that
------------------------------------------
all shares of Common Stock which it shall hereafter acquire by means of a stock
split, stock dividend, distribution or otherwise (other than pursuant to a
Public Offering) shall be subject to the provisions of this Agreement to the
same extent as if held on the date hereof.
III.2 Termination. This Agreement shall terminate, and thereby
-----------
become null and void, in full on the earliest date on which Blackstone does not
beneficially own in the aggregate at least 5% of the Common Stock outstanding on
a fully diluted basis.
III.3 Injunctive Relief. Holder acknowledges and agrees that a
-----------------
violation of any of the terms of this Agreement will cause the Company and
Blackstone irreparable injury for which adequate remedy at law is not available.
Accordingly, it is agreed that the Company or Blackstone shall be entitled to an
injunction, restraining order or other equitable relief to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which they may be entitled
at law or equity.
III.4 Other Stockholders' Agreements. Holder shall not enter into
------------------------------
any stockholder agreement or other arrangement of any kind with any person with
respect to shares of Common Stock, and Holder represents and warrants that it
has not previously entered into such an agreement that remains in full force and
effect as of the date hereof which is inconsistent with the provisions of this
Agreement or which may impair its ability to comply with this Agreement.
III.5 Amendments. This Agreement may be amended only by a written
----------
instrument signed by each party hereto.
III.6 Successors, Assigns and Transferees. The provisions of this
-----------------------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and transferees permitted hereunder
(except for transferees that are transferred Common Stock pursuant to a Public
Offering, pursuant to Rule 144 under the Securities Act or pursuant to Section
2.5 or 2.6), each of
<PAGE>
23
which shall agree in writing to become a party hereto and be bound to the same
extent hereby as the transferor that has transferred the Common Stock to such
transferees; provided, that if Holder transfers a portion of its Common Stock to
--------
one or more transferees which are entitled to rights of the transferor
hereunder, then such transferee(s) shall exercise such rights as a single group
with that transferor and its affiliates; provided further, that the rights
----------------
granted to the Holder in Sections 2.5 and 2.7 can only be transferred to
Permitted Affiliates.
III.7 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or two days after being
delivered to a recognized courier (whose stated terms of delivery are three days
or less to the destination of such notice) or, in the case of telecopy notice,
when received, addressed as follows to the parties hereto, or to such other
address as may be hereafter notified by the respective parties hereto:
When Holder is the intended recipient:
___________________________
___________________________
___________________________
Attention: ________________
Telecopy: ________________
When the Company is the intended recipient:
Clark Refining Holdings, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: Maura J. Clark
Telecopy: (314) 854-1570
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely
Telecopy: (212) 455-2502
III.8 Integration. This Agreement, and the documents referred to
-----------
herein or delivered pursuant hereto, contain the entire understanding of the
parties with respect to the subject matter hereof. There are no agreements,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein or in the
Company's stock incentive plan and any related award agreement. If there is any
conflict between such incentive plan or such award agreement and this Agreement,
the provisions of this Agreement shall control. This Agreement supersedes all
other prior agreements and understandings between the parties with respect to
the matters set forth herein.
III.9 Severability. If one or more of the provisions, paragraphs,
------------
words, clauses, phrases or sentences contained herein, or the application
thereof in any circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision, paragraph, word, clause, phrase or sentence in every other respect
and of the remaining provisions, paragraphs, words, clauses, phrases or
sentences hereof shall not be in any way impaired, it
<PAGE>
24
being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
III.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
III.11 Governing Law. This Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the State of New York
without regard to the conflicts of law principles thereof. The parties
executing this Agreement hereby agree to submit to the non-exclusive
jurisdiction of the federal and state courts located in the State of New York in
any action or proceeding arising out of or relating to this Agreement.
III.12 Voting. Holder hereby agrees that, so long as this
------
Agreement shall remain in effect, it will vote all of the Common Stock
beneficially owned or held of record by it to ratify, approve and adopt any and
all actions (including without limitation the election of directors) adopted or
approved by Blackstone.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CLARK REFINING HOLDINGS INC.
By:___________________________
Name:
Title:
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management Associates III, L.L.C.,
its general partner
By:___________________________
<PAGE>
25
Name:
Title:
__________________________
Name of Holder:
<PAGE>
EXHIBIT 10.22
AMENDMENT TO THE
CLARK RETIREMENT SAVINGS PLAN
This Plan Amendment, executed on the _____ day of July, 1999, by Clark
Refining & Marketing, Inc., a Delaware corporation ("Company").
WITNESSETH
----------
WHEREAS, Clark Refining & Marketing, Inc., a Delaware corporation
established a 401(k)/profit sharing plan, the Clark Retirement Savings Plan (the
"Plan") effective January 1, 1989; and
WHEREAS, the Company adopted an amended and restated Plan document
effective April 1, 1994; and
WHEREAS, the Company amended the Plan by Board of Directors Resolutions
dated October 31, 1997 and December 21, 1998; and
WHEREAS, the Company desires to further amend the Plan by the adoption of
this Amendment to the Plan;
NOW, THEREFORE, the Company amends the Plan effective June 1, 1999, as
follows:
1. Add a new Section 11.14 as follows:
Notwithstanding any other provision to the contrary, upon the
occurrence of any of the following events, a Participant shall be
entitled to a distribution of his Accounts:
a. Termination of the Plan without the establishment of another
defined contribution plan other than an employee stock ownership
plan (as defined in Section 4975(e) or Section 409 of the Code)
or a simplified employee pension plan as defined in Section
408(k) of the Code.
b. The disposition by the Company to an unrelated corporation of
substantially all of the assets (within the meaning of section
409(d)(2) of the Code) used in a trade or business of the Company
if the Company continues to maintain the Plan after the
disposition, but only with respect to an employee who continues
employment with the corporation acquiring such assets.
<PAGE>
c. The disposition by the Company to an unrelated entity of the
Company's interest in a subsidiary (within the meaning of section
409(d)(3) of the Code) if the Company continues to maintain this
Plan, but only with respect to employees who continue employment
with such subsidiary.
All distributions triggered by any one of these three events must be made
in a lump sum and be made as soon as practicable following the occurrence of the
triggering event. Such distributions shall be subject to the provisions of
Section 11.13.
IN WITNESS WHEREOF, the Company has caused this Plan amendment to be
executed on the day and year first above written.
CLARK REFINING & MARKETING, INC.
By:________________________________
Maura J. Clark
Executive Vice President and
Chief Financial Officer
2
<PAGE>
EXHIBIT 10.23
AMENDMENT TO THE
CLARK RETIREMENT SAVINGS PLAN
This Plan Amendment, executed on the 30th day of December, 1999, by Clark
Refining & Marketing, Inc., a Delaware corporation ("Company").
WITNESSETH
----------
WHEREAS, Clark Refining & Marketing, Inc., a Delaware corporation
established a 401(k)/profit sharing plan, the Clark Retirement Savings Plan (the
"Plan') effective January 1, 1989; and
WHEREAS, the Company adopted an amended and restated Plan document
effective April 1, 1994 (the "Amended and Restated Plan"); and
WHEREAS, the Company amended the Amended and Restated Plan effective
October 31, 1997, December 21, 1998 and July 6, 1999 by Board of Directors
Resolutions; and
WHEREAS, the Company desires to further amend the Amended and Restated Plan
by the adoption of this Amendment to the Plan.
NOW, THEREFORE, the Company amends the Amended and Restated Plan as
follows:
1. Effective for all Plan Years beginning on or after January 1,1999,
Section 5.1 shall be deleted in its entirety and substituted in lieu
thereof is the following:
5.1. Matching Contributions. Subject to the conditions and
----------------------
limitations of Section 8, for each Plan Year an Employer shall
contribute to the Plan on behalf of each Participant employed by
such Employer an amount equal to 200 percent of the Before-Tax
Contributions made on behalf of the Participant that do not
exceed 3 percent of such Participant's Eligible Compensation for
such Plan Year. Any contribution made pursuant to this
subsection 5.1 shall be referred to hereinafter as a "Matching
Contribution". At all times, Matching Contributions made with
respect to Participants who are not Union Participants shall be
made in a manner to qualify under the safe harbor rules of
Section 401(k)(10) of the Code.
2. Effective for all Plan Years beginning on or after January 1, 1999,
Section 5.2 is deleted in its entirety.
<PAGE>
3. Effective with all Plan Years beginning on or after January 1, 1999,
Section 9.1 is deleted in its entirety and substituted in lieu thereof
is the following:
9.1 Determination of Vested Interest. The interest of a Union
--------------------------------
Participant in his Matching Account shall become fully vested
and nonforfeitable in accordance with the following schedule:
Years of Service Vested Percentage
---------------- -----------------
Fewer than 1 0
1 but fewer than 2 20
2 but fewer than 3 40
3 but fewer than 4 60
4 but fewer than 5 80
5 or more 100
A Union Participant shall at all times have a nonforfeitable
interest in his Before-Tax Account, After-Tax Account and
Rollover Account.
A Participant who is not a Union Participant shall at all times
have a nonforfeitable interest in his Before-Tax Account,
After-Tax Account, Rollover Account and Matching Account.
4. Sections 10.1(a) and (b) are deleted in their entirety and substituted
in lieu thereof are the following:
10.1. Loans to Participants. For Plan Years beginning on or after
---------------------
January 1, 1997 and prior to January 1, 2000, the Committee,
upon request by a Participant who is an employee of an Employer
or a Related Company, or who is otherwise required to be given
the opportunity to borrow under applicable regulations, in such
form as the Committee may require, may, to the extent required
under applicable law or regulations, authorize a loan to be
made to the Participant from all his Accounts, subject to the
following:
(a) No loan shall be made to a Participant if, immediately
after such loan, the sum of the outstanding balances
(including principal and interest) of all loans made to
him under this Plan and under any other qualified
retirement plans maintained by the Related Companies would
exceed the lesser of:
-2-
<PAGE>
(i) $50,000 reduced by the excess, if any, of:
(A) the highest outstanding balance of all loans to
the Participant from the plans during the one-
year period ending on the day immediately before
the date on which the loan is made; over
(B) the outstanding balance of loans from the plans
to the Participant on the date on which such
loan is made; or
(ii) the lesser of one-half of the total vested balance of
the Participant's Accounts under the Plan as of the
date the loan is made.
(b) Each loan to a Participant shall be charged pro rata
against the Participant's Accounts and shall be charged
against each Investment Fund in which his Accounts are
invested in the same ratio as the value of his interest in
such fund with respect to each such Account bears to the
total of all his interest in that Account.
For Plan Years beginning before January 1, 1997 and on or after
January 1, 2000, the Committee, upon request by a Participant
who is an employee of an Employer or a Related Company, or who
is otherwise required to be given the opportunity to borrow
under applicable regulations, in such form as the Committee may
require, may, to the extent required under applicable law or
regulations, authorize a loan to be made to the Participant
from his Before-Tax Account, subject to the following:
(aa) No loan shall be made to a Participant if, immediately
after such loan, the sum of the outstanding balances
(including principal and interest) of all loans made to
him under this Plan and under any other qualified
retirement plans maintained by the Related Companies would
exceed the lesser of:
(i) $50,000 reduced by the excess, if any, of:
(A) the highest outstanding balance of all loans to
the Participant from the plans during the one-
year period ending on the
-3-
<PAGE>
day immediately before the date on which the
loan is made; over
(B) the outstanding balance of loans from the plans
to the Participant on the date on which such
loan is made; or
(ii) the lesser of one-half of the total vested balance of
the Participant's Accounts under the Plan as of the
date the loan is made or the balance in the
Participant's Before-Tax Account.
(bb) Each loan to a Participant shall be charged against the
Participant's Before-Tax Account and shall be charged
against each Investment Fund in which his Before-Tax
Account is invested in the same ratio as the value of his
interest in such Fund with respect to the Before-Tax
Account bears to the total of all his interest in that
Account.
5. Section 11.15 is added as follows:
11.15 Account Transfer - Acquired Employees: Effective for the Plan
-------------------------------------
Year beginning on or after January 1, 2000; Accounts of
Participants who are "Acquired Employees", as that term is
defined in the Asset Purchase Agreement by and between Clark
Refining & Marketing, Inc. and Equilon Enterprises LLC dated as
of December 1, 1999 ("Transaction"), shall be transferred to a
qualified plan maintained by the purchaser in such transaction.
As such Transaction is expected to close during the Plan Year
beginning January 1, 2000; the transfer of Accounts shall occur
as soon as administratively practicable following the closing
of the Transaction.
6. A new A-14 is added to Supplement A as follows:
Union Participant A-14. A Union Participant shall mean a Participant
-----------------
who is a member of a collective bargaining unit as
to which retirement benefits have been the subject
of good faith bargaining.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Plan amendment to be
executed on the day and year first above written.
CLARK REFINING & MARKETING, INC.
By:______________________________________________
Maura J. Clark
Executive Vice President and Chief Financial
Officer
-5-
<PAGE>
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated March 1, 2000 by and between
Clark Refining & Marketing, Inc. (the "Company") and Jeffry N. Quinn (the
"Executive").
WHEREAS, the Company considers it essential to its best interests and the
best interests of its stockholders to foster the employment of Executive by the
Company during the term of this Agreement and Executive is willing to accept
Executive's employment on the terms hereinafter set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. Term of Employment; Executive Representation.
--------------------------------------------
a. Employment Term. Subject to the provisions of Section 8 of this
---------------
Agreement, Executive shall be employed by the Company for the three-year
period commencing on March 1, 2000 and ending on February 28, 2003 (the
"Employment Term") on the terms and subject to the conditions set forth in
this Agreement. Notwithstanding the preceding sentence, commencing March
1, 2003, and on each anniversary thereof thereafter (each anniversary, an
"Extension Date"), the Employment Term shall be automatically extended for
an additional one-year period, unless either party provides the other party
hereto with 60 days' written notice prior to the next Extension Date that
the Employment Term shall not be so extended. For the avoidance of doubt,
the term "Employment Term" shall include any extension that becomes
applicable pursuant to the preceding sentence.
b. Executive Representation. Executive hereby represents to the Company
------------------------
that the execution and delivery of this Agreement by Executive and the
Company and the performance by Executive of the Executive's duties
hereunder shall not constitute a breach of, or otherwise contravene, the
terms of any employment agreement or other agreement or policy to which
Executive is a party or otherwise bound.
2. Position.
--------
a. While employed hereunder, Executive shall serve as the Company's
Executive Vice-President-Legal, Human Resources, and Public Affairs and as
an Executive Vice-President of Clark Refining Holdings, Inc. and Clark USA,
Inc. Executive shall also serve as the Company's General Counsel, or such
other title as shall denote his status as the chief legal officer of the
Company. However, nothing contained herein shall in any way restrict the
ability of the Company to assign Executive, with his consent, to other
positions of equivalent status within the Company. In such positions,
Executive shall have such duties and authority as shall be determined from
time to time by the Board of Directors of the Company (the "Board"), and
the Executive shall report directly to the Chief Executive Officer of the
Company. If requested, the Executive shall also serve as a member of the
Board or the boards of any affiliates of the Company without additional
compensation.
<PAGE>
2
b. While employed hereunder, Executive will devote Executive's full
business time and best efforts to the performance of Executive's duties
hereunder and will not engage in any other business, profession or
occupation for compensation or otherwise which would conflict with the
rendition of such services either directly or indirectly; provided that
--------
nothing herein shall preclude Executive, subject to the prior approval of
the Chief Executive Officer, from accepting appointment to the board of
directors or trustees of any business corporation or any charitable
organization, provided in each case, and in the aggregate, that such
activities do not interfere with the performance of Executive's duties
hereunder or conflict with Section 9. Any compensation earned by Executive
for serving in such director or trustee capacity shall be the sole and
exclusive property of Executive.
3. Base Salary. While employed hereunder, the Company shall pay Executive a
-----------
base salary (the "Base Salary") at the annual rate of $282,500, payable in
regular installments in accordance with the Company's usual payment practices.
Executive shall be entitled to such increases in Executive's Base Salary, if
any, as may be determined from time to time in the sole discretion of the Board,
and any such increased Base Salary shall be deemed to be Executive's "Base
Salary" for purposes of this Agreement.
4. Bonuses.
-------
a. Signing Bonus. As consideration for Executive's entering into this
-------------
Agreement, the Company shall pay Executive a one-time signing bonus of
$125,000, payable as soon as practicable after the date hereof.
b. Annual Bonus. With respect to each calendar year while employed
------------
hereunder, Executive shall be eligible to earn an annual bonus award
pursuant to the Company's annual incentive plan (the "Annual Incentive
Plan") in an amount to be determined at the sole discretion of the Board in
consultation with the Chief Executive Officer. Executive's Annual Bonus
Opportunity (as defined in the Annual Incentive Plan) shall be 150% of Base
Salary and his Annual Target Bonus (as defined in the Annual Incentive
Plan) shall be 100% of Base Salary. However, Executive's Annual Bonus
Opportunity and Annual Target Bonus shall be subject to change based upon
modifications made from time to time to the Annual Incentive Plan by the
Company's management team, which team shall include the Executive,
provided, however, that in any such modification of the Annual Incentive
Plan Executive's Annual Bonus Opportunity and Annual Target Bonus shall be
no less than that of other similarly situated officers of the Company,
including any Executive Vice President thereof. Notwithstanding the
foregoing, Executive shall be entitled to an annual bonus of at least
$100,000 in respect of calendar year 2000.
5. Equity Arrangements. Executive shall be granted an option to purchase
-------------------
120,000 shares of the common stock of Clark Refining Holdings Inc. (the "Common
Stock") pursuant to the terms of the Clark Refining Holdings Inc. 1999 Stock
Incentive Plan (the "Stock Incentive Plan"). The option shall have a per share
exercise price of $9.90.
The options for 60,000 shares shall vest ratably over the four years
following the date hereof (1/4 per year), and the options for the remaining
60,000 shares shall vest on the seventh
<PAGE>
3
anniversary of the grant date, or upon the achievement of the share prices set
forth below for the Common Stock: (i) following an initial public offering, as
an average closing price for any 180 day consecutive period, or (ii) in a Change
in Control:
Per Share Price % Vested
------------------ ------------
below $12.00 0%
$12.00 - $14.99 10%
$15.00 - $17.99 20%
$18.00 - $19.99 30%
$20.00 - $24.99 50%
$25.00 - $29.99 75%
above $29.99 100%
The specific terms of such grant shall be set forth in a separate option
agreement, and shall be subject to the terms of the Stock Incentive Plan.
6. Employee Benefits.
-----------------
a. Welfare and Pension Benefits. The Company shall provide Executive
----------------------------
during the term of his employment hereunder with coverage under all
employee pension and welfare benefit programs, plans and practices in
accordance with the terms thereof, which the Company generally makes
available to its senior executives; provided, however, that the Company
-------- -------
shall reimburse Executive for the cost of COBRA continuation coverage
(elected by Executive under his prior employer's group health plan) during
the first 30 days of the Employment Term (after which time Executive will
be eligible for coverage under the Company's medical plan pursuant to this
Section 6(a)).
b. Vacation and Other Perquisites. Executive shall also be entitled to
------------------------------
such number of paid vacation and sick leave days in each calendar year as
established under the Company's policies as in effect from time to time,
which shall be taken at such times as are consistent with Executive's
responsibilities hereunder. In addition, the Company shall reimburse
Executive for the reasonable cost of financial, estate and tax preparation
and planning services listed on Exhibit A incurred by Executive during the
calendar year 2000, upon presentation by Executive from time to time of
appropriately itemized accounts of such expenditures. Such accounts shall
be subject to approval by the Chief Executive Officer.
7. Business Expenses. Executive is authorized to incur reasonable expenses
-----------------
in carrying out his duties and responsibilities under this Agreement, including,
without limitation, expenses for travel and similar items related to such duties
and responsibilities. The Company will reimburse Executive for all such
expenses upon presentation by Executive from time to time of appropriately
itemized and approved (consistent with the Company's policy) accounts of such
expenditures.
<PAGE>
4
8. Termination. The Executive's employment hereunder may be terminated by
-----------
either party at any time and for any reason; provided that Executive will be
--------
required to give the Company at least 60 days advance written notice of any
resignation of Executive's employment. Notwithstanding any other provision of
this Agreement, the provisions of this Section 8 shall exclusively govern
Executive's rights upon termination of employment with the Company and its
affiliates. Upon termination of Executive's employment for any reason,
Executive agrees to resign, as of the date of such termination, from the Board
and the board of directors of any of the Company's affiliates.
a. By the Company For Cause or by Executive Resignation Without Good
-----------------------------------------------------------------
Reason.
- ------
(i) Executive's employment hereunder may be terminated by the Company
for Cause (as defined below) at any time or, upon 60 days prior
written notice, by Executive without Good Reason (as defined below).
(ii) For purposes of this Agreement, "Cause" shall mean (A)
Executive's continued failure to substantially perform Executive's
duties hereunder (other than as a result of total or partial
incapacity due to physical or mental illness) for a period of 10 days
following written notice by the Company to Executive of such failure,
(B) dishonesty in the performance of Executive's duties hereunder, (C)
an act or acts on Executive's part constituting (x) a felony under the
laws of Missouri or (y) a misdemeanor involving moral turpitude, (D)
Executive's willful malfeasance or willful misconduct in connection
with Executive's duties hereunder or any act or omission which is
materially injurious to the financial condition or business reputation
of the Company or any of its subsidiaries or affiliates, (E)
Executive's breach of the restrictive covenants set forth in Section 9
hereof or (F) Executive's failure to substantially perform Executive's
duties hereunder (other than as a result of total or partial
incapacity due to physical or mental illness) at the Company's
location in the St. Louis, Missouri metropolitan area, except as
otherwise required by the Company.
(iii) If Executive's employment is terminated by the Company for
Cause or by Executive without Good Reason, Executive shall be entitled
to receive:
(A) the Base Salary through the date of termination;
(B) any annual bonus earned but unpaid as of the date of
termination for any previously completed calendar year;
(C) reimbursement for any unreimbursed business expenses properly
incurred by Executive in accordance with Company policy prior to
the date of Executive's termination; and
(D) such employee benefits, if any, as to which Executive may be
entitled under the employee benefit plans of the Company (the
amounts
<PAGE>
5
described in clauses (A) through (D) hereof being referred to as
the "Accrued Rights").
Following such termination of Executive's employment by the Company
for Cause or by Executive without Good Reason, except as set forth in this
Section 8(a), Executive shall have no further rights to any compensation
or any other benefits under this Agreement.
b. Disability or Death.
-------------------
(i) Executive's employment hereunder shall terminate upon Executive's
death or if Executive becomes physically or mentally incapacitated, as
determined pursuant to the Company's long-term disability program as
may be in effect from time to time (the "LTD Program"), and is
therefore unable, for a period of time as determined under the LTD
Program, to perform Executive's duties (such incapacity is hereinafter
referred to as "Disability"). Any question as to the existence of the
Disability of Executive as to which Executive and the Company cannot
agree shall be determined in writing by a qualified independent
physician mutually acceptable to Executive and the Company. If
Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two
physicians shall select a third who shall make such determination in
writing. The determination of Disability made in writing to the
Company and Executive shall be final and conclusive for all purposes
of the Agreement.
(ii) Upon termination of Executive's employment hereunder for either
Disability or death, Executive or Executive's estate (as the case may
be) shall be entitled to receive:
(A) the Accrued Rights; and
(B) a pro rata portion of Executive's annual target bonus based
upon the percentage of the calendar year that shall have elapsed
through the date of termination of the Executive's employment,
payable when such bonus would have otherwise been payable had
Executive's employment not terminated.
Following Executive's termination of employment due to death or
Disability, except as set forth in this Section 8(b), Executive shall have
no further rights to any compensation or any other benefits under this
Agreement.
<PAGE>
6
c. By the Company Without Cause, Expiration of Employment Term, or
---------------------------------------------------------------
Resignation by Executive for Good Reason.
- ----------------------------------------
(i) The Executive's employment hereunder may be terminated by the
Company without Cause, by the Company's election not to extend the
Employment Term, or, upon 60 days prior written notice, by Executive's
resignation for Good Reason.
(ii) In the event that the Company elects not to extend the Employment
Term pursuant to Section 1, unless Executive's employment is earlier
terminated pursuant to paragraphs (a), (b) or (c) of this Section 8,
Executive's termination of employment hereunder (whether or not
Executive continues as an employee of the Company thereafter) shall be
deemed to occur on the close of business on the day immediately
preceding the next scheduled Extension Date.
(iii) For purposes of this Agreement, "Good Reason" shall mean: (A) a
reduction in Executive's Base Salary or annual bonus opportunity or
target bonus (other than any general salary reduction affecting at
least the majority of salaried employees or annual incentive plan
changes affecting all similarly situated officers of the Company,
including any Executive Vice President, and provided that the
establishment of reasonable performance targets by the Board will not
constitute a reduction of annual bonus opportunity or target bonus),
(B) a substantial diminution of Executive's duties and
responsibilities, or (C) a transfer of Executive's primary workplace
by more than thirty-five (35) miles from the Executive's workplace
immediately prior to such transfer.
Notwithstanding the foregoing, none of the events described in
clauses (A), (B) or (C) of this Section 8(c)(ii) shall constitute
Good Reason unless Executive shall have notified the Company in
------
writing describing the events which constitute Good Reason and then
only if the Company shall have failed to cure such event within thirty
(30) days after the Company's receipt of such written notice.
However, any termination of Executive's employment by the Company
after delivery by the Executive to the Company of such notice shall be
deemed to be a termination without Cause if Good Reason did exist at
the time such notice was given by Executive.
(iv) If Executive's employment is terminated by the Company without
Cause (other than by reason of death or Disability), as a result of
the Company's nonrenewal of the Employment Term pursuant to Section 1
hereof, or by Executive's resignation for Good Reason, Executive shall
be entitled to receive:
(A) the Accrued Rights; and
(B) subject to Executive's continued compliance with the
provisions of Section 9, an amount equal to two (the "Severance
Multiplier") times the sum of the (1) then Base Salary and (2)
then annual target bonus, payable
<PAGE>
7
in accordance with normal payroll practices of the Company in
substantially equal installments over the 24 month period
following termination of employment; provided that the aggregate
--------
amount described in this clause (B) shall be reduced by the
present value of any other cash severance or termination benefits
payable to Executive under any other plans, programs or
arrangements of the Company or its affiliates.
Notwithstanding the foregoing, in the event Executive's
employment is terminated under this Section 8(c) at any time
following a Change of Control (defined below), the Severance
Multiplier shall be increased from two to three, and any
severance amounts payable pursuant to Section 8(c)(iv)(B) shall
be payable in the form of a single, lump sum cash payment within
10 days following termination of employment.
(C) The Company, at its expense, shall provide the Executive with
the reasonable job relocation counseling services of a firm
chosen from time to time by the Executive, for a period not to
exceed 18 months after the Date of Termination.
(D) The Company shall maintain in full force and effect, for the
Executive's continued benefit, until the earlier of (1) one year
after the date of the termination of Executive's employment or
(2) the Executive's commencement of full time employment with a
new employer, all life insurance, medical, dental, health and
accident and disability plans, programs or arrangements in which
the Executive was entitled to participate immediately prior to
the termination of Executive's employment at a cost to the
Executive no greater than the Executive paid while employed by
the Company, provided that the Executive's continued
participation is possible under the general terms and provisions
of such plans and programs. In the event that the Executive's
participation is barred, the Company shall arrange to provide the
Executive, at the Company's expense, with benefits substantially
similar to those which the Executive is entitled to receive under
such plans, programs or arrangements, or pay cash in an amount
after tax sufficient to enable the Executive to purchase
substantially similar coverage for a one year period on an
individual basis, at a cost to the Executive no greater than the
Executive paid while employed. In the case of the Executive's
commencement of full time employment with a new employer within
the one year period, the Company agrees to make up any
differential in benefits between what the Executive would have
received from the Company in the one year period and what the
Executive receives from his new employer, so that the Executive
is ensured of receiving the same benefits which he would have
been entitled to receive from the Company had his employment with
the Company continued for the one year period
<PAGE>
8
at a cost to the Executive no greater than the Executive paid
while employed.
Following Executive's termination of employment by the Company without
Cause (other than by reason of Executive's death or Disability), as a
result of the Company's nonrenewal of the Employment Term pursuant to
Section 1 hereof, or by Executive's resignation for Good Reason, except as
set forth in this Section 8(c), Executive shall have no further rights to
any compensation or any other benefits under this Agreement.
d. Notice of Termination. Any purported termination of employment by the
---------------------
Company or by Executive (other than due to Executive's death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 11(h) hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of employment under the provision so indicated.
e. Definition of Change of Control. For purposes hereof, "Change of
-------------------------------
Control" shall mean any transaction, the result of which is that any Person
(an "Acquiring Person") other than (i) Blackstone (defined below) or (ii)
any Person, a majority of whose voting equity is owned by Blackstone,
becomes the beneficial owner, directly or indirectly, of shares of stock of
the Company or Clark US, Inc. entitling such Acquiring Person to exercise
50% or more of the total voting power of all classes of stock of the
Company or Clark USA, Inc., as the case may be, entitled to vote in
elections of directors. For purposes hereof, "Blackstone" shall mean,
collectively, The Blackstone Group, Blackstone Capital Partners III
Merchant Banking Fund L.P., and their affiliates (other than the Company
and its subsidiaries) and "Person" shall mean a "person" as such term is
used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended.
f. (i) In the event it shall be determined that any payment, benefit or
distribution (or combination thereof) by the Company, or by any other
member of the same affiliated group with the Company (as determined
under Code Section 280G(d)(5)) for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement, or otherwise) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), or any
interest or penalties are incurred by the Executive with respect to
such excise tax (other than interest or penalties incurred as a result
of the failure of the Executive to file any tax return, or pay any tax
(except any such failure to pay tax in accordance with the terms
hereof), required by applicable law or to be filed or paid by the
Executive) (such tax together with any such interest and penalties,
hereinafter collectively referred to as the "Excise Tax"), the
Executive shall be entitled to receive an additional payment (a "Gross-
Up Payment") in an amount such that after payment by the Executive of
taxes (including payroll taxes and any interest or penalties imposed
with respect to such taxes, other than interest or penalties imposed as
a result of the failure of the Executive to file any tax return
<PAGE>
9
or pay any tax (except any such failure to pay tax in accordance with
the terms hereof), required by applicable law to be filed or paid by
the Executive), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto, other than
interest or penalties imposed as a result of the failure of the
Executive to file any tax return or pay any tax (except any such
failure to pay tax in accordance with the terms hereof), required by
applicable law to be filed or paid by the Executive) and the Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(ii) Subject to the provisions of subsection 8(g)(iii), all
determinations required to be made under this subsection 8(g),
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Deloitte & Touche LLP
or, if Deloitte & Touche LLP is unable or unwilling to serve, then
such nationally recognized accounting firm as the Company shall select
(Deloitte & Touche LLP or such other accounting firm being the
"Accounting Firm" ), which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8(g), shall be paid by the Company to the Executive
within five (5) days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall so indicate to the Executive in
writing. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Corporation
exhausts its remedies pursuant to subsection 8(g)(iii) and the
Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by
the Corporation to or for the benefit of the Executive.
(iii) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten (10)
business days after the Executive is informed in writing of such claim
and shall apprize the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the thirty (30) day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is
<PAGE>
10
due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(A) give the Company any information requested by the Company
relating to such claim;
(B) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company;
(C) cooperate with the Company in good faith in order to
effectively contest such claim; and
(D) permit the Company to participate in any proceedings relating
to such claim; provided, however, that the Company shall bear and
pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest
and shall indemnify and hold the Executive harmless, on an after-
tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto, other than interest or
penalties imposed as a result of the failure of the Executive to
file any tax return or pay any tax (except any such failure to
pay tax in accordance with the terms hereof), required by
applicable law to be filed or paid by the Executive) imposed as a
result of such representation and payment of costs and expenses,
Without limitation on the foregoing provisions of this subsection
8(g)(iii), the Company shall control all proceedings taken in
connection with such content and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company shall determine;
provided, however, that of the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an interest-free
basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any excise Tax or income tax (including
interest or penalties with respect thereto, other than interest
or penalties imposed as a result of the failure of the Executive
to file any tax return or pay any tax (except any such failure to
pay tax in accordance with the terms hereof), required by
applicable law to be filed or paid by the Executive) imposed with
respect to such advance or with respect to any imputed income
with respect to such advance; and provided, further, that if the
Executive is required to extend the statute of limitations to
enable the Company to contest such
<PAGE>
11
claim, the Executive may limit this extension solely to such
contested amount. The Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(iv) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to subsection 8(g)(iii), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of subsection 8(g)(iii)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to subsection
8(g)(iii), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid.
9. Nondisclosure of Confidential Information; Non-Solicitation.
-----------------------------------------------------------
a. At any time during or for a period of three years after Executive's
employment with the Company, Executive shall not, without the prior written
consent of the Company, use, divulge, disclose or make accessible to any
other person, firm, partnership, corporation or other entity any
Confidential Information (as hereinafter defined) pertaining to the
business of the Company or any of its subsidiaries, except (i) while
employed by the Company, in the business of and for the benefit of the
Company, or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over
the business of the Company, or by any administrative body or legislative
body (including a committee thereof) with jurisdiction to order Executive
to divulge, disclose or make accessible such information. For purposes of
this Section 8(a), "Confidential Information" shall mean non-public
information concerning the financial data, strategic business plans, and
other non-public, proprietary and confidential information of the Company,
its subsidiaries, Blackstone (defined above), and their respective
affiliates as in existence as of the date of Executive's termination of
employment that, in any case, is not otherwise available to the public
(other than by Executive's breach of the terms hereof).
b. In the course of Executive's employment Executive will acquire knowledge
of Confidential Information and trade secrets. Executive acknowledges that
the Confidential Information and trade secrets which the Company has
provided and will provide to him could play a significant role were he to
directly or indirectly be engaged in any business that competes with the
Company or its subsidiaries. Executive agrees that, without the prior
written consent of the Company, (i) during his employment with the Company
and
<PAGE>
12
for a period of two years thereafter he shall not, on his own behalf or
on behalf of any person, firm or company, directly or indirectly, solicit
the business of any person or entity that has been a client or customer of
the Company or its subsidiaries at any time during the 12 months
immediately preceding such solicitation, and (ii) during his employment
with the Company or for a period of one year thereafter he shall not, on
his own behalf or on behalf of any person, firm or company, directly or
indirectly, solicit or offer employment to any person who has been employed
by the Company, its subsidiaries, or Blackstone in an executive or
management capacity at any time during the 12 months immediately preceding
such solicitation.
c. Executive and the Company agree that the foregoing covenants not to
solicit are a reasonable covenant under the circumstances, and further
agree that if in the opinion of any court of competent jurisdiction such
restraints are not reasonable in any respect, such court shall have the
right, power and authority to excise or modify such provision or provisions
of these covenants as, to the court, shall appear not reasonable and to
enforce the remainder of the covenant as so amended.
10. Specific Performance. Executive acknowledges and agrees that the Company's
--------------------
remedies at law for a breach or threatened breach of any of the provisions of
Section 9 would be inadequate and, in recognition of this fact, Executive agrees
that, in the event of such a breach or threatened breach, in addition to any
remedies at law, the Company, without posting any bond, shall be entitled to
cease making any payments or providing any benefit otherwise required by this
Agreement and obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available.
11. Miscellaneous.
-------------
a. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Missouri, without regard to
conflicts of laws principles thereof.
b. Entire Agreement/Amendments. This Agreement contains the entire
---------------------------
understanding of the parties with respect to the employment of Executive by
the Company. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties with respect to the subject
matter herein other than those expressly set forth herein. This Agreement
may not be altered, modified, or amended except by written instrument
signed by the parties hereto. This Agreement supercedes all prior
agreements and understandings (including verbal agreements) between
Executive and the Company and/or its affiliates regarding the terms and
conditions of Executive's employment with the Company and/or its affiliates
c. No Waiver. The failure of a party to insist upon strict adherence to
---------
any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement.
<PAGE>
13
d. Severability. In the event that any one or more of the provisions of
------------
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not be affected thereby.
e. Assignment. This Agreement shall not be assignable by Executive. This
----------
Agreement may be assigned by the Company to a company which is a successor
in interest to substantially all of the business operations of the Company.
Such assignment shall become effective when the Company notifies Executive
of such assignment or at such later date as may be specified in such
notice. Upon such assignment, the rights and obligations of the Company
hereunder shall become the rights and obligations of such successor
company, provided that any assignee expressly assumes the obligations,
--------
rights and privileges of this Agreement.
Mitigation. If the Executive's employment hereunder is terminated for any
----------
reason, the Executive shall not be subject to any duty or obligation to
seek alternate employment or other sources of income or benefits, or to
mitigate his damages, or to any similar duty or obligation, and, except as
specifically provided with respect to the continuation of benefits, all
payment and other obligations of the Company under this Agreement shall not
be subject to any rights of set-off, duty to mitigate or other reduction,
and shall be paid and performed in full notwithstanding any alternate
employment or other sources of income or benefits obtained or received or
receivable by the Executive.
g. Successors; Binding Agreement. This Agreement shall inure to the
-----------------------------
benefit of and be binding upon personal or legal representatives,
executors, administrators, successors, heirs, distributes, devises and
legatees.
h. Notice. For the purpose of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below Agreement, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
If to the Company:
Clark Refining & Marketing, Inc.
c/o Clark USA, Inc.
8182 Maryland Avenue
Clayton, Missouri 63105
Attention: Corporate Secretary
If to Executive:
To the most recent address of Executive set forth in the personnel records
of the Company.
<PAGE>
14
i. Withholding Taxes. The Company may withhold from any amounts payable
-----------------
under this Agreement such Federal, state and local taxes as may be required
to be withheld pursuant to any applicable law or regulation.
j. Counterparts. This Agreement may be signed in counterparts, each of
------------
which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
k. Legal and Professional Fees. The Corporation shall pay to the Executive
---------------------------
all reasonable legal and professional fees and expenses incurred by the
Executive in seeking to obtain or enforce any right or benefit provided by
this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CLARK REFINING & MARKETING, INC.:
By:________________________
Name:
Title:
JEFFRY N. QUINN:
___________________________
245 Litchford Court
Creve Coeur, Missouri 63141
<PAGE>
15
EXHIBIT A
(Financial, Estate and Tax Preparation and Planning Services)
. Financial consulting services from AYCO, Inc.
. Estate planning work rendered by Gerald Zaft, Attorney-At-Law.
. Tax preparation and planning services for 2000 performed by AYCO,
Inc.
<PAGE>
Exhibit 10.32
EXECUTION COPY
================================================================================
SERVICES AND SUPPLY AGREEMENT
BETWEEN
CLARK REFINING & MARKETING, INC.
AND
PORT ARTHUR COKER COMPANY L.P.
August 19, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS 2
Section 1.1 Definitions......................................................... 2
Section 1.2 Other Definitional Provisions....................................... 2
ARTICLE 2. GENERAL SCOPE OF CLARK R&M RESPONSIBILITIES................................... 2
ARTICLE 3. ANCILLARY EQUIPMENT; SUPPLY AND SERVICES...................................... 3
Section 3.1 Crude Supply Management Services.................................... 3
Section 3.2 Docking, Pipeline Delivery, Handling and Storage of Crude Deliveries 4
Section 3.3 Supply of Other Ancillary Equipment Feedstocks...................... 4
Section 3.4 Operation of Ancillary Equipment.................................... 5
Section 3.5 Processing of Clark R&M Products.................................... 5
Section 3.6 Title to Product Streams from Ancillary Equipment................... 6
Section 3.7 Disposition of Product Streams from Ancillary Equipment............. 6
ARTICLE 4. COKER COMPLEX; SUPPLY AND SERVICES............................................ 6
Section 4.1 Operation of Coker Complex.......................................... 6
Section 4.2 Processing of Clark R&M Products; Coker............................. 7
Section 4.3 Processing of Clark R&M Products; Hydrocracker...................... 7
Section 4.4 Supply and Delivery of Other Feedstocks to Coker Complex............ 8
Section 4.5 Title to Product Streams from Coker Complex......................... 9
Section 4.6 Disposition of Product Streams from Coker Complex................... 9
ARTICLE 5. GENERAL SERVICES AND SUPPLIES................................................. 9
Section 5.1 Construction Management............................................. 9
Section 5.2 Contract Management................................................. 9
Section 5.3 Maintenance Services................................................ 10
Section 5.4 Operation and Maintenance of Clark Equipment........................ 10
Section 5.5 Utility Services.................................................... 11
Section 5.6 Waste Management and Wastewater Services............................ 12
Section 5.7 Support Services.................................................... 13
Section 5.8 Personnel and Management Services................................... 13
Section 5.9 Spare Parts......................................................... 14
Section 5.10 Catalysts, Chemicals and Consumables................................ 14
Section 5.11 Quantity and Quality Control........................................ 14
Section 5.12 Environmental, Health and Safety Services........................... 16
Section 5.13 Insurance Coverage.................................................. 16
Section 5.14 Licensing, Permits and Approvals.................................... 16
Section 5.15 Sulfur Recovery..................................................... 17
</TABLE>
i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6. ANNUAL BUDGET AND OPERATING PLAN.............................................. 17
Section 6.1 Annual Budget....................................................... 17
Section 6.2 Operating Adjustments............................................... 18
Section 6.3 Quarterly Reports................................................... 19
ARTICLE 7. PRICING AND PAYMENT........................................................... 20
Section 7.1 Pricing of Services and Supplies.................................... 20
Section 7.2 Net Pricing and Statements.......................................... 20
Section 7.3 Payment Procedure................................................... 20
Section 7.4 Alternative Pricing................................................. 20
Section 7.5 Recordkeeping; Right to Audit; Access to Books and Records.......... 21
Section 7.6 Interest Rate for Late Payments..................................... 21
ARTICLE 8. DEFAULTS, REMEDIES AND TERMINATION............................................. 22
Section 8.1 Clark R&M's Right to Terminate...................................... 22
Section 8.2 Coker Company's Right to Terminate and Other Remedies............... 22
Section 8.3 Termination Option.................................................. 23
Section 8.4 Non-Exclusive Remedies; Specific Performance........................ 23
ARTICLE 9. TERM, AND COMMENCEMENT OF SERVICES............................................ 23
Section 9.1 Effectiveness; Term................................................. 23
Section 9.2 End of Term Obligations............................................. 23
ARTICLE 10. REPRESENTATIONS AND WARRANTIES................................................ 24
Section 10.1 Representations and Warranties of the Coker Company................. 24
Section 10.2 Representations and Warranties of Clark R&M......................... 25
ARTICLE 11. FURTHER AGREEMENTS............................................................ 26
Section 11.1 Intellectual Property; Confidentiality.............................. 26
Section 11.2 Force Majeure....................................................... 26
Section 11.3 Cooperation with Other Parties...................................... 26
Section 11.4 Site Access......................................................... 26
Section 11.5 Indemnity........................................................... 26
Section 11.6 Dispute Resolution.................................................. 27
Section 11.7 Taxes............................................................... 28
Section 11.8 Title to Property................................................... 28
Section 11.9 Subcontractors...................................................... 29
ARTICLE 12. MISCELLANEOUS................................................................. 29
Section 12.1 Relationship of Parties............................................. 29
Section 12.2 Third Party Beneficiaries........................................... 29
Section 12.3 Clark R&M Warranties................................................ 30
Section 12.4 No Indirect Damages................................................. 30
Section 12.5 Assignments......................................................... 30
Section 12.6 Amendments.......................................................... 31
Section 12.7 Notices............................................................. 31
</TABLE>
ii-
<PAGE>
<TABLE>
<S> <C>
Section 12.8 GOVERNING LAW....................................................... 32
Section 12.9 Submission to Jurisdiction; Forum Selection......................... 32
Section 12.10 Appointment of Agent for Service of Process......................... 33
Section 12.11 No Waiver........................................................... 33
Section 12.12 Counterparts........................................................ 33
Section 12.13 Integration......................................................... 33
Section 12.14 Severability........................................................ 33
Section 12.15 Headings............................................................ 33
Section 12.16 WAIVER OF JURY TRIAL................................................ 34
</TABLE>
iii-
<PAGE>
APPENDIX A -- DEFINITIONS
SCHEDULES
Schedule 3.1 Crude Supply Management Services
Schedule 3.2 Dock, Pipeline and Storage Services
Schedule 3.3 Ancillary Equipment Feedstock Supply
Schedule 3.5 Clark Processing Fee -- Ancillary Equipment
Schedule 4.1 Coker Company Employees
Schedule 4.2 Clark R&M Processing Fee -- Coker
Schedule 4.3 Clark R&M Processing Fee -- Hydrocracker
Schedule 4.4 Hydrogen Supply Services
Schedule 5.1 Construction Management Services
Schedule 5.3 Maintenance Services
Schedule 5.5.1 Electricity
Schedule 5.5.2 Steam
Schedule 5.5.3 Natural and Fuel Gas
Schedule 5.5.4 Water
Schedule 5.5.5 Compressed Air
Schedule 5.5.6 Nitrogen
Schedule 5.5(b) Utility Meters
Schedule 5.6 Waste Management and Wastewater Treatment Services
Schedule 5.7.1 Sulfur and Coke Transport Service
Schedule 5.7.2 Broad Band and Network Computing Services
Schedule 5.7.3 Radio and Phone Services
Schedule 5.7.4 Analytical Laboratory and Custody Transfer Services
Schedule 5.7.5 Security Services
Schedule 5.7.6 Other Support Service
Schedule 5.8.1 Operations Services
Schedule 5.8.2 Engineering Services
Schedule 5.8.3 Human Resources Services
Schedule 5.8.4 Accounting Services
Schedule 5.8.5 Administrative Services
Schedule 5.9 Coker Company Spares
Schedule 5.10 Catalyst and Caustic
Schedule 5.12.1 Environmental, Health and Safety Services
Schedule 5.12.2 Emergency Response Services
Schedule 5.13 Insurance
Schedule 5.14 Licenses, Permits and Approvals
Schedule 6.1 Annual Budget and Operating Plan
EXHIBITS
Exhibit A Base Case Financial Model
iv-
<PAGE>
AGREEMENT FOR SUPPLY AND SERVICES, dated as of August 19, 1999,
between Clark Refining & Marketing, Inc., a Delaware corporation ("Clark R&M")
---------
and Port Arthur Coker Company L.P., a Delaware limited partnership (the "Coker
-----
Company").
- -------
RECITALS
WHEREAS, the Coker Company has entered into an EPC Contract with the
Contractor for the construction of the Coker Complex;
WHEREAS, the Coker Company is causing the Coker Complex to be
constructed on land within the Refinery leased from Clark R&M, which Coker
Complex is intended to have at least the Coker Complex Design Capacity;
WHEREAS, the Coker Company has leased the Ancillary Equipment located
within the Refinery, which Ancillary Equipment is being upgraded to have the
Crude Design Capacity to permit the production of at least the minimum volume of
feedstocks for the Coker Complex to operate at the Coker Complex Design
Capacity;
WHEREAS, the Coker Company, pursuant to the Long-Term Oil Supply
Agreement, has access to Maya Crude Oil for processing through the Heavy Oil
Processing Facility;
WHEREAS, Clark R&M has access to additional crude oil and other
feedstreams necessary to operate the Ancillary Equipment at the Crude Design
Capacity and the Coker Complex at the Coker Complex Design Capacity;
WHEREAS, the Coker Company desires to deliver and Clark R&M desires to
purchase the Required Product Mix under the Product Purchase Agreement;
WHEREAS, the Coker Company requires supplies and services in order to
operate the Ancillary Equipment and the Coker Complex and to produce the
Required Product Mix;
WHEREAS, Clark R&M has the necessary technical and operational
capacity to deliver the such supplies and to provide such services required to
operate the Ancillary Equipment and the Coker Complex; and
WHEREAS, the obligations of Clark R&M and the rights of the Coker
Company hereunder will be assigned to the Financing Parties as security in order
to finance the construction of the Coker Complex.
NOW THEREFORE, for and in consideration of the mutual covenants,
premises and agreements set forth herein, and good and valuable consideration,
the receipt, sufficiency and adequacy of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
<PAGE>
2
ARTICLE 1. DEFINITIONS
Section 1.1 Definitions. Except as contained in this Section 1.1 or
-----------
as otherwise defined herein, the capitalized terms used herein shall have the
respective meanings assigned thereto in Appendix A. For all purposes of this
Services and Supply Agreement, the following terms shall have the following
meanings:
"Applicable Price" means, with respect to each Service or Supply to be
----------------
provided by Clark R&M hereunder during any monthly period, the total
reimbursable cost or fee due and payable by the Coker Company to Clark R&M for
such Service or Supply determined in accordance with the formula set forth under
the heading "Applicable Price" on the Schedule relating to such Service or
Supply, provided that to the extent any Service or Supply is not described in a
--------
Schedule, the "Applicable Price" for such Service or Supply shall equal the
Permitted Reimbursable Expenses incurred by Clark R&M in providing such Service
or Supply.
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) The words "hereof," "herein", "hereto" and "hereunder" and words
of similar import when used in this Services and Supply Agreement shall refer to
this Services and Supply Agreement as a whole and not to any particular
provision of this Services and Supply Agreement, and Article, Section and
Schedule references are to this Services and Supply Agreement unless otherwise
specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE 2. GENERAL SCOPE OF CLARK R&M RESPONSIBILITIES
Clark R&M shall operate, manage and maintain all components of the
Ancillary Equipment and the Coker Complex and perform all other necessary
services (all of the foregoing, collectively, the "Services") and provide all
--------
necessary feedstocks and other materials (collectively, the "Supplies"), other
--------
than matters expressly stated herein to be the obligations of the Coker Company,
in order to generate the Required Product Mix on a continuous basis during the
term of this Services and Supply Agreement. Clark R&M shall provide the
Services and Supplies in a prudent and efficient manner in compliance with the
following:
(a) Applicable Law;
(b) Prudent Industry Practice;
(c) requirements of applicable Warranties;
(d) applicable equipment manufacturers' recommended maintenance
procedures;
<PAGE>
3
(e) the Operating Manuals, the Maintenance and Instruction Manuals
and the Mechanical Catalogs (each as defined in the EPC Contract);
(f) the EPC Contract and the other Project Documents; and
(g) the Financing Documents.
ARTICLE 3. ANCILLARY EQUIPMENT; SUPPLY AND SERVICES
Section 3.1 Crude Supply Management Services. (a) Clark R&M shall
--------------------------------
coordinate the scheduling and execution of deliveries of the Contract Quantity
of Coker Company Maya to the Heavy Oil Processing Facility on behalf of the
Coker Company in accordance with the Long-Term Oil Supply Agreement and the
specifications set forth in Schedule 3.1.
(b) To the extent that the Coker Company does not have access under
the Long-Term Oil Supply Agreement to the volume of Maya Crude Oil required for
start-up and operation of the Heavy Oil Processing Facility during the Start-up
Period, Clark R&M shall supply the Coker Company with the additional volume of
Maya Crude Oil required for start-up and operation of the Heavy Oil Processing
Facility during such period and shall coordinate the scheduling and execution of
deliveries of such crude oil to the Heavy Oil Processing Facility on behalf of
the Coker Company, in accordance with the specifications set forth in Schedule
3.1. The Coker Company shall reimburse Clark R&M for the purchase price of such
crude oil and any reasonable administrative fees, financing fees or capital
allocation costs incurred by Clark R&M in procuring such crude oil by Clark R&M.
(c) Clark R&M shall procure on behalf of the Coker Company one or
more contracts for the supply of light crude oil necessary for the processing of
Coker Company Maya and shall coordinate the scheduling and execution of
deliveries of such crude oil to the Heavy Oil Processing Facility on behalf of
the Coker Company, in accordance with the specifications set forth in Schedule
3.1.
(d) Should the supply of Maya Crude Oil pursuant to the Long-Term Oil
Supply Agreement become unavailable for any reason, Clark R&M shall procure on
behalf of the Coker Company one or more alternative supplies of Maya Crude Oil
in amounts substantially equivalent to the Contract Quantity. Clark R&M shall
coordinate the scheduling and execution of deliveries of such Maya Crude Oil to
the Heavy Oil Processing Facility in accordance with the specifications set
forth in Schedule 3.1.
(e) In connection with its obligations under this Section 3.1, Clark
R&M shall engage tankers on behalf, and at the expense, of the Coker Company for
the shipment of Coker Company Maya and Coker Company light crude oil. All
shipping contracts in connection therewith shall be entered into directly by the
Coker Company. Clark R&M shall ensure that all
<PAGE>
4
such shipments of Coker Company Maya and Coker Company light crude oil are
adequately covered by marine cargo, casualty and other required insurance. In
addition, in connection with such shipping, Clark R&M shall ensure that prior to
arrival at the Refinery Clark Maya will not be commingled with any shipment of
Coker Company Maya and Clark R&M light crude oil will not be commingled with any
shipment of Coker Company light crude oil.
(f) To the extent that any Clark R&M-owned crude oil is delivered to
the Refinery by the same pipeline as Coker Company-owned crude oil of the same
type, title to such commingled crude oil shall be allocated in accordance with
the respective volume of crude oil purchased by Clark R&M or the Coker Company
as evidenced by the bills of lading for such shipments.
(g) Clark R&M shall not grant any Lien on Clark R&M-owned crude oil
that is to be commingled with Coker Company-owned crude oil at the Refinery,
other than purchase money security interests necessary to secure the purchase
price of such Clark R&M-owned crude oil.
Section 3.2 Docking, Pipeline Delivery, Handling and Storage of Crude
---------------------------------------------------------
Deliveries. (a) Clark R&M shall provide all docking, pipeline, handling and
- ----------
storage services necessary for the delivery of Coker Company Maya and other
Coker Company light crude oil to the Heavy Oil Processing Facility, in
accordance with the specifications set forth in Schedule 3.2.
(b) For the term of this Services and Supply Agreement, Clark R&M
shall (i) maintain the Marine Dock and Terminaling Agreement (as such term is
defined in the Common Security Agreement) in effect and comply with all of its
material obligations thereunder and (ii) make advance payments to Sun Pipe Line
Company every thirty (30) days in amounts equal to the maximum amount that Clark
R&M estimates, in its reasonable good faith judgment, will be due and payable by
Clark R&M to Sun Pipe Line Company pursuant to the Marine Terminaling Agreement
in the next succeeding thirty (30) days.
Section 3.3 Supply of Other Ancillary Equipment Feedstocks. (a)
----------------------------------------------
Clark R&M shall coordinate the scheduling and execution of deliveries of
Hydrogen needed to process Coker Company Maya and light crude oil through the
Ancillary Equipment on behalf of the Coker Company in accordance with the
Hydrogen Supply Agreement and shall otherwise perform the Coker Company's
obligations (other than payment to obligations) and exercise its rights under
the Hydrogen Supply Agreement, in accordance with Schedule 4.3.
(b) Clark R&M shall supply and the Coker Company shall purchase all
other feedstocks (including any additional hydrogen not available to the Coker
Company under the Hydrogen Supply Agreement) necessary for the processing of
Coker Company Maya and Coker Company light crude oil through the Ancillary
Equipment and Clark R&M shall deliver such products to the Ancillary Equipment,
in accordance with the specifications set forth in Schedule 3.3 and Schedule
4.4.
<PAGE>
5
(c) Clark R&M shall maintain the Clark Hydrogen Supply Contract in
effect for the term of this Services and Supply Agreement and shall comply with
all of its material obligations thereunder.
Section 3.4 Operation of Ancillary Equipment. Clark R&M shall
--------------------------------
operate and maintain the Ancillary Equipment and manage the processing of Maya
Crude Oil and other feedstreams thereby on behalf of itself and the Coker
Company.
Section 3.5 Processing of Clark R&M Products. (a) Prior to the
--------------------------------
Start-up Date, Clark R&M shall have the right to process Clark R&M-owned crude
oil through the Ancillary Equipment; provided that (i) all operating expenses
--------
related thereto shall be for the account of, and exclusively paid by, Clark R&M
and (ii) the processing of Clark R&M-owned crude oil pursuant to this clause (a)
shall (x) in no way interfere with the timely performance of the Lessor
Ancillary Equipment Upgrade, the construction of the Coker Complex by the
Contractor or the achievement of the Guranteed Values by the Guaranteed
Performance Dates (as such terms are defined in the EPC Contract) or (y) not
adversely affect the reliability or the useful life of the Ancillary Equipment.
The parties agree that consideration for the processing rights granted Clark R&M
under this Section 3.5(a) has been given to the Coker Company in the form of a
reduction in the rent payable that would otherwise be payable pursuant to
Section 13.1(a)(i) of the Ancillary Equipment Site Lease.
(b) After Final Completion, subject to the terms and conditions
hereinafter set forth, Clark R&M shall have the right (the "Excess Crude
Capacity Option") each calendar quarter during the term of this Service and
Supply Agreement to require the Coker Company to process Clark R&M-owned crude
oil and other feedstreams equal to the Excess Crude Capacity for each day during
such calendar quarter.
(c) If Clark R&M shall not have given the Coker Company written
notice at least thirty days prior to any calendar quarter that it does not
intend to exercise its Excess Crude Capacity Option for the succeeding calendar
quarter, Clark R&M shall be deemed to have exercised such right and shall pay
the Coker Company for the processing of Clark R&M-owned crude oil and other
feedstreams equal to the Excess Crude Capacity for each day during such calendar
quarter in accordance with the formulas set forth on Schedule 3.5.
(d) If Clark R&M chooses not to exercise its Excess Crude Capacity
Option in any calendar quarter, the Coker Company may sell such processing right
(or portion of such right) to an alternative purchaser and Clark R&M agrees to
provide such alternative purchaser and/or the Coker Company with such Services
and Supplies hereunder as may be required to process crude oil and other
feedstreams for such party through the Ancillary Equipment.
(e) If Clark R&M chooses to exercise its Excess Crude Capacity Option
in any calendar quarter, the Coker Company agrees to process Clark R&M-owned
crude oil and other feedstreams through the Ancillary Equipment or through any
other appropriate equipment to which the Coker Company may have access, provided
--------
that (i) if the Coker Company chooses to process such Clark R&M-owned crude oil
and other feedstreams through the Ancillary
<PAGE>
6
Equipment, such processing will not interrupt, reduce or otherwise materially
interfere with the processing of Coker Company Maya during such calendar quarter
or (ii) if the Coker Company chooses to process such Clark R&M-owned crude oil
and other feedstreams through alternative equipment, such processing will not
materially affect the expected product yields from such crude oil and other
feedstreams.
Section 3.6 Title to Product Streams from Ancillary Equipment. Title
-------------------------------------------------
to product streams resulting from the processing of Coker Company Maya and other
Coker Company-owned crude oil through the Ancillary Equipment shall be
determined on a pro rata basis in proportion to the relative volume of Coker
Company-owned crude oil and other crude oil processed through the Ancillary
Equipment for Clark R&M (or for other third parties if Clark R&M does not
exercise its Excess Crude Capacity Option), in accordance with the
specifications and formulas under the heading "Quantity" on the Schedules to the
Product Purchase Agreement (it being understood that Clark R&M shall have title
to those product streams resulting from the processing of Clark R&M-owned
feedstreams through the Ancillary Equipment pursuant to Section 3.5).
Section 3.7 Disposition of Product Streams from Ancillary Equipment.
-------------------------------------------------------
(a) Clark R&M shall determine the portion, if any, of Coker Company-
owned VGO and Clark R&M-owned VGO produced by the Crude Unit that is required to
fill the remaining Excess Hydrocracker Capacity of the Hydrocracker on any day
in accordance with the provisions of Section 4.3 and shall manage the delivery
of any such VGO to the Hydrocracker on behalf of the Coker Company and itself.
(b) Clark R&M shall manage the delivery of VTBs from the Ancillary
Equipment to the Coker on behalf of the Coker Company and itself.
(c) Clark R&M shall manage the delivery of all Products from the
Ancillary Equipment (including all Coker Company-owned VGO not delivered to the
Hydrocracker pursuant to clause (a) above) that are to be sold under the
Products Purchase Agreement in accordance with such agreement.
(d) Clark R&M shall deliver all other Clark R&M-owned product streams
(other than VTBs and VGO to be delivered to the Coker Complex) to the battery
limits of the Ancillary Equipment and shall take possession and control all such
Clark R&M-owned product streams delivered to the battery limits of the Ancillary
Equipment.
ARTICLE 4. COKER COMPLEX; SUPPLY AND SERVICES
Section 4.1 Operation of Coker Complex.
--------------------------
(a) The Coker Company shall employ the roster of personnel with the
job descriptions listed on Schedule 4.1; provided, however, that the Coker
-------- -------
Company may reduce the
<PAGE>
7
number of such employees to the extent (i) that changes in technology or
automation opportunities allow a reduced number of Coker Company to perform such
job descriptions in a more cost effective manner and (ii) permitted by the
Financing Documents.
(b) Clark R&M shall supervise and train the employees referred to in
clause (a) above and shall otherwise operate and maintain the Coker Complex and
manage the processing of VTBs, VGO, LCO and other feedstreams thereby on behalf
of the Coker Company.
(c) Clark R&M shall operate the Coker Complex in accordance with all
of the terms and conditions set forth in the EPC Contract.
Section 4.2 Processing of Clark R&M Products; Coker. (a) Subject to
---------------------------------------
the terms and conditions hereinafter set forth and to Section 6.2(d), Clark R&M
shall have the right (the "Excess Coker Capacity Option") each calendar quarter
during the term of this Service and Supply Agreement to require the Coker
Company to process Clark R&M-owned VTBs and other feedstreams equal to the
Excess Coker Capacity each day during such calendar quarter.
(b) If Clark R&M shall not have given the Coker Company written
notice at least thirty days prior to any calendar quarter that it does not
intend to exercise its Excess Coker Capacity Option for the succeeding calendar
quarter, Clark R&M shall be deemed to have exercised such right and shall pay
the Coker Company for the processing of VTBs and other feedstreams equal to the
Excess Coker Capacity each day during such calendar quarter in accordance with
the formula set forth on Schedule 4.2.
(c) If Clark R&M chooses not to exercise its Excess Coker Capacity
Option in any calendar quarter, the Coker Company may sell such processing right
(or portion of such right) to an alternative purchaser and Clark R&M agrees to
provide such alternative purchaser and/or the Coker Company with such Services
and Supplies hereunder as may be required to process VTBs and other feedstreams
for such party through the Coker.
(d) If Clark R&M chooses to exercise its Excess Coker Capacity Option
in any calendar quarter, the Coker Company agrees to process Clark R&M-owned
VTBs and other feedstreams through the Coker or through any other appropriate
equipment to which the Coker Company may have access, provided that (i) if the
--------
Coker Company chooses to process such Clark R&M-owned feedstreams through the
Coker, such processing will not interrupt, reduce or otherwise materially
interfere with the processing of Coker Company VTBS during such calendar quarter
or (ii) if the Coker Company chooses to process such Clark R&M-owned feedstreams
through alternative equipment, such processing will not materially affect the
expected product yields from such feedstreams.
Section 4.3 Processing of Clark R&M Products; Hydrocracker. (a)
----------------------------------------------
Subject to the terms and conditions hereinafter set forth, Clark R&M shall have
the right (the "Excess Hydrocracker Capacity Option") each calendar quarter
during the term of this Service and Supply Agreement to require the Coker
Company to process Clark R&M-owned feedstreams up to an amount equal to the
Excess Hydrocracker Capacity each day during such calendar quarter.
<PAGE>
8
(b) If Clark R&M shall not have given the Coker Company written
notice at least thirty days prior to any calendar quarter that it does not
intend to exercise its Excess Hydrocracker Capacity Option for the succeeding
calendar quarter, Clark R&M shall be deemed to have exercised such right and
shall pay the Coker Company for the processing of Clark R&M-owned feedstreams
during such calendar quarter in accordance with the formulas set forth on
Schedule 4.3.
(c) If Clark R&M chooses to exercise its Excess Hydrocracker Capacity
Option in any calendar quarter, the Coker Company agrees to process the volume
of Clark R&M-owned LCO, VGO and other feedstreams designated by Clark R&M each
day up to the Excess Hydrocracker Capacity for such day through the Hydrocracker
or through any other appropriate equipment to which the Coker Company may have
access, provided that (i) if the Coker Company chooses to process such Clark
--------
R&M-owned feedstreams through the Hydrocracker, such processing will not
interrupt, reduce or otherwise materially interfere with the processing of Coker
Company VGO produced by the Coker during such calendar quarter or (ii) if the
Coker Company chooses to process such Clark R&M-owned feedstreams through
alternative equipment, such processing will not materially affect the expected
product yields from such feedstreams. To the extent that Clark R&M does not
exercise its right to use all Excess Hydrocracker Capacity on any day during
such calendar quarter, Clark R&M shall ensure that pro rata portions of Coker
Company-owned and Clark R&M-owned VGO produced by the Crude Unit on such day are
used to fill the remaining Excess Hydrocracker Capacity of the Hydrocracker.
Clark R&M shall pay the Coker Company for all such Clark R&M-owned VGO processed
by the Hydrocracker in accordance with the formulas set forth on Schedule 4.3.
(d) If Clark R&M chooses not to exercise its Excess Hydrocracker
Capacity Option in any calendar quarter, the Coker Company may sell such
processing right (or portion of such right) to an alternative purchaser or
direct Clark R&M to ensure that the Excess Hydrocracker Capacity (or any portion
thereof) is used to process Coker Company VGO produced by the Crude Unit. In
either case, Clark R&M shall provide the Coker Company and/or such alternative
purchaser with such Services and Supplies hereunder as may be required to
process VGO or other feedstreams for such party through the Hydrocracker.
Section 4.4 Supply and Delivery of Other Feedstocks to Coker Complex.
--------------------------------------------------------
(a) Clark R&M shall coordinate the scheduling and execution of
deliveries of Hydrogen needed to process Coker Company-owned VTBs and VGO by the
Coker Complex on behalf of the Coker Company in accordance with the Hydrogen
Supply Agreement and shall otherwise perform the Coker Company's obligations
(other than payment to obligations) and exercise its rights under the Hydrogen
Supply Agreement, in accordance with Schedule 4.4.
(b) Clark R&M shall supply and the Coker Company shall purchase all
other feedstocks (including any additional hydrogen not available under the
Hydrogen Supply Agreement) necessary to process Coker Company-owned VTBs, VGO
and other feedstreams through the Coker Complex and shall manage the delivery of
such products to the Coker Complex, in accordance with the specifications set
forth in Schedule 4.4.
<PAGE>
9
(c) Clark R&M shall provide at its expense all hydrogen and other
feedstocks necessary to process any Clark R&M-owned VTBs, LCO and other
feedstreams through the Coker Complex and shall deliver such products to the
Coker Complex.
Section 4.5 Title to Product Streams from Coker Complex. Title to
-------------------------------------------
product streams resulting from the processing of Coker Company-owned VTBs and
VGO through the Coker Complex shall be determined on a pro rata basis in
proportion to the relative volume of Coker Company-owned VTBs and VGO and other
VTBs and VGO processed by the Coker Complex for Clark R&M (or for other third
parties if Clark R&M has not exercised its Excess Coker Capacity Option and/or
its Excess Hydrocracker Capacity Option, as the case may be), in accordance with
the specifications and formulas under the heading "Quantity" on the Schedules to
the Product Purchase Agreement (it being understood that Clark R&M shall have
title to any product streams resulting from the processing of Clark R&M-owned
LCO and other Clark R&M-owned product streams through the Coker Complex pursuant
to Section 4.2).
Section 4.6 Disposition of Product Streams from Coker Complex. (a)
-------------------------------------------------
Clark R&M shall coordinate and manage the delivery of Coker Company Products
from the Coker Complex, in accordance with the Product Purchase Agreement.
(b) Clark R&M shall deliver all Clark R&M-owned product streams from
the Coker Complex to the battery limits of the Coker Complex and shall take
possession and control all such Clark R&M-owned product streams delivered to the
battery limits of the Coker Complex.
ARTICLE 5. GENERAL SERVICES AND SUPPLIES
Section 5.1 Construction Management.
-----------------------
(a) Clark R&M (i) shall manage and supervise the construction of the
Coker Complex by the Contractor and cooperate with the Independent Engineer to
ensure the construction of the Coker Complex in accordance with the EPC Contract
and (ii) shall fulfill all obligations, and perform all functions, of the Coker
Company under the EPC Contract, other than payment obligations of the Coker
Company thereunder including, without limitation, those listed on Schedule 5.1
hereto.
(b) Without limiting the generality of the foregoing clause, Clark
R&M agrees to schedule, coordinate, manage and perform all start-up and
performance testing obligations of the Coker Company under the EPC Contract and
take such other steps as are necessary to cause the Coker Complex to achieve the
Guaranteed Values by the Guaranteed Performance Dates (as such terms are defined
in the EPC Contract).
Section 5.2 Contract Management. (a) Clark R&M shall supervise and
-------------------
monitor the performance by counterparties (other than itself) to all Coker
Company contracts (other than the Financing Documents) and the Coker Company's
relationships with such parties,
<PAGE>
10
including, without limitation, (i) the adequacy and timeliness of the
performance by such counterparties, (ii) timely assertion of the Coker Company's
rights under such contracts, (iii) enforcement of contractor, subcontractor and
vendor warranties and guaranties in connection therewith, and (iv) management of
dispute resolution and/or litigation in connection therewith.
(b) Clark R&M's performance of its obligations under clause (a) above
shall be subject to the on-going supervision and control of the Coker Company.
In connection with its obligations under Section 6.3, Clark R&M shall provide
the Coker Company quarterly reports describing actions taken by Clark R&M in the
previous calendar quarter in connection with the performance of its obligations
under clause (a) above.
Section 5.3 Maintenance Services
--------------------
(a) In compliance with Applicable Law and Prudent Industry Practice,
Clark R&M shall provide all maintenance services, materials and labor necessary
and advisable to efficiently operate and maintain the Heavy Oil Processing
Facility and the on-going production of the Required Product Mix, including,
without limitation, the services specified on Schedule 5.3. The Coker Company
shall pay for such Services in accordance with the pricing formula set forth in
Schedule 5.3. Notwithstanding the foregoing, the parties agree that certain
capital repairs and similar maintenance services with respect to the Ancillary
Equipment shall be provided at the expense of Clark R&M pursuant to Section 9.1
of the Ancillary Equipment Lease.
(b) Clark R&M shall regularly update and implement an equipment
upgrade, repair and preventive maintenance program with respect to the Heavy Oil
Processing Facility that meets the requirements of (i) Applicable Law, (ii) the
Permits, (iii) specifications of equipment manufacturers, (iv) the
recommendations of the Contractor and (v) the Financing Documents.
(c) Notwithstanding the foregoing provisions of this Section 5.3,
Clark R&M shall not be required to fund or commit to fund any capital
expenditures in connection with its obligations under this Section 5.3 that are
in excess of amounts available in the Coker Company's Major Maintenance Account
(as such term is defined in the Financing Documents), unless the Coker Company
has demonstrated that it is capable of compensating Clark R&M for such capital
expenditures and that payment of such compensation is permitted under the
Financing Documents.
Section 5.4 Operation and Maintenance of Clark Equipment.
--------------------------------------------
(a) In compliance with Applicable Law and Prudent Industry Practice,
throughout the term of this Services and Supply Agreement Clark R&M shall
operate and maintain all pipelines, interconnections and other Clark Equipment
as necessary for the efficient operation of the Heavy Oil Processing Facility
and the on-going production of the Required Product Mix. Without limiting the
generality of the foregoing, Clark R&M shall provide all maintenance services,
equipment improvements, personnel and other resources that are necessary for the
Clark Equipment to (i) generate the feedstocks for the Heavy Oil Processing
Facility that
<PAGE>
11
this Services and Supply Agreement contemplates will be generated by the Clark
Equipment, (ii) process intermediate products from the Heavy Oil Processing
Facility into saleable products, (iii) continue to operate the remainder of the
Refinery and produce intermediate and saleable products and (iv) otherwise
provide the Services and Supplies that this Services and Supply Agreement
contemplates will be provided by Clark Equipment.
(b) Clark R&M shall coordinate the scheduling and performance of all
necessary maintenance, including turnarounds and unscheduled unit shutdowns, at
the Refinery to ensure on-going production of the Required Product Mix.
Section 5.5 Utility Services. (a) Clark R&M shall provide the
----------------
following utility services, each in accordance with the more detailed
description on the Schedule referenced opposite such Service on the chart below,
to the Coker Company for the operation of the Heavy Oil Processing Facility. The
Coker Company shall reimburse Clark R&M for the cost of each such Service
(except for potable water, the cost for which is included in the rents payable
by the Coker Company under the Coker Complex Ground Lease and the Ancillary
Equipment Site Lease) in accordance with the formulas set forth in the Schedule
relating thereto:
Utility Schedule
------- --------
Electricity Schedule 5.5.1
Steam Schedule 5.5.2
Natural and Fuel Gas Schedule 5.5.3
Water Schedule 5.5.4
Compressed Air Schedule 5.5.5
Nitrogen Schedule 5.5.6
Notwithstanding anything in the foregoing to the contrary, in the event the
Clark Hydrogen Supply Agreement is terminated or expires prior to its stated
term, (i) the Coker Company shall have no obligation to purchase its full
requirements for electricity or steam from Clark R&M and (ii) to the extent that
the Coker Company purchases any portion of its requirements of steam and
electricity from Air Products pursuant to the Hydrogen Supply Agreement, Clark
R&M shall provide the Coker Company with any additional steam or electricity
required for operation of the Heavy Oil Processing Facility and the Coker
Company shall reimburse Clark R&M for the costs of such Services in accordance
with the formulas set forth in Schedule 5.5.1 or Schedule 5.5.2, as the case may
be.
(b) In order to properly measure each Service provided to the Coker
Complex pursuant to clause (a) above, Clark R&M shall (i) utilize the meter(s)
or calculation method, as the case may be, described under the heading
"Metering/Measurement Methodology for Services to the Coker Complex" on the
Schedule relating to such Service and/or Schedule 5.5(b), as the case may be,
(ii) operate and maintain all metering devices described on such Schedules and
(iii) test the accuracy of such meters and the calculation methods in accordance
with its regular practices.
<PAGE>
12
(c) If any test described in clause (b)(iii) of this Section 5.5
discloses that any metering device or calculation method related to the Services
provided pursuant to clause (a) above is materially inaccurate, Clark R&M shall
(i) promptly take such steps as necessary to correct such inaccuracy by
calibrating the applicable meters and/or adjusting the applicable calculation
method and (ii) adjust charges (except with respect to potable water) to the
Coker Company under Article 7 in order to compensate for the effect of such
inaccuracy on any charges related to the period extending back to the prior
accuracy test. For the purpose of calculating the amount of such adjustment,
the parties agree to assume that the inaccuracy occurred at the midpoint in time
between the prior accuracy test and the current accuracy test; provided,
--------
however, that if the time that such inaccuracy occurred can be ascertained by
- -------
Prudent Industry Practice, the amount of the applicable adjustment shall be
based on such time.
(d) Clark R&M shall preserve all its original test data, charts and
other records related to testing and measurements described in this Section for
a period of at least two years and make such records available, together with
calculations therefrom, for inspection or verification by the Coker Company.
(e) Should Clark R&M determine, in its reasonable judgment, that
additional and/or replacement meters are necessary to more accurately measure
the utilities described in this Section 5.5, it shall propose a metering upgrade
plan as part of the Annual Budget and Operating Plan for the Heavy Oil
Processing Facility.
(f) The agreement and obligation of Clark R&M to provide electric
utilities and electric service, natural gas and gas service and potable water
and water service under this Section 5.5 and sanitary sewage service under
Section 5.6 (each a "Regulated Utility") to the Coker Company is incident to,
-----------------
dependent upon and inseparable from the landlord/tenant relationship established
by the Coker Complex Ground Lease and the Ancillary Site Equipment Lease, and
such obligation shall continue only for the Coker Complex Ground Lease Term and
the Ancillary Site Lease Term, respectively, and the existence of such
landlord/tenant relationships between Clark R&M as landlord and the Coker
Company as tenant under such leases. The provisions of this Services and Supply
Agreement and the Ancillary Equipment Operating Fee are intended only to provide
a mechanism for Clark R&M to recover from the Coker Company the costs of
providing such Regulated Utilities described herein (and it is not intended that
Clark R&M shall make a profit by providing such utilities or utility services).
The Coker Company acknowledges, understands and agrees that none of the
Regulated Utilities provided by Clark R&M to the Coker Company may be sold or
resold by the Coker Company, and none of such Regulated Utilities may be used by
any other party or for any purposes other than in connection with its tenancies
under the Coker Complex Ground Lease and the Ancillary Site Equipment Lease,
respectively.
Section 5.6 Waste Management and Wastewater Services. Clark R&M
----------------------------------------
shall provide all collection, processing, treatment, transportation, storage,
disposal and recycling of waste generated by the Heavy Oil Processing Facility
and all rain water runoff, cooling tower blow down, sanitary sewage, recovered
oil, recovered residuals and all other hazardous and solid
<PAGE>
13
waste originating at the Heavy Oil Processing Facility in accordance with
Schedule 5.6. The Coker Company shall reimburse Clark R&M for the costs of such
Services (except sanitary sewage service, the costs for which are included in
the rents payable by the Coker Company under the Coker Complex Ground Lease and
the Ancillary Equipment Site Lease) in accordance with the formulas set forth in
Schedule 5.6.
Section 5.7 Support Services. Clark R&M shall provide the following
----------------
additional support services, each as more particularly described on the Schedule
opposite such Service on the chart below, as necessary for the operation of the
Heavy Oil Processing Facility. The Coker Company shall pay for each such
Service in accordance with the pricing formulas set forth in the Schedule
relating to such Service:
Support Service Schedule
--------------- --------
Sulfur and Coke Transport Service Schedule 5.7.1
Broad Band and Network Computing Services Schedule 5.7.2
Radio and Phone Services Schedule 5.7.3
Analytical Laboratory and
Custody Transfer Services Schedule 5.7.4
Security Services Schedule 5.7.5
Other Support Service Schedule 5.5.6
Section 5.8 Personnel and Management Services.
---------------------------------
(a) Clark R&M shall hire or provide all additional labor (other than
Coker Company employees) required to operate the Coker Complex and all labor and
professional, supervisory and management personnel as are required to operate
the Ancillary Equipment and to otherwise perform its obligations hereunder
including, without limitation, personnel required to provide the following
Services, each more particularly described on the Schedule referenced opposite
such Service on the chart below:
Operations Services Schedule 5.8.1
Engineering Services Schedule 5.8.2
Human Resources Services Schedule 5.8.3
Accounting Services Schedule 5.8.4
Administrative Services Schedule 5.8.5
(b) All personnel described in clause (a) above shall be employees of
Clark R&M for all purposes, including compensation, payroll, income and other
tax liabilities, pension contributions, insurance and workers compensation.
Clark R&M shall ensure that all key personnel are qualified and experienced in
operating facilities such as the Refinery.
(c) To the extent the Coker Company requires additional personnel to
fulfill its obligation under clause (a) of Section 4.1, Clark R&M shall assist
the Coker Company in
<PAGE>
14
hiring and training personnel that are qualified and experienced in operating
facilities such as the Refinery.
Section 5.9 Spare Parts.
-----------
(a) Pursuant to the Bill of Sale, the Coker Company is purchasing the
spare parts listed on Schedule 5.9 from Clark R&M (the "Existing Spare Parts").
--------------------
In accordance with Section 2.38 of the EPC Contract and its obligations under
Sections 5.1 and 5.2, Clark R&M shall procure additional spare parts on behalf
of the Coker Company or instruct the Contractor to purchase such spare parts on
behalf of the Coker Company (all such spare parts together with the Existing
Spare Parts, the "Coker Company Spare Parts"). Clark R&M shall use its best
-------------------------
efforts to ensure that all purchases of Coker Company Spare Parts are made at
competitive rates. At all times during the term of this Services and Supply
Agreement, Clark R&M shall maintain a complete inventory of all Coker Company
Spare Parts and shall manage and store such spare parts in a manner that ensures
that the Coker Company Spare Parts are at all time separate from the Common
Spare Parts and identifiable as property of the Coker Company. The Coker
Company shall reimburse Clark R&M for all Coker Company Spare Parts procured by
Clark R&M.
(b) Clark R&M shall acquire, manage and store all other spare parts
necessary for the operation of the Heavy Oil Processing Facility and the
performance of Clark R&M's obligations hereunder (the "Common Spare Parts").
------------------
The Coker Company shall reimburse Clark R&M for the cost of Common Spare Parts
utilized in connection with the Coker Complex.
(c) Clark R&M shall (i) ensure that all Coker Company Spare Parts are
new and that all spare parts described in this Section 5.9, including Coker
Company Spare Parts, are of good quality and free from defects, (ii) utilize all
such spare parts in accordance with manufacturer and supplier warranties and
recommendations, and (iii) assign to the Coker Company any warranties it obtains
in procuring Coker Company Spare Parts and other spare parts or equipment that
are utilized in connection with the Coker Complex.
Section 5.10 Catalysts, Chemicals and Consumables. Clark R&M shall
------------------------------------
supply all catalysts, chemicals and other consumable materials necessary for the
operation of the Heavy Oil Processing Facility and the performance of its
obligations hereunder, including, without limitation those more particularly
described on Schedule 5.10. The Coker Company shall pay Clark R&M for such
materials, in accordance with the pricing formulas set forth in Schedule 5.10.
Section 5.11 Quantity and Quality Control.
----------------------------
(a) In order to properly measure each product to be delivered under
this Services and Supply Agreement and the Product Purchase Agreement in
accordance with Prudent Industry Practice, Clark R&M shall (i) utilize the
meter(s) or calculation method, as the case may be, described under the headings
"Quantity" and "Quantity Measurement" on the Schedules to the Product Purchase
Agreement or the heading "Metering/Measurement Methodology" on the
<PAGE>
15
Schedules to the Services and Supply Agreement relating to such product, (ii)
operate and maintain all metering devices described on such Schedules and (iii)
test the accuracy of such meters and the calculation methods as described in
clause (d) below.
(b) Clark R&M shall implement, manage and maintain a system of
quality control and sampling to ensure that each product delivered under this
Services and Supply Agreement complies with (i) the specifications in the
Schedules and (ii) the Product Purchase Agreement, as the case may be.
(c) Every three days, Clark R&M shall provide the Coker Company with
the product quantity and quality information necessary for the Coker Company to
bill Clark R&M under Section 4.2 of the Product Purchase Agreement.
(d) In accordance with its regular practices, Clark R&M shall test
the accuracy of the meters and calculation methods described in clause (a) above
through a combination of field verifications of meters and material balances of
Refinery units. The Coker Company may from time to time request Clark R&M to
conduct additional accuracy tests, at the Coker Company's expense. If any
material inaccuracy is disclosed by any such test, Clark R&M shall (i) promptly
take such steps as necessary to correct such inaccuracy by calibrating meters
and/or adjusting the applicable calculation method and (ii) as applicable,
adjust charges to the Coker Company under Article 7 and/or provide the Coker
Company the information to adjust charges to Clark R&M under Section 4.2 of the
Products Purchase Agreement in order to compensate for the effect of such
inaccuracy on any charges related to the period extending back to the prior
accuracy test. For the purpose of calculating the amount of such adjustment, the
parties agree to assume that the inaccuracy occurred at the midpoint in time
between the prior accuracy test and the current accuracy test; provided,
--------
however, that if the time that such inaccuracy occurred can be ascertained by
- -------
Prudent Industry Practice, the amount of the applicable adjustment shall be
based on such time.
(e) Clark R&M shall preserve all its original test data, charts and
other records related to the quantity and quality measurements described in this
Section for a period of at least two years and make such records available,
together with calculations therefrom, for inspection or verification by the
Coker Company.
(f) Should Clark R&M determine, in its reasonable judgment, that
additional and/or replacement meters are necessary to more accurately measure
the Products, it shall propose a metering upgrade plan as part of the Annual
Budget and Operating Plan for the Heavy Oil Processing Facility.
(g) To the extent that any meters described on the Exhibits to the
Product Purchase Agreement are designated "XX-XXX", the Coker Company and Clark
R&M shall promptly replace such designation with meter identification numbers
upon completion of design engineering relating to such meter.
<PAGE>
16
Section 5.12 Environmental, Health and Safety Services.
-----------------------------------------
(a) Clark R&M shall be solely responsible for initiating, maintaining
and supervising all environmental, health and safety precautions and programs in
connection with the construction, operation and maintenance of the Heavy Oil
Processing Facility and the performance of its duties hereunder and shall
maintain the safety of the Heavy Oil Processing at a level consistent with
Applicable Law and Prudent Industry Practice, in accordance with Schedule
5.12.1.
(b) Clark R&M shall provide the emergency response services described
on Schedule 5.12.2. If an emergency conditions arises, Clark R&M may take
whatever steps it deems necessary and/or appropriate consistent with Prudent
Industry Practice and Applicable Law to preserve and protect any portion of the
Refinery and persons at the Refinery and to overcome the emergency condition,
restore the Refinery and continue performance of its duties hereunder. To the
extent such emergency action involves the Heavy Oil Processing Facility, the
Coker Company will reimburse Clark R&M for its pro rata share of expenses
incurred in connection with such action, in accordance with Schedule 5.12.2.
Section 5.13 Insurance Coverage.
------------------
(a) Clark R&M shall purchase and maintain, on behalf of the Coker
Company, the insurance coverage specified in Schedule 5.13 for the Heavy Oil
Processing Facility. Clark R&M shall cause such insurance coverage to (i) be
available at such times and in such amounts as required by the Financing
Documents, (ii) comply in form and substance to the requirements of the
Financing Documents, including, without limitation, the naming of Financing
Parties as mortgagees, additional insureds and loss payees, as appropriate, on
each insurance policy obtained pursuant to this clause (a) and (iii) provide an
insurer's waiver of subrogation in favor of each insured party thereunder.
(b) The Coker Company shall reimburse Clark R&M for its share of
costs associated with insurance coverage obtained pursuant to clause (a) above
according to the pricing formulas set forth in Schedule 5.13.
Section 5.14 Licensing, Permits and Approvals.
--------------------------------
(a) Clark R&M shall investigate, determine, procure, pay for and
maintain in effect, including all renewals and updating thereof, any and all
professional licenses, other Permits, or governmental approvals necessary for
continuous operation of the Heavy Oil Processing Facility including, without
limitation, those listed on Schedule 5.14.
(b) To the extent that any Permits are necessary for the continuous
operation of the Coker Complex, Clark R&M shall, to the extent permitted by
Applicable Law, (i) procure such Permits in the Coker Company's name or (ii)
ensure that such Permits are freely assignable by Clark R&M to the Coker Company
and, subsequently, to the Financing Parties. With respect to any Permits
currently held by Clark R&M that are necessary for the continuous operation of
<PAGE>
17
the Coker Complex that are not assignable under Applicable Law, Clark R&M agrees
to use its best efforts to ensure that such Permits are procured in the Coker
Company's name.
(c) The Coker Company shall reimburse Clark R&M for its share of
costs associated with any licenses, Permits or approvals obtained pursuant to
clause (a) above in accordance with the pricing formula set forth in Schedule
5.14.
(d) The Coker Company hereby agrees not to exercise its right,
pursuant to its air emissions permit No. 6825Z and PSD-TX-492 issued by the
Texas Natural Resource Conservation Commission (the "Standby Permit"), to
activate the Standby Permit to cover the entire Refinery, including the
Ancillary Equipment, unless activating the Standby Permit is required to allow
the Coker Company to continue operation of the Coker Complex. If the Coker
Company activates the Standby Permit, the Coker Company shall cooperate with
Clark R&M, at Clark R&M's sole cost and expense, to modify the Standby Permit to
the extent necessary to obtain air emission permits for the Clark Equipment;
provided that no such modification shall impair or restrict the right of the
- --------
Coker Company to operate the Heavy Oil Processing Facility at the greater of its
design capacity or its then actual capacity.
Section 5.15 Sulfur Recovery Services.
------------------------
(a) To the extent, at any time, the Sulfur Plant is unable to process
sulfur produced by the processing of Coker Company-owned feedstreams through the
Ancillary Equipment, the Hydrocracker and the Coker, Clark R&M shall provide the
Coker Company with alternative sulfur recovery services.
(b) In exchange for the provision of sulfur recovery services by
Clark R&M pursuant to clause (a) of this Section 5.15, to the extent, at any
time, the Clark R&M-owned sulfur recovery units at the Refinery are unable to
process sulfur produced by the processing of the Clark R&M-owned feedstreams at
the Refinery, the Coker Company agrees to the processing of Clark R&M-owned
sulfur through the Sulfur Plant to the extent that capacity is available at the
Sulfur Plant.
(c) Clark R&M shall coordinate the sulfur recovery activities
described in this Section 5.15.
ARTICLE 6. ANNUAL BUDGET AND OPERATING PLAN; REPORTING
Section 6.1 Annual Budget and Operating Plan.
--------------------------------
(a) The Annual Budget and Operating Plan for the first Operating Year
shall be the budget attached hereto as Schedule 6.1, as the same may be amended
by mutual consent, subject to any approval rights of the Financing Parties or
Independent Engineer set forth in the Financing Documents.
<PAGE>
18
(b) Sixty (60) calendar days prior to the start of each Operating
Year, other than the first Operating Year, Clark R&M shall prepare and submit to
the Coker Company, the Financing Parties and the Independent Engineer, for their
review and comment, a proposed annual budget and operating plan for such year
which Annual Budget and Operating Plan shall be substantially in the form of
Schedule 6.1 and include, without limitation, (i) detailed line items of the
anticipated revenues and expenses relating to the operation of the Heavy Oil
Processing Facility for such year and (ii) the scheduled maintenance shutdown(s)
of units comprising the Heavy Oil Processing Facility during such year.
(c) Subject to any approval rights of the Financing Parties or
Independent Engineer set forth in the Financing Documents, the Coker Company
shall accept or object to all or any portion of the proposed Annual Budget and
Operating Plan within thirty (30) calendar days of receipt thereof. If the Coker
Company objects to any portion of such proposed Annual Budget and Operating
Plan, the Coker Company and Clark R&M shall attempt in good faith to agree to an
Annual Budget and Operating Plan. If the Coker Company and Clark R&M have not
reached agreement on the Annual Budget and Operating Plan for any Operating Year
prior to the first day of such Operating Year, the Annual Budget and Operating
Plan in effect for such Operating Year shall be the same as the Annual Budget
and Operating Plan for the immediately preceding calendar year (with each item
on the budget adjusted based on a percentage change in the U.S. Consumer Price
Index, in each case, from the date the Annual Budget and Operating Plan then in
effect was approved) until a new Annual Budget and Operating Plan is approved.
Section 6.2 Operating Adjustments.
---------------------
(a) Clark R&M may modify the operations of the Ancillary Equipment or
the Coker Complex at its discretion so long as such modification does not (i) in
any way impede production of the Required Product Mix, (ii) cause an increase in
the reimbursable costs of the Coker Company that are payable hereunder that is
not offset by a corresponding increase in revenues under the Product Purchase
Agreement, (iii) adversely affect the reliability of or the useful life of
either the Coker Complex or the Ancillary Equipment, or (iv) otherwise have a
material adverse effect on the Coker Company, the Coker Complex, the Ancillary
Equipment or the Refinery (including, without limitation, a material adverse
effect on the ability of the Coker Company to pay its Senior Debt Obligations
when they become due and payable or to prepay Senior Debt in accordance with the
Base Case Financial Model).
(b) The Coker Company and Clark R&M agree to modify the Schedules
when and to the extent necessary in connection with adjustments permitted by
this Section 6.2. In the event of any such adjustments, Clark R&M shall notify
the Coker Company as soon as reasonably possible, and the parties shall
cooperate to effect the intent of this Section.
(c) To the extent Clark R&M determines, in its reasonable business
judgment and in conformity with Prudent Industry Practices, that it is
economically and technically prudent to process Coker Company feedstreams
through another Clark R&M processing unit at the Refinery which has
substantially the same processing capabilities as a unit comprising the Heavy
Oil Processing Facility, Clark R&M may substitute the processing capacity of
such unit with the
<PAGE>
19
other Clark R&M unit so long as (i) a substantially equivalent volume of Clark
R&M feedstreams are processed through the unit comprising the Ancillary
Equipment, (ii) the Clark Processing Fees shall be calculated as if the Coker
Company feedstreams were processed through the Heavy Oil Processing Facility
unit, and (iii)Clark R&M believes in its reasonable good faith judgment that the
result of such exchange of processing capacities will be to maximize the
profitability of the Refinery as a whole in a manner (A) that is mutually
beneficial to Clark R&M and the Coker Company and (B) that does not maximize the
profitability of Clark R&M at the expense of the Coker Company.
(d) To the extent that operational difficulties cause Actual Crude
Capacity for any day to be less than Crude Design Capacity, Clark R&M shall use
commercially reasonable efforts to procure alternative Coker feedstocks on
behalf of itself and the Coker Company in order operate the Coker at Actual
Coker Capacity and preserve the relative processing capacities of Clark R&M and
the Coker Company as would exist if the Ancillary Equipment were operating at
Crude Design Capacity. In such event, the Coker Company shall reimburse Clark
R&M for all Permitted Reimbursable Expenses incurred by Clark R&M in procuring
such feedstocks on behalf of the Coker Company and the Excess Coker Capacity for
such day shall be deemed to equal the volume necessary to preserve the relative
processing capacities of Clark R&M and the Coker Company as would exist if the
Ancillary Equipment were operating at Crude Design Capacity.
To the extent that such operating difficulties involve the Crude Unit,
Clark R&M shall use commercially reasonable efforts to procure alternative
feedstocks for the other units comprising the Ancillary Equipment on behalf of
itself and the Coker Company in order operate such units at their actual
capacities and preserve the relative processing capacities of Clark R&M and the
Coker Company as would exist if the Crude Unit were operating at Crude Design
Capacity. In such event, the Coker Company shall reimburse Clark R&M for all
Permitted Reimbursable Expenses incurred by Clark R&M in procuring such
feedstocks on behalf of the Coker Company and the capacity of such units
available for processing Clark R&M feedstreams pursuant to Section 3.5 hereof
for such day shall be deemed to equal the volume necessary to preserve the
relative processing capacities of Clark R&M and the Coker Company as would exist
if the Crude Unit were operating at Crude Design Capacity.
Section 6.3 Quarterly Reports. Clark R&M shall, within forty five
-----------------
(45) calendar days after the end of each of the first three calendar quarters of
each year and within ninety (90) days after the end of each calendar year,
submit a report to the Coker Company, the Financing Parties and the Independent
Engineer summarizing the actual operating activities at the Heavy Oil Processing
Facility during that quarter or year, as the case may be, including, without
limitation, the feedstream mixes and volumes utilized and such other operation
information as may be reasonably requested by the Coker Company the Financing
Parties or the Independent Engineer.
<PAGE>
20
ARTICLE 7. PRICING AND PAYMENT
Section 7.1 Pricing of Services and Supplies.
--------------------------------
(a) The Coker Company shall pay Clark R&M the Applicable Price for
each Service and Supply provided by Clark R&M to the Coker Company hereunder
(except for potable water and sanitary sewage services as provided in Sections
5.5 and 5.6, respectively).
(b) Clark R&M shall pay the Coker Company the Clark Processing Fee
for the processing services provided by the Coker Company to Clark R&M
hereunder.
Section 7.2 Net Pricing and Statements.
--------------------------
(a) Clark R&M shall deliver to the Coker Company an itemized
statement substantially in the form of Exhibit A hereto (the "Reconciliation
--------------
Statement") showing computation of the following for the prior monthly period:
- ---------
(i) a calculation of the Applicable Price for each Service and
Supply provided by Clark R&M to the Coker Company during such period;
(ii) a calculation of the Clark Processing Fee for such period;
and
(iii) the difference obtained as a result of subtracting the
amount in 7.2(a)(i) from the amount in 7.2(a) (ii), as such difference
may be adjusted from time to time pursuant to clause (d) Section 5.11.
(b) The Reconciliation Statement shall be considered an invoice to
the Coker Company of the amount computed in clause (a)(iii) above which shall be
paid in accordance with Section 7.3.
Section 7.3 Payment Procedure. Payments due under this Article 7
-----------------
shall be made pursuant to Reconciliation Statements to be rendered by Clark R&M
to the Coker Company on the eleventh (11/th/) Business Day of each month and to
be paid on the twentieth (20/th/) calendar day of each month.
Section 7.4 Alternative Pricing.
-------------------
(a) If a change in Applicable Law requires Clark R&M to make capital
expenditures or change its operating procedures in a manner that directly
results in a material increase in the cost of providing the Services and
Supplies hereunder, then upon the written request of Clark R&M the parties shall
meet to negotiate in good faith an equitable adjustment or adjustments to the
pricing of Services and Supplies hereunder (or an adjustment to the rents
payable under the Coker Complex Ground Lease and/or the Ancillary Equipment Site
Lease, respectively, with respect to the provision of potable water or sanitary
sewage service); provided, however, that no such adjustment or adjustments shall
-------- -------
become effective unless or until Clark
<PAGE>
21
R&M has demonstrated to the satisfaction of the Coker Company (and such other
parties as required under the Financing Documents) that such adjustment or
adjustments shall not (i) have a material adverse effect on the ability of the
Coker Company to pay its Senior Debt Obligations when they become due or payable
and (ii) become effective until approved by the Independent Engineer.
(b) In the event that either party hereto determines in good faith
judgment that the provisions set forth under the heading "Applicable Price" on
the Schedule relating to any Service or Supply hereunder does not accurately
reflect the actual cost of providing such Service or Supply (for any reason
other than a change in Applicable Law), then upon written request of such party
the parties shall meet to negotiate in good faith an equitable adjustment or
adjustments to the pricing of such Services or Supply to reflect the actual cost
of providing such Service or Supply (and to preserve the profit component, if
any, of such price); provided, however, that such adjustment or adjustments
-------- -------
shall not (i) have a material adverse effect on the ability of the Coker Company
to pay its Senior Debt Obligations when they become due or payable and (ii)
become effective until approved by the Independent Engineer.
(c) To the extent that any expansion of operations of Clark R&M at
the Refinery (including, without limitation, the operation of the existing Clark
R&M cokers after the Start-up Date) causes the Applicable Price of any Service
to be provided pursuant to Sections 5.5 or 5.6 to increase, Clark R&M shall
reduce the amounts charged the Coker Company for such Service so that the
Applicable Price of such Service shall conform to the pricing that would have
been in effect if such expansion had not occurred.
(d) Any disputes with respect to the foregoing shall be resolved in
accordance with Section 11.6 below.
Section 7.5 Recordkeeping; Right to Audit; Access to Books and
--------------------------------------------------
Records.
-------
(a) Clark R&M shall, in accordance with good business practices, keep
and maintain such books, records, accounts and other documents as may be
necessary to the performance of its obligations hereunder and which are
sufficient to reflect accurately and completely all amounts which form the basis
for Reconciliations Statements. Such records shall include receipts, memoranda,
vouchers, inventories, and accounts of every kind and nature pertaining to the
accounting for the Services and Supplies, as well as complete summaries and
reports setting forth in reasonably detail all reimbursable expenses incurred.
(b) The Coker Company shall have the right to audit all costs
incurred by Clark R&M for which Clark R&M seeks payment hereunder and shall have
the right to inspect and examine, during regular business hours and on not less
than five (5) days notice to Clark R&M all records maintained pursuant to clause
(a) above.
Section 7.6 Interest Rate for Late Payments. All amounts payable
-------------------------------
hereunder if not paid when due will accrue interest daily at the annual rate of
interest announced from time to time for dollars by The Chase Manhattan Bank,
N.A. at its offices located in New York, New
<PAGE>
22
York as its prime commercial interest rate for U.S. Dollar-denominated loans
originated in the United States plus two percent (2%) calculated from the due
date of such payment until the date of payment.
ARTICLE 8. DEFAULTS, REMEDIES AND TERMINATION
Section 8.1 Clark R&M's Right to Terminate. The failure of the Coker
------------------------------
Company to pay any amount due hereunder in excess of $250,000 which remains
uncured for a period of five (5) consecutive days from the date when payment of
such amount is due shall constitute a Coker Company default hereunder.
If a Coker Company default shall occur and be continuing, Clark R&M
after having given the Coker Company and the Financing Parties ninety (90) days
prior written notice may terminate this Services and Supply Agreement upon the
Coker Company's and/or the Financing Parties' subsequent failure to cure such
default within such ninety (90) day cure period.
Section 8.2 Coker Company's Right to Terminate and Other Remedies.
-----------------------------------------------------
Each of the following shall constitute a Clark R&M default hereunder:
(a) Failure by Clark R&M to pay any amount due hereunder in excess of
$250,000 on the date when payment of such amount is required, which continues
uncured for a period of five (5) consecutive days;
(b) Failure by Clark R&M to perform substantially any material
obligation hereunder, which failure continues uncured for a period of thirty
(30) consecutive days;
(c) Commencement of insolvency, receivership, reorganization or
bankruptcy proceedings by or against Clark R&M, which are not dismissed within
60 days;
(d) Any material representation or warranty of Clark R&M herein that
continues uncured for a period of sixty (60) consecutive days;
(e) Default by Clark R&M under Section 6.2 to the Product Purchase
Agreement; and
(f) Failure by Clark R&M to perform substantially any material
obligation under the Ancillary Equipment Site Lease or the Coker Complex Ground
Lease, which failure continues uncured for a period of thirty (30) consecutive
days.
Upon the occurrence of a Clark R&M default hereunder and subject to
such consent as may be required under the Financing Documents, the Coker Company
may take any of the following actions, provided that with respect to a default
--------
pursuant to clause (a) or (b) of this Section 8.2, the Coker Company shall have
first given Clark R&M sixty (60) days notice and
<PAGE>
23
opportunity to cure such default and Clark R&M shall have failed to cure such
default in its entirety within such sixty (60) day cure period: (x) terminate
this Services and Supply Agreement, and/or (y) exercise any or all remedies
available to it at law or in equity.
Section 8.3 Termination Option. Notwithstanding anything to the
------------------
contrary herein and subject to such consent as may be required under the
Financing Documents, this Services and Supply Agreement shall terminate at the
option of either party hereto should Final Completion (as such term is defined
in the EPC Contract) and completion of the Lessor Ancillary Equipment Upgrade
not occur on or before March 1, 2002 or such later date for completion of
construction of the Heavy Oil Processing Facility as may be contemplated by the
Financing Documents.
Section 8.4 Non-Exclusive Remedies; Specific Performance.
--------------------------------------------
(a) None of the provisions in this Article 8 are intended to be
exclusive of, or to limit, any rights available to either party at law or in
equity.
(b) Each of the parties hereto acknowledges and agrees that (i)
monetary damages may be an inadequate remedy for a breach of any of the
provisions of this Services and Supply Agreement, (ii) in addition to being
entitled to exercise all of its rights granted by law, including recovery of
damages, the other party shall therefore be entitled to specific performance of
the other party's obligations under this Services and Supply Agreement and (iii)
in the event of any action for specific performance it shall waive the defense
that a remedy at law would be adequate.
ARTICLE 9. TERM, AND COMMENCEMENT OF SERVICES
Section 9.1 Effectiveness; Term. This Services and Supply Agreement
-------------------
shall become effective on the date hereof and shall continue in effect until the
earlier of (a) the date on which this Services and Supply Agreement is
terminated pursuant to Article 8, and (b) the date of that is thirty (30) years
after the date hereof.
Section 9.2 End of Term Obligations.
-----------------------
Upon the expiration or termination, for whatever reason, of this
Services and Supply Agreement:
(a) Clark R&M shall cooperate with the Coker Company to enable it to
continue operation of the Coker Complex, reclaim goods, equipment and materials,
and otherwise effectuate the smooth transition of operations of the Coker
Complex to the Coker Company or a new manager engaged by the Coker Company;
(b) The Coker Company shall have the right, in its sole discretion,
directly to assume and become liable for any contracts or obligations that Clark
R&M may have undertaken
<PAGE>
24
with third parties in connection with the Services or provision of the Supplies
(other than any contracts or obligations related to the provision of electric
utilities or electric service), and Clark R&M shall execute all documents and
take all other reasonable steps requested by the Coker Company which may be
required to assign to and vest in the Coker Company all rights, benefits,
interest and title in connection with such contracts or obligations;
(c) Clark R&M shall deliver to the Coker Company all materials and
documents that are the Coker Company property including, without limitation, the
property referred to in Section 11.8; and
(d) Clark R&M and the Coker Company shall cooperate to amend their
respective Permits to reallocate their respective rights thereunder as necessary
for the Coker Company to continue operation the Heavy Oil Processing Facility
and Clark R&M to continue operation of the Clark Equipment.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES
Section 10.1 Representations and Warranties of the Coker Company.
---------------------------------------------------
The Coker Company represents and warrants to Clark R&M that:
(a) The Coker Company is a limited partnership duly formed and
validly existing under the laws of the State of Delaware; the Coker Company has
the power and authority to own its assets and to transact the business in which
it is now engaged or proposed to be engaged in; and the Coker Company is duly
qualified to do business in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.
(b) The execution, delivery and performance by the Coker Company of
this Services and Supply Agreement has been duly authorized by all necessary
corporate action and does not and will not: (1) require any further consent or
approval of the members of the Coker Company; (2) contravene the Coker Company's
partnership agreement or limited partnership certificate; (3) violate any
provision of any law, rule, regulation, order, writ, judgment, decree,
determination, or award presently in effect having applicability to the Coker
Company; (4) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to which
the Coker Company is a party or by which it or its properties may be bound or
affected; (5) result in, or require, the creation or imposition of any lien,
upon or with respect to any of the properties now owned or hereafter acquired by
the Coker Company; or (6) cause the Coker Company to be in default under any
such law, rule, regulation, order, writ, judgment, injunction, decree,
determination, or award or any such indenture, agreement, lease or instrument.
(c) This Services and Supply Agreement is in full force and effect
and is the legal, valid, and binding obligation of the Coker Company,
enforceable against the Coker
<PAGE>
25
Company in accordance with its terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, moratorium, insolvency or other similar
laws affecting creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
Section 10.2 Representations and Warranties of Clark R&M.
-------------------------------------------
Clark R&M represents and warrants to the Coker Company that:
(a) Clark R&M is a corporation duly formed and validly existing under
the laws of Delaware; Clark R&M has the corporate power and authority to own its
assets and to transact the business in which it is now engaged or proposed to be
engaged in; and Clark R&M is duly qualified to do business in each jurisdiction
in which the character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary.
(b) The execution, delivery and performance by Clark R&M of this
Services and Supply Agreement has been duly authorized by all necessary
corporate action and does not and will not: (1) require any further consent or
approval of the members of Clark R&M; (2) contravene Clark R&M's certificate of
incorporation or by laws, (3) violate any provision of any law, rule,
regulation, order, writ, judgment, decree, determination, or award presently in
effect having applicability to Clark R&M; (4) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Clark R&M is a party or by which
it or its properties may be bound or affected; (5) result in, or require, the
creation or imposition of any lien, upon or with respect to any off the
properties now owned or hereafter acquired by Clark R&M; or (6) cause Clark R&M
to be in default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or award or any such indenture, agreement,
lease or instrument.
(c) This Services and Supply Agreement is in full force and effect
and is the legal, valid, and binding obligation of Clark R&M enforceable against
Clark R&M in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, moratorium, insolvency, or
other similar laws affecting creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
(d) Clark R&M has all the required skills and capacity necessary to
provide and shall diligently provide the Services and Supplies in a timely and
professional manner, utilizing sound operation principles, project management
procedures and supervisory procedures, all in accordance with Applicable Law,
Prudent Industry Practice and the Base Case Financial Model.
<PAGE>
26
ARTICLE 11. FURTHER AGREEMENTS
Section 11.1 Intellectual Property; Confidentiality. Clark R&M agrees
--------------------------------------
to be bound by all confidentiality agreements and all agreements with respect to
intellectual property rights contained in the other Project Documents.
Section 11.2 Force Majeure.
-------------
(a) If an Event of Force Majeure causes a material adverse effect on
a party's ability to carry out its obligations hereunder, other than the
obligation to pay money, such party shall give to the other party prompt notice
of such Event of Force Majeure with reasonably full particulars thereof, and any
such obligations so far as they are affected by such Event of Force Majeure
shall be suspended during but not longer than the continuance of such Event of
Force Majeure and such further period thereafter as shall be reasonable in the
circumstances.
(b) As soon as practicable after giving notice under clause (a) above
the claiming party shall provide to the other party confirmation of the
particulars required to be given under clause (a) above.
(c) Nothing in this Section 11.2 shall suspend, excuse or delay any
party's obligation to pay hereunder.
(d) The non-performing party shall use reasonable diligence to remedy
its inability to perform or to minimize the impact of the Event of Force Majeure
as quickly as possible.
Section 11.3 Cooperation with Other Parties. Clark R&M shall
------------------------------
reasonably cooperate with the Coker Company, the Independent Engineer and the
Financing Parties in connection with the Financing Documents and/or any
refinancing thereof including, without limitation, the furnishing of such
information, the giving of such certificates and the furnishing of a reasonable
consent and such reasonable opinions of counsel and other matters as the Coker
Company, the Independent Engineer or the Financing Parties may reasonably
request in connection with the transactions contemplated hereby or by the
Financing Documents.
Section 11.4 Site Access. The Coker Company hereby grants to Clark
-----------
R&M a continuing license to use the portions of the Refinery owned or leased by
the Coker Company (the "Coker Company Site") to the extent necessary to perform
------------------
its obligations hereunder.
Section 11.5 Indemnity.
---------
(a) The Coker Company shall protect, indemnify, defend and hold
harmless Clark R&M, and Clark R&M shall protect, indemnify, defend and hold
harmless the Coker Company and the Financing Parties, together with in each case
the respective indemnitee's directors, officers, employees and agents (including
but not limited to affiliates and their employees) from and against all
liabilities, damages, losses, penalties, claims, judgments,
<PAGE>
27
awards, costs, expenses (including reasonable legal fees and any fines or
assessments charged against it), demands, suits and proceedings of any nature
whatsoever for death, injury or property damage that arise out of or are in any
manner connected with the negligence or willful misconduct of that party in its
performance of this Services and Supply Agreement.
(b) Each party's obligations with respect to claims and suits covered
by this Section are subject to the conditions that (i) the indemnitee gives the
indemnitor reasonably prompt notice of any such claim or suit, (ii) the
indemnitee cooperates in the defense of any such claim or suit and (iii) the
indemnitor has sole control of the defense and settlement to the extent of the
indemnitor's liability for any such claim or suit, provided that indemnitor
--------
shall confirm in writing its obligation to indemnify the indemnitee with respect
to all costs and expenses with respect to such claim or suit. Nothing contained
in this clause (b), however, shall preclude the indemnitee from (x) being
represented by its own counsel at its own expense or (y) participating in the
settlement if the claimed relief is non-monetary in nature.
(c) The Coker Company hereby agrees that, notwithstanding any
provision herein to the contrary, with respect to any loss that is or would be
covered by the policies of insurance specified in Section 5.13, Clark R&M shall
first seek to recover insurance proceeds under such policies, through submission
of a claim and exercise of good faith efforts over the ensuing sixty (60) day
period toward recovery of damages hereunder.
Section 11.6 Dispute Resolution.
------------------
(a) In the event of any dispute arising out of or in connection with
the Services and Supply Agreement, Clark R&M or the Coker Company may notify the
other party of the nature of the dispute and the parties shall, in good faith
and using all reasonable efforts, seek to settle the dispute amicably through
negotiation between senior executives. Within twenty (20) days after delivery of
such notice, such senior executives shall meet at a mutually acceptable time and
place, and thereafter as often as reasonably deemed necessary, to exchange
relevant information and to attempt to resolve the dispute. All discussions
pursuant to this clause (a) shall be confidential and shall be treated as
compromise and settlement negotiations for all purposes including the admission
of evidence in any subsequent arbitration. If the matter has not been resolved
within sixty (60) days of the delivery of notice of the dispute, or if the
parties fail to meet within the twenty-day period referred to above, either
party may initiate arbitration of the dispute pursuant to the terms of clause
(b) of this Section.
(b) All disputes arising out of or in connection with the Services
and Supply Agreement shall be settled finally by arbitration under rules
applicable to arbitrations of the American Arbitration Association (the "AAA
---
Rules") in effect at such time. The arbitration shall take place in New York
- -----
City. Subject to the provisions of paragraph (c) below, the arbitral tribunal
shall consist of three arbitrators, one designated by each of the parties and
the third, who shall be the chairman of the tribunal, selected by agreement of
the two designated arbitrators. In the event the two arbitrators fail to agree
on the selection of the chairman, the chairman shall be selected in accordance
with ABB Rules. The substantive law applicable to the subject matter of the
arbitration shall be the law indicated in Section 12.8. Copies of the request
for arbitration
<PAGE>
28
and the answer thereto shall be served by a party on the other party in
accordance with Section 12.7. Subject to paragraph (c) below, the award of the
arbitral tribunal shall be rendered within one hundred eighty (180) days from
signature or approval of the terms of reference, subject to extension for good
cause only. The award shall be final and binding on the parties, and may be
confirmed or embodied in any order or judgment of any court of competent
jurisdiction.
(c) In the case of any claim for damages in a principal amount of two
hundred fifty thousand U.S. dollars (U.S.$250,000) or less, (i) the claim shall
be resolved by a sole arbitrator selected in accordance with AAA Rules, (ii) the
terms of reference shall be signed and any hearing of the matter shall be held
within one hundred twenty (120) days following the later of service of the
answer and transmission of the file to the arbitrator, and (iii) the arbitrator
shall render the award within thirty (30) days after the hearing or, in the
event a hearing is not held, signature or approval of the terms of reference,
subject extension for good cause only.
Section 11.7 Taxes.
-----
(a) The Coker Company shall be responsible for payment of or
reimbursement of the cost to Clark R&M of (i) all duties and all real property,
personal property, sales, use, municipal or VAT, and other like taxes, in each
case assessed against the Coker Complex and (ii) its pro rata share of all
duties and all real property, personal property, sales, use, municipal or VAT,
and other like taxes, in each case assessed against the Ancillary Equipment.
(b) Clark R&M shall use commercially reasonable efforts to minimize
the tax obligations arising out of or associated with this Services and Supply
Agreement, the Ancillary Equipment or the Coker Complex and shall assist the
Coker Company in (i) applying for available tax exemptions including, without
limitation, a Texas direct pay permit and (ii) preparing and submitting any
exemption certificates required under the clause (a) above. When obtained, the
Coker Company shall issue Clark R&M its Texas direct pay permit for the
provisions of Services and Supplies hereunder. If, for any reason, during the
term of this Services and Supply Agreement, the Coker Company provides Clark R&M
products or services which are subject to Texas sales and use tax, Clark R&M
shall provide it Texas direct pay permit to the Coker Company.
(c) Each party shall be solely responsible for payment of any
federal, state or local taxes based on upon or measured by such party's income.
Section 11.8 Title to Property.
-----------------
(a) Title to all materials, equipment, supplies, consumables, spare
parts and other items purchased or obtained by Clark R&M in connection with
performance of the Services related to, and provision of the Supplies for, the
Coker Complex shall pass immediately to and vest in the Coker Company upon
passage of title from the vendor or supplier thereof.
(b) All materials and documents prepared or developed by Clark R&M or
its employees, representatives or contractors in connection with performance of
the Services related
<PAGE>
29
to, and provision of Supplies for, the Coker Complex, including all manuals,
data, designs, drawings, plans, specifications, reports, and accounts shall
become the property of the Coker Company when prepared, and Clark R&M and its
contractors.
Section 11.9 Subcontractors.
--------------
(a) Clark R&M shall have the right to subcontract any portion of the
Services to be provided hereunder and enter into supply agreements with third
parties in connection with the provision of Supplies hereunder. Clark R&M shall
assure that its subcontractors, subcontracts and supply agreements comply with
all pertinent provisions of this Services and Supply Agreement.
(b) Clark R&M shall remain responsible for all of its obligations
under this Supply and Service Agreement regardless of whether a subcontract or
supply agreement is made or whether Clark R&M relies upon any subcontractor to
any extent. Clark R&M's use of subcontractors for the performance of its
obligations hereunder shall in no way increase Clark R&M's rights or diminish
Clark R&M's liabilities hereunder with respect to the Coker Company and this
Services and Supply Agreement shall be as though Clark R&M had itself performed
such obligations.
(c) The Coker Company shall not be deemed by virtue of any
subcontract entered into by Clark R&M in connection herewith to have any
contractual obligation to or relationship with any subcontractor of Clark R&M.
ARTICLE 12. MISCELLANEOUS
Section 12.1 Relationship of Parties.
-----------------------
(a) Nothing in this Services and Supply Agreement shall be deemed to
constitute either party hereto a partner, joint venturer, agent or legal
representative of the other party or to create any fiduciary relationship
between or among the parties.
(b) Clark R&M shall at all times be deemed an independent contractor
with respect to the provision of Services and Supplies and neither it nor any of
its employees or the employees of any of its subcontractors shall be considered
an agent, servant or employee of the Coker Company.
Section 12.2 Third Party Beneficiaries. (a) The Financing Parties
-------------------------
are intended third party beneficiaries of this Services and Supply Agreement and
the representations, warranties, covenants and agreements of the parties hereto
are made for the benefit of, and may be relied upon by, the Financing Parties.
<PAGE>
30
(b) Except as otherwise provide in this Section 12.2, the rights and
obligations created hereunder shall apply exclusively to the parties hereto and
their successors and permitted assigns, and no right shall be created in any
third party by reason of this Services and Supply Agreement or separate act or
action taken independently by either party.
Section 12.3 Clark R&M Warranties.
--------------------
(a) Clark R&M warrants that at time of delivery, each product that
Clark R&M supplies to the Coker Company hereunder shall meet its respective
specifications set forth herein and in the Schedule in all material respects.
CLARK R&M DOES NOT MAKE, AND EXPRESSLY DISCLAIMS, ANY OTHER WARRANTIES
WHATSOEVER WITH RESPECT TO THE PRODUCTS TO BE SUPPLIED BY CLARK R&M HEREUNDER,
INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
(b) Clark R&M hereby assigns any assignable warranties made by third
party suppliers for any products supplied by it hereunder. Clark R&M shall
cooperate with the Coker Company in claims made by the Coker Company against any
third party suppliers regardless of any warranty rights. The Coker Company
hereby releases Clark R&M from claims arising from a breach of such third party
warranties.
(c) Clark R&M warrants that each Service or Supply provided by Clark
R&M to the Coker Company hereunder shall meet its respective specifications set
forth herein and in the Schedules in all material respects and shall meet the
practices Clark R&M generally uses to perform similar functions at other United
States refinery facilities it owns and operates. CLARK R&M DOES NOT MAKE, AND
EXPRESSLY DISCLAIMS, ANY OTHER WARRANTIES WHATSOEVER WITH RESPECT TO THE
SERVICES AND SUPPLIES TO BE PROVIDED BY CLARK R&M HEREUNDER, INCLUDING WITHOUT
LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
Section 12.4 No Indirect Damages. Notwithstanding anything to the
-------------------
contrary herein, in no event shall either party be liable for consequential,
incidental, indirect, special or punitive damages hereunder including, without
limitation, any damages measured by the principal amount of the Coker Company's
obligations under the Financing Documents.
Section 12.5 Assignments.
-----------
(a) Clark R&M shall not assign its rights hereunder without the prior
written consent of the Coker Company and the Financing Parties. The Coker
Company may assign its rights hereunder to the Financing Parties, as collateral
security for its obligations under the Financing Documents, but otherwise shall
not assign its rights hereunder without the prior written consent of Clark R&M
and the Financing Parties. Clark R&M hereby expressly authorizes the Financing
Parties, or the Collateral Trustee acting on behalf of the Financing Parties, as
a secured party, to exercise all rights of the Coker Company under this Services
and Supply Agreement and to subsequently assign such rights in connection
therewith.
<PAGE>
31
(b) This Services and Supply Agreement shall be binding upon and
shall inure to the benefit of, the successors and permitted assigns of Clark R&M
and the Coker Company.
(c) This Services and Supply Agreement shall inure to the benefit of
the Collateral Trustee, the Financing Parties and any subsequent transferee or
assignee thereof.
(d) Notwithstanding anything to the contrary herein, no assignment of
the rights of the Coker Company with respect to the Regulated Utilities to any
Person shall be effective unless and until the rights of the Coker Company under
the Coker Complex Ground Lease and the Ancillary Equipment Site Lease are
assigned to such Person.
Section 12.6 Amendments. No amendment, modification or alteration of
----------
the terms hereof shall be binding unless the same is in writing and duly
executed by each of the parties hereto.
Section 12.7 Notices. Any notice, request, consent, waiver or other
-------
communication required or permitted hereunder shall be effective only if it is
in writing and personally delivered by hand or by overnight courier or sent by
certified or registered mail, postage prepaid, return receipt requested,
addressed as follows:
If to Clark R&M:
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: Richard A. Keffer
If to the Coker Company:
Port Arthur Coker Company L.P.
Port Arthur Refinery
1801 S. Gulfway Drive
Office Number 36
Port Arthur, Texas 77640
Attention: K.W. Isom
(or if sent by U.S. Mail:
Port Arthur Coker Company L.P.
P.O. Box 908
Port Arthur, Texas 77641-0908
Attention: K.W. Isom)
<PAGE>
32
Any such notice, request, consent, waiver or other communication
required or permitted hereunder, whether to Clark R&M or the Coker Company,
shall also be personally delivered by hand or by overnight courier or sent by
certified or registered mail, postage prepaid, return receipt requested, to the
Collateral Trustee on behalf of the Financing Parties, addressed as follows:
Bankers Trust Company
Corporate Trust & Agency Services
Four Albany Street, 4/th/ Floor
New York, New York 10006
Attention: James McDonough
Section 12.8 GOVERNING LAW. THE PLACE OF EXECUTION, DELIVERY OR
-------------
PERFORMANCE OF THIS SERVICES AND SUPPLY AGREEMENT OR OF THE DOMICILE OF THE
PARTIES HERETO NOTWITHSTANDING, THIS SERVICES AND SUPPLY AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SERVICES AND SUPPLY AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT MATTERS AFFECTING THE
OBLIGATION OF CLARK R&M TO PROVIDE ELECTRIC UTILITIES OR ELECTRIC SERVICE,
NATURAL GAS OR GAS SERVICE, POTABLE WATER OR WATER SERVICE OR SANITARY SEWAGE
SERVICES TO THE COKER COMPANY, INCLUDING THE ENFORCEMENT OF REMEDIES WITH
RESPECT THERETO, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Section 12.9 Submission to Jurisdiction; Forum Selection.
-------------------------------------------
(a) Each of the parties hereto submits to the non-exclusive
jurisdiction of the courts of the State of New York, the State of Texas and the
courts of the United States of America located in the State of New York and the
State of Texas over (i) any suit, action or proceeding with respect to this
Services and Supply Agreement or the transactions contemplated hereby if not
settled by arbitration pursuant to Section 11.6 above and (ii) the enforcement
of any arbitral award issued pursuant to Section 11.6 above.
(b) Except for an arbitration award under Section 11.6 hereof, any
suit, action or proceeding with respect to this Services and Supply Agreement or
the transactions contemplated hereby, or the enforcement of any arbitral award
in connection therewith, may be brought only in the courts of the State of New
York or the courts of the United States of America located in the State of New
York, in each case located in the Borough of Manhattan, City of New York, State
of New York. Each of the parties hereto waives any objection that it may have to
the
<PAGE>
33
venue of such suit, action or proceeding in any such court or that such suit,
action or proceeding in such court was brought in an inconvenient court and
agrees not to plead or claim the same.
Section 12.10 Appointment of Agent for Service of Process. Each
-------------------------------------------
party hereto irrevocably appoint CT Corporation, at 1633 Broadway, New York, New
York 10019, as its authorized agent in the State of New York upon which process
may be served in any suit, action or proceeding with respect to this Services
and Supply Agreement or the transactions contemplated hereby, and agrees that
service of process upon such agent, and written notice of said service to such
party by the person serving the same to the address provided in Section 12.7,
shall be deemed in every respect effective service of process upon such party in
any such suit or proceeding. Each party hereto further agrees to take any and
all action as may be necessary to maintain such designation and appointment of
such agent in full force and effect so long as this Services and Supply
Agreement is in effect pursuant to Section 9.1.
Section 12.11 No Waiver. The waiver of either party of a default or
---------
breach of any provision of this Services and Supply Agreement by the other party
shall not operate or be construed to operate as a waiver of any subsequent
defaults or breaches of the same or different kind. The failure of a party to
exercise any rights hereunder in a particular instance shall not operate as a
waiver of such party's right to exercise the same or different rights in
subsequent instances. The making or acceptance of a payment by either party
with knowledge of the existence of a default or breach shall not operate or be
construed to operate as a waiver of any default or breach.
Section 12.12 Counterparts. This Services and Supply Agreement may
------------
be executed by one or more of the parties to this Services and Supply Agreement
on any number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. Delivery of
an executed signature page of this Services and Supply Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.
Section 12.13 Integration. This Services and Supply Agreement and
-----------
the other Project Documents represent the agreement of the Coker Company and
Clark R&M with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Coker Company or Clark R&M
relative to subject matter hereof not expressly set forth or referred to herein
or in the other Project Documents.
Section 12.14 Severability. Any provision of this Services and
------------
Supply Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 12.15 Headings. Captions and headings in this Services and
--------
Supply Agreement are for reference only and do not constitute a part of the
substance of this Services and Supply Agreement.
<PAGE>
34
Section 12.6 WAIVER OF JURY TRIAL. THE COKER COMPANY AND CLARK R&M
--------------------
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS SERVICES AND SUPPLY AGREEMENT OR ANY OTHER
PROJECT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Services and Supply Agreement to be signed by their respective
officers thereunto duly authorized as of the day and year first set forth above.
CLARK REFINING & MARKETING, INC.
By: /s/ Maura J. Clark
--------------------------------------
Name: Maura J. Clark
Title: Executive Vice President and
Chief Financial Officer
PORT ARTHUR COKER COMPANY L.P.
By: SABINE RIVER HOLDING CORP., as
General Partner
By: /s/ Maura J. Clark
---------------------------------
Name: Maura J. Clark
Title: Executive Vice President and
Chief Financial Officer
<PAGE>
APPENDIX A-DEFINITIONS TO THE:
Services and Supply Agreement
Product Purchase Agreement
Coker Complex Ground Lease
Ancillary Equipment Site Lease
Transfer and Assignment Agreement
General Provisions
------------------
The following terms shall have the following meanings for all purposes of
the Services and Supply Agreement, the Product Purchase Agreement, Coker Complex
Ground Lease, the Ancillary Equipment Site Lease and the Transfer and Assignment
Agreement, each referred to below, unless otherwise defined in such agreements
or the context thereof shall otherwise require, and such meanings shall be
equally applicable to both the singular and the plural forms of the terms herein
defined. In the case of any conflict between the provisions of this Appendix A
and the provisions of the main body of any of the above agreements, the
provisions of the main body of such agreement shall control the construction of
such agreement.
Unless the context otherwise requires, references to (i) agreements shall
include sections, schedules, exhibits and appendices thereto and shall be deemed
to mean and include such agreement (and sections, schedules, exhibits and
appendices) as the same may be amended, supplemented and otherwise modified from
time to time, (ii) parties to agreements or government agencies shall be deemed
to include the permitted successors and assigns of such parties and the
successors and assigns of such agencies and (iii) laws or regulations shall be
deemed to mean such laws or regulations as the same may be amended from time to
time and any superseding laws or regulations covering the same subject matter.
"Actual Coker Capacity" means with respect to the Coker, its capacity, from
---------------------
time to time, to process feedstreams.
"Actual Crude Capacity" means with respect to the Ancillary Equipment, its
---------------------
capacity, from time to time, to process crude oil.
"Actual Hydrocracker Capacity" means with respect to the Hydrocracker, its
----------------------------
capacity, from time to time, to process gas oil.
"Adjacent Refinery Property" means the land described on Exhibit B to the
--------------------------
Coker Complex Ground Lease and also on Exhibit C to the Ancillary Equipment Site
Lease.
"Amine Treating Unit" means the amine treating unit to be constructed
-------------------
at the Refinery and designated ATU 7841.
"Ancillary Equipment" means, collectively, the Crude Unit and the other
-------------------
processing units described on Exhibit B to the Ancillary Equipment Site Lease.
"Ancillary Equipment Easement" has the meaning given such term in Section
----------------------------
2.2 of the Ancillary Equipment Site Lease.
<PAGE>
2
"Ancillary Equipment Operating Fee" has the meaning given such term in
---------------------------------
Section 13.2(b) of the Ancillary Equipment Site Lease.
"Ancillary Equipment Site" has the meaning given such term in Section 2.1
------------------------
of the Ancillary Equipment Site Lease.
"Ancillary Equipment Site Initial Term" means the period commencing on the
-------------------------------------
August 19, 1999 and ending on August 19, 2029.
"Ancillary Equipment Site Lease" means the Ancillary Equipment Site Lease
------------------------------
and Easement Agreement, dated as of August 19, 1999, between Clark R&M and the
Coker Company.
"Ancillary Equipment Site Leasehold" has the meaning given such term in
----------------------------------
Section 2.1 of the Ancillary Equipment Site Lease.
"Ancillary Equipment Site Lease Term" has the meaning given such term in
-----------------------------------
Article XX of the Ancillary Equipment Site Lease.
"Ancillary Equipment Site Renewal Term" means each period following the end
-------------------------------------
of the Ancillary Equipment Initial Term with respect to which Lessee has the
option to renew the Ancillary Equipment Site Lease pursuant to Article XX of the
Ancillary Equipment Site Lease.
"Ancillary Equipment Upgrade Contract" means the Reimbursable Contract for
------------------------------------
Engineering, Procurement and Construction, dated as of March 24, 1998, between
Clark R&M and the Contractor, as amended by Amendment No. One, dated as of
August 19, 1999, as further amended, supplemented or otherwise modified from
time to time.
"Annual Budget and Operating Plan" means, for any Operating Year, the
--------------------------------
budget and operating plan in effect pursuant to Section 6 of the Services and
Supply Agreement.
"Applicable Law" means, collectively, (i) all Permits and (ii) all laws,
--------------
treaties, ordinances, judgments, decrees, injunctions, writs, orders and
stipulations of any court, arbitrator or governmental agency or authority and
statutes, rules, regulations, orders and interpretations thereof of any federal,
state, county, municipal, regional, environmental or other governmental body,
instrumentality, agency, authority, court or other body applicable from time to
time to the Refinery, the operation or maintenance of the Refinery, or the
performance of any obligations under the Clark R&M Agreements, any other Project
Document or any other agreement entered into in connection therewith.
"Appraisal Procedure" with respect to any renewal option of any lease,
-------------------
means a procedure whereby two independent Qualified Appraisers, one appointed by
the lessor and one by the lessee, shall agree upon the value, period, amount or
determination then the subject of an appraisal, as follows: If either the
lessor or the lessee shall determine that a value, period or amount of
determination to be determined under such lease or any related document cannot
timely be established by agreement, such party shall appoint its Qualified
Appraiser and give
<PAGE>
3
notice thereof to the other party, which shall appoint its Qualified Appraiser
within 10 days thereafter. If such other party does not appoint its Qualified
Appraiser within such ten day period, the determination of the first Qualified
Appraiser made within 20 days thereafter shall be conclusive and binding on the
lessor and the lessee. If within 20 days after appointment of the second of the
two Qualified Appraisers, such Qualified Appraisers are unable to agree upon the
value, period, amount or determination in question, they jointly shall appoint a
third Qualified Appraiser within 10 days thereafter, or, if they do not do so,
either the lessor or the lessee may request the American Arbitration Association
office in Houston, Texas (or if no such office exists at such time, the American
Arbitration Association office in New York, New York), or any organization
successor thereto, to appoint the third Qualified Appraiser from a panel of
arbitrators knowledgeable on the subject of refinery land and asset valuations
in the Texas Gulf Coast area. The decision of the third Qualified Appraiser
shall be given within 20 days after his appointment. If three Qualified
Appraisers shall be so appointed, the average of all three determinations shall
be conclusive and binding on the lessor and the lessee unless the determination
of one Qualified Appraiser is disparate from the middle determination by more
than twice the amount by which the third determination is disparate from the
middle determination, in which case the determination of the most disparate
Qualified Appraiser shall be excluded and the average of the remaining two
determinations shall be conclusive and binding on the lessor and the lessee.
The obligation to pay the fees and expenses of Qualified Appraisers incurred in
connection with any Appraisal Procedure shall be divided equally between the
lessor and the lessee.
"Auxiliary Facilities" has the meaning given such term in Article VI of the
--------------------
Coker Complex Ground Lease.
"Auxiliary Rights" has the meaning given such term in Article VI of the
----------------
Coker Complex Ground Lease.
"Available Coker Company Maya" means, for any day, the sum of (a) the
----------------------------
Contract Quantity for such day, plus (b) the extent, if any, that the Available
----
Coker Company Maya for the preceding day exceeds the Actual Crude Capacity for
such preceding day.
"Available Coker Company VTBs" means, for any day, the sum of (a) the Coker
----------------------------
Company VTBs produced by the Crude Unit on such day, plus (b) the extent, if
----
any that Available Coker Company VTBs for the preceding day exceeds Actual Coker
Capacity for such preceding day.
"Base Case Financial Model" shall mean the financial model described on
-------------------------
Exhibit A to the Services and Supply Agreement.
"BPD" has the meaning given such term in the Long-Term Oil Supply
---
Agreement.
"Business Day" means any day other than Saturday, Sunday or a legal holiday
------------
in the United States of America.
<PAGE>
4
"Clark Equipment" means all Clark Refinery Property other than the
---------------
Ancillary Equipment.
"Clark Hydrogen Supply Contract" means the Product Supply Agreement, dated
------------------------------
as of August 1, 1999, between Clark R&M and Air Products, Inc.
"Clark Maya" means Maya Crude Oil purchased by Clark R&M.
----------
"Clark Processing Fee" means, for any monthly period, the total fees due
--------------------
the Coker Company from Clark R&M for processing services provided pursuant to
Sections 3.5, 4.2 and 4.3.
"Clark R&M" means Clark Refining & Marketing, Inc., a Delaware corporation.
---------
"Clark R&M Agreements" means, collectively, (i) the Services and Supply
--------------------
Agreement, (ii) the Product Purchase Agreement, (ii) the Coker Complex Ground
Lease and (iv) the Ancillary Equipment Site Lease.
"Clark Refinery Property" means all real and personal property owned by
-----------------------
Clark R&M and located at the Refinery.
"Coker" means the delayed coker to be constructed at the Refinery and
-----
designated DCU 843.
"Coker Company" means Port Arthur Coker Company L.P., a Delaware limited
-------------
partnership.
"Coker Company Crude Oil Volume" means, on any day, the volume, stated in
------------------------------
BPD, of Coker Company-owned crude oil processed through the Crude Unit.
"Coker Company Maya" means Maya Crude Oil purchased by the Coker Company.
------------------
"Coker Complex" means, collectively, the Coker, the Hydrocracker, the
-------------
Sulfur Plant, the Sour Water Stripper, the Amine Treating Unit and the Coker
Complex Offsites.
"Coker Complex Design Capacity" means with respect to the Coker Complex,
-----------------------------
its nameplate capacity, stated in BPD, to process feedstocks.
"Coker Complex Ground Lease" means the Coker Complex Ground Lease and
--------------------------
Blanket Easement Agreement, dated as of August 19, 1999, between Clark R&M and
the Coker Company.
"Coker Complex Ground Lease Term" has the meaning given such term in
-------------------------------
Article XX of the Coker Complex Ground Lease.
<PAGE>
5
"Coker Complex Initial Term" means the period commencing on August 19, 1999
--------------------------
and ending on August 19, 2029.
"Coker Complex Leasehold" has the meaning given such term in Section 2.1 of
-----------------------
the Coker Complex Ground Lease.
"Coker Complex Offsites" means, collectively, (a) the control room, flare,
----------------------
cooling tower, sulfur loading facilities and power station no. 6 that are being
constructed pursuant to the EPC Contract and (b) the coker feed tank nos. 108
and 109 that are being modified pursuant to the EPC Contract.
"Coker Complex Renewal Term" means each period following the end of the
--------------------------
Initial Term with respect to which Lessee has the option to renew the Coker
Complex Ground Lease pursuant to Article XX of the Coker Complex Ground Lease.
"Coker Complex Site" has the meaning give such term in Section 2.1(a) of
------------------
the Coker Complex Ground Lease.
"Coker Design Capacity" means with respect to the Coker, its nameplate
---------------------
capacity, stated in BPD, to process feedstocks.
"Collateral Trustee" means the collateral trustee granted a security
------------------
interest, on behalf of the Financing Parties, in the Senior Debt pursuant to the
Financing Documents and any successor collateral trustee thereunder.
"Common Security Agreement" means the Common Security Agreement, dated as
-------------------------
of August 19, 1999, among the Coker Company, the Funding Company, Sabine,
Neches, Bankers Trust Company, as Collateral Trustee and Depositary Bank,
Deutsche Bank AG, New York Branch, as Administrative Agent, Winterthur
International Insurance Company Limited, as Oil Payment Insurers Administrative
Agent and HSBC Bank USA, as Capital Markets Trustee,
"Contract Quantity" means (a) for any day when the Long-Term Oil Supply
-----------------
Agreement is in effect and PMI has not reduced the volume of Maya available to
the Coker Company pursuant thereto, the "Contract Quantity" in effect on such
day pursuant to the Long-Term Oil Supply Agreement or such lesser amount of Maya
Crude Oil as may be purchased thereunder pursuant to Section 8.2 of the Long-
Term Oil Supply Agreement, and (b) for any other day, the amount of Maya Crude
Oil sufficient to operate the Coker at eighty percent of Actual Coker Capacity.
"Contractor" means Foster Wheeler USA Corporation, a Delaware corporation.
----------
"Crude Design Capacity" means with respect to the Ancillary Equipment, its
---------------------
nameplate capacity, stated in BPD, to process heavy crude oil.
<PAGE>
6
"Crude Unit" means the crude unit and vacuum tower located at the Refinery
----------
and collectively designated AVU-146.
"CRU 1344 Hydrotreater" means the naphtha hydrotreater located at the
---------------------
Refinery and designated CRU 1344.
"Easements" has the meaning given such term in Section 2.2 of the Coker
---------
Complex Ground Lease.
"EPC Contract" means the Contract for Engineering, Procurement and
------------
Construction Services, dated as of July 12, 1999, between the Coker Company and
the Contractor, as amended, supplemented or otherwise modified from time to
time.
"Event of Force Majeure" means any event or circumstance if (i) such event
----------------------
or circumstance is beyond the reasonable control of the affected party and (ii)
such event or circumstance is not the direct or indirect result of a party's
negligence or the failure of such party to perform any of its obligations under
the applicable Clark R&M Agreement, including, without limitation:
1. any interruption or cessation in delivery of Coker Company Maya to the
Refinery, whether or not due to an event of force majeure under the
Long-Term Oil Supply Agreement;
2. acts of God, epidemic, earthquake, landslide, lightning, fire,
explosion, accident, tornado, drought, blight, famine, flood, hurricane,
or other extraordinary weather conditions more severe than those
experienced at any time in the last thirty (30) years for the geographic
area of the Refinery;
3. acts of a public enemy, war (declared or undeclared), blockade,
insurrection, riot or civil disturbance, sabotage, quarantine, or any
exercise of the power of eminent domain, police power, condemnation or
other taking by or on behalf of any public, quasi-public or private
entity;
4. laws, rules, regulations, orders, judgments or other acts of any
foreign, federal, state or local court, administrative agency,
governmental body or authority;
5. strikes, boycotts or lockouts, except any such strike, boycott or
lockout that is not national or industry-wide that involves the
employees of Clark R&M; and
6. a partial or entire interruption or other failure of (a) the supply of
electricity, water, wastewater treatment, steam, hydrogen or other
utilities
<PAGE>
7
to the Refinery or any part thereof, or (b) pipeline service, ship or
barge service, dock access or usage or other transportation facilities.
"Excess Coker Capacity" means, for any day, the extent that Actual Coker
---------------------
Capacity for such day exceeds the capacity necessary for the Coker to process
the Available Coker Company VTBs for such day.
"Excess Coker Capacity Option" has the meaning given such term in Section
----------------------------
4.2(a) of the Services and Supply Agreement.
"Excess Crude Capacity" means, for any day, the extent that Actual Crude
---------------------
Capacity for such day exceeds the capacity necessary for the Ancillary Equipment
to process the Available Coker Company Maya for such day and the light crude oil
necessary to process such Available Coker Company Maya.
"Excess Crude Capacity Option" has the meaning given such term in Section
----------------------------
3.5(b) of the Services and Supply Agreement.
"Excess Hydrocracker Capacity" means, for any day, the extent that Actual
----------------------------
Hydrocracker Capacity for such day exceeds the capacity necessary for the
Hydrocracker to process Coker Company VGO produced by the Coker on such day.
"Excess Hydrocracker Capacity Option" has the meaning given such term in
-----------------------------------
Section 4.3(a) of the Services and Supply Agreement.
"Fair Market Rental Value" shall mean, with respect to any land and/or
------------------------
equipment to be leased pursuant to a lease, the value, which shall not in any
event be less than zero, that would be obtained in an arm's length transaction
for cash between an informed and willing lessee and an informed and willing
lessor, neither of whom is under any compulsion to lease, for the use of such
land and/or equipment for a given period, without regard, in the case of land,
(i) to the value of any equipment or improvements that are not included in such
lease but which are located on such land, (ii) to the value of any reversionary
interest of the lessor in any equipment or improvements located on such land,
whether or not included in such lease, or (iii) to the highest and best use of
such land.
"Final Completion" has the meaning given such term in the EPC Contract.
----------------
"Financial Close" means the date when the initial funding of the Senior
---------------
Debt has occurred.
"Financing Documents" has the meaning given such term in the Common
-------------------
Security Agreement.
"Financing Parties" means any lender or note purchaser that may at any time
-----------------
be party to the Financing Documents and any trustee or agent acting on their
behalf.
<PAGE>
8
"Funding Company" means Port Arthur Finance Corp., a Delaware corporation.
---------------
"GFU 241" means the distillate hydrotreater located at the Refinery and
-------
designated GFU 241.
"GFU 242" means the distillate hydrotreater located at the Refinery and
-------
designated GFU 242.
"GFU 243" means the distillate hydrotreater located at the Refinery and
-------
designated GFU 243.
"Guaranteed Values" has the meaning given such term in the EPC Contract.
-----------------
"Heavy Oil Processing Facility" means, collectively, the Coker Complex and
-----------------------------
the Ancillary Equipment.
"Hydrocracker" or "HCU 942" means the hydrocracker to be constructed at the
------------ -------
Refinery and designated HCU 942.
"Hydrogen" means hydrogen purchased by the Coker Company pursuant to the
--------
Hydrogen Supply Agreement.
"Hydrogen Supply Agreement" means the Supply Agreement, dated as of
-------------------------
August 1, 1999, between the Coker Company and Air Products, Inc.
"Independent Engineer" means Purvin & Gertz, Inc., or successor thereto
--------------------
appointed pursuant to the Financing Documents.
"Inflation Factor" shall mean, for any month, (a) the most current Producer
----------------
Price Index published by the U.S. Department of Labor, Bureau of Statistics,
divided by, (b) the Producer Price Index on August 19, 1999.
- ----------
"Labor Costs" shall mean, with respect to any service provided by Clark
-----------
R&M, all reasonable direct labor costs of Clark R&M in performing such service
including wages, salaries, overtime charges, reasonable and customary bonuses,
payroll insurance and taxes and holidays, vacations, group medical, dental and
life insurance and other employee benefits.
"LCO" means light cycle oil.
---
"Lessor Ancillary Equipment Upgrade" shall have the meaning given such term
----------------------------------
in Section 6.1 of the Ancillary Equipment Site Lease.
"Lien" any mortgage, security interest, pledge, hypothecation, encumbrance
----
or lien (statutory or other) of any kind or nature whatsoever.
<PAGE>
9
"Long-Term Oil Supply Agreement" means the Maya Crude Oil Sale Agreement,
------------------------------
dated as of March 10, 1998, between PMI and Clark R&M, as amended by the First
Amendment and Supplement to the Maya Crude Oil Sales Agreement, dated as of
August 19, 1999, and as assigned by Clark R&M to the Coker Company pursuant to
the Long-Term Oil Supply Agreement Assignment.
"Long-Term Oil Supply Agreement Assignment" means the Assignment of the
-----------------------------------------
Long-Term Oil Supply Agreement, dated as of August 19, 1999, by Clark R&M to the
Coker Company.
"Maya Crude Oil" means Mexican crude oil of the "Maya" type, as more
--------------
particularly described in the Long-Term Oil Supply Agreement and, to the extent
necessary, such alternative crude oil(s) and/or other feedstock(s) that may be
used to produce the Required Product Mix.
"Neches" mean Neches River Holding Corp., a Delaware corporation.
------
"Operating Year" means (i) the period beginning on the Start-up Date and
--------------
ending on the last day of the calendar year in which the Start-up Date occurs
and (ii) each calendar year thereafter. All annual amounts set forth in the
Clark R&M Agreements shall be adjusted pro rata for the first Operating Year.
"Performance Test Standards" has the meaning given such term in the EPC
--------------------------
Contract.
"Permit" means any valid waiver, exemption, variance, franchise, permit,
------
authorization, license or similar order of or from any federal, state, county,
municipal, regional, environmental or other governmental body, instrumentality,
agency, authority, court or other body having jurisdiction over the Refinery,
the Coker Complex or the Ancillary Equipment or the performance of any
obligation under any Clark R&M Agreement, any Project Document or any other
agreement in connection therewith.
"Permitted Liens" means (i) the respective rights and interests created by
---------------
or under the Financing Documents and the Project Documents, (ii) Liens for Taxes
that either are not delinquent or are being contested in good faith and by
appropriate proceedings diligently conducted, so long as such proceedings do not
(a) involve a substantial risk of foreclosure, forfeiture, loss or sale of any
portion of the Clark Refinery Property subject to the Ancillary Equipment Site
Lease or the Coker Complex Ground Lease or interest therein, (b) interfere with
the use, possession or disposition of any Clark Refinery Property subject to the
Ancillary Equipment Site Lease or the Coker Complex Ground Lease or interest
therein or (c) interfere with the payment of rent under the Ancillary Equipment
Site Lease or the Coker Complex Ground Lease; (iii) materialmen's, mechanics',
workmen's, repairmen's, employees', carriers', warehousemen's and other like
Liens arising in the ordinary course of business for amounts that either are not
more than 30 days past due or are being contested in good faith by appropriate
proceedings, so long as such proceedings satisfy the conditions for the
continuation of
<PAGE>
10
proceedings to contest Taxes set forth in clause (ii) above; (iv) Liens of any
of the types referred to in clauses (ii) and (iii) above that have been bonded
for the full amount in dispute (or as to which other security arrangements
reasonably satisfactory to the Collateral Trustee have been made); (v) Liens
securing judgments, decrees or orders of any court (i) that are not currently
dischargeable or (ii) that have been discharged or stayed or appealed within
thirty (30) days after the date of such judgment, decree or order (in the case
of a stay or appeal, during the period of such stay or appeal); (vi) other Liens
that would not impair (x) the ability of the Coker Company or its successors,
assigns or subtenants to operate the Coker Complex in accordance with the Base
Case Financial Model or (y) any of the security interests granted, or to be
granted, by the Coker Company to the Financing Parties pursuant to the Financing
Documents, (vii) with respect to the Ancillary Equipment Site Lease, the Liens
listed on Schedule I thereto; and (viii) with respect to the Coker Complex
Ground Lease, the Liens listed on Schedule I thereto.
"Permitted Reimbursable Expenses" shall mean, with respect to any service
-------------------------------
provided by Clark R&M, any reasonable expense or expenditure incurred in
performance of such service including, without limitation, (i) Labor Costs, (ii)
purchases of spare parts, tools, equipment, consumables, materials and other
supplies necessary for performance of such service and (iii) direct cost of
subcontract labor or services needed to perform such service.
"Person" an individual, partnership, corporation, business trust, joint
------
stock company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
"PMI" means P.M.I. Comercio Internacional, S.A. de C.V., a corporation
---
organized under the laws of Mexico.
"Product Purchase Agreement" means the Product Purchase Agreement, dated as
--------------------------
of August 19, 1999, between Clark R&M and the Coker Company, as amended,
supplemented or otherwise modified from time to time.
"Products" means each product described under the heading "Product" on
--------
Exhibits A-1 through A-42 to the Product Purchase Agreement.
"Project Documents" means, collectively, the Services and Supply Agreement,
-----------------
the Product Purchase Agreement, the Long-Term Oil Supply Agreement, the EPC
Contract, the Coker Complex Ground Lease, the Ancillary Equipment Site Lease and
the Hydrogen Supply Agreement.
"Prudent Industry Practice" means those practices, methods, equipment,
-------------------------
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used in refinery facilities in the United
States of a type and size similar to the Refinery.
"Qualified Appraiser" means an appraisal firm with a national reputation
-------------------
and experience in appraising facilities of a nature and type similar to the
Refinery.
<PAGE>
11
"Reconciliation Statement" has the meaning given such term in Section
------------------------
7.2(a) of the Services and Supply Agreement.
"Refinery" means, collectively, the existing oil refinery owned by Clark
--------
R&M located in Port Arthur, Texas, the Ancillary Equipment and the Coker
Complex.
"Regulated Utilities" has the meaning given such term in Section 5.5(f) of
-------------------
the Services and Supply Agreement.
"Required Product Mix" means, from time to time, the quantity and quality
--------------------
specifications of products to be produced by the Heavy Oil Processing Facility
pursuant to Section 2.2 of the Product Purchase Agreement.
"Sabine" means Sabine River Holding Corp., a Delaware corporation.
------
"Senior Debt" has the meaning given such term in the Common Security
-----------
Agreement.
"Senior Debt Obligations" means the obligations to pay principal and
-----------------------
interest on the disbursed Senior Debt, and all commissions, fees, indemnitees,
prepayment premiums and other amounts payable to the senior lenders under the
Financing Documents.
"Services" has the meaning set forth in Section 2.1 of the Services and
--------
Supply Agreement.
"Services and Supply Agreement" means the Services and Supply Agreement,
-----------------------------
dated as of August 19, 1999, between Clark R&M and the Coker Company, as
amended, supplemented or otherwise modified from time to time.
"Sour Water Stripper" means the sour water stripper to be constructed at
-------------------
the Refinery and designated SWS-8747.
"Standards" means, in addition to any other standards set forth in the EPC
---------
Contract, the technical requirements of the Project Documents, generally
accepted standards of professional care, skill, diligence and competence
applicable to engineering and construction and project management practices,
good refinery and petrochemical industry practices for oil refineries of similar
size, type and design to the Refinery, manufacturer's specifications and
warranty requirements and all Applicable Laws.
"Start-up Date" means the date on which hydrocarbons are first introduced
-------------
into the Coker Complex for the processing of test runs under the EPC Contract.
"Start-up Period" means the period from the Start-up Date until Final
---------------
Completion.
<PAGE>
12
"Sulfur Plant" means the sulfur plant to be constructed at the Refinery and
------------
designated SRU 545.
"Supplies" has the meaning set forth in Section 2.1 of the Services and
--------
Supply Agreement.
"Tax" means, with respect to any site or parcel of land and the
---
improvements thereon, all real estate taxes and assessments, including
substitutes therefor or supplements thereto, assessed upon, levied against or
imposed on such land and improvements located thereon which accrue and are due
and payable during the term of the Coker Complex Ground Lease. Notwithstanding
anything to the contrary contained herein, the term "Taxes" shall not include
any franchise, income, corporation, inheritance, succession, gift, estate,
realty transfer, capital or other tax which may be charged or assessed against
Lessor or any income, excess profit or revenue tax or any other tax which may be
assessed against or become a lien upon the Coker Complex Site or the rent
accruing therefrom.
"Total Crude Oil Volume" means, for any day, the total daily volume, stated
----------------------
in BPD, of crude oil processed by the Crude Unit.
"Transfer and Assignment Agreement" means the Transfer and Assignment
---------------------------------
Agreement, dated as of August 19, 1999, between Clark R&M and the Coker Company,
as amended, supplemented or otherwise modified from time to time.
"VGO" means vacuum gas oil.
---
"VTBs" means vacuum tower bottoms.
----
"Warranties" means the requirements of all warranties and guarantees
----------
applicable to equipment and structures constituting the Coker Complex or
the Ancillary Equipment provided by the Contractor, subcontractors,
vendors,suppliers or others.
<PAGE>
Schedule 3.1
Services and Supply Agreement
CRUDE SUPPLY MANAGEMENT SERVICES
7. Scope.
-----
1.1. Long-Term Oil Supply Agreement
Clark R&M shall administer the Long-Term Oil Supply Agreement on
behalf of the Coker Company and perform all the Coker Company's
obligations (other than payment obligations) and exercise its rights
thereunder including, without limitation, the following:
a. providing quarterly progress reports to PMI with respect to (i)
construction under the EPC Contract and (ii) the Ancillary
Equipment Upgrade
b. providing PMI timely notice of the occurrence of events of
force majeure or other occurrences that may affect the Coker
Company's ability to perform its material obligations under the
Long-Term Oil Supply Agreement
c. furnishing monthly lifting programs to PMI (including, without
limitation, the quantity of Maya to be delivered each month and
the tankers that are to deliver such Maya) and cooperating with
PMI to agree on actual monthly lifting programs for deliveries
of Maya to the Refinery, all in accordance with Section 21.1 of
the Long-Term Oil Supply Agreement
d. engagement of tankers on behalf of the Coker Company for
delivery of Maya
e. cooperate with PMI (i) to determine if an alternative pricing
mechanism is required if so notified by PMI pursuant to Section
10.2 of the Long-Term Oil Supply Agreement and (ii) if so, to
determine the parameters of such mechanism
f. monitor and keep records of on-going calculations of the
Differential Guarantee, Quarterly Shortfalls and Quarterly
Surpluses (each as defined in the Long-Term Oil Supply
Agreement)
1.2 Other Crude Oil Contracts
a. Clark R&M shall administer and perform all the Coker Company's
obligations (other than payment obligations) and exercise its
rights under all other crude oil contracts procured on behalf
of the Coker Company pursuant to Section 3.1 of the Services
and Supply Agreement.
-13-
<PAGE>
Schedule 3.1
Services and Supply Agreement
b. Clark R&M shall procure, negotiate and administer such contracts
in a manner that ensures the timely delivery to the Refinery of
the volumes and types of crude oil necessary for the on-going
production of the Required Product Mix.
8. Applicable Price.
----------------
2.1 The Coker Company shall reimburse Clark R&M for all Permitted
Reimbursable Expenses (other than Labor Costs) incurred by Clark R&M
in connection with providing crude supply management services to the
Coker Company, including, without limitation, those expenses described
in 3.1 below. The allocation of Labor Costs incurred by Clark R&M in
providing crude supply management services to the Coker Company shall
be included in the charges to the Coker Company under Section 5.8 of
the Services and Supply Agreement.
2.2 In addition, the Coker Company shall pay Clark R&M a handling fee of
$0.03 for each barrel of Coker Company-owned crude oil delivered to
the Refinery.
9. Additional Terms.
----------------
3.1 Clark R&M shall pass through charges to the Coker Company for the
following Permitted Reimbursable Expenses associated with the
transportation of crude, including without limitation, the following
fees:
Customs Fees
MPA Fees
Harbor Maintenance
Merchandising Processing Fee
3.2 The Coker Company is expected to be billed directly (as part of
invoice for payment for crude oil purchases) by the applicable third
party for certain expenses associated with the transportation of
crude, including, without limitation, charges related to the
following:
Marine Freight
Freight
OPA
Lightering
Marine Losses
Insurance
Inspection
Pipeline Tariffs (excluding CPAP)
Pipeline Losses
Pour Depressant
-14-
<PAGE>
Schedule 3.1
Services and Supply Agreement
Viscosity Surcharge
Superfund Tax
State Tax
Oil Spill Fees
-15-
<PAGE>
Schedule 3.2
Services and Supply Agreement
DOCK, PIPELINE AND STORAGE SERVICES
1. Scope.
-----
1.1. Clark R&M shall provide and coordinate all dock, pipeline and spot
storage services needed to bring Maya and other Coker Company crude
oil to the Heavy Oil Processing Facility. As of the date hereof,
Clark R&M intends to provide such services by means of the following:
a. the Clark R&M-owned docks (the "Clark Docks") and tank farms;
b. the dock owned by Sunoco, Inc. located in Nederland, Texas
(the "Sun Dock") and the related storage facilities ("Sun
Storage");
c. the Refinery pipeline system (the "Refinery Pipeline);
d. the pipeline system located at 9405 West Port Arthur Road,
Beaumont, Texas and commonly know as the Lucas Station and the
related storage facilities (the "Lucas Station"); and
e. other third party pipeline and terminal services.
1.2 Clark R&M shall manage and coordinate vessel activities at the Clark
Docks and the Sun Dock as necessary for the delivery of Maya and
other Coker Company crude oil, including, without limitation,
scheduling vessels, arranging berthing, vessel tie-up and release,
connecting loading and unloading systems, furnishing standby and
safety operators, taking product samples, operating the spill
prevention system, preparing bills of lading and other required
documentation and hiring tankermen and independent inspectors.
1.3 Clark R&M shall manage and coordinate all other vessel and pipeline
activities necessary for the delivery of Coker Company crude oil to
the Heavy Oil Processing Facility, including, without limitation,
scheduling vessels, pipelines, arranging berthing, vessel tie-up and
release, connecting loading/unloading systems, furnishing
standby/safety operators, taking product samples, operating spill
prevention system and preparing bills of lading and other required
documentation including the hiring of tankermen and independent
inspectors.
1.4 Clark R&M shall maintain the Clark Dock facilities in a condition
suitable to meet the shipping requirements of the Coker Company and
manage priority of Clark Dock usage in a manner consistent therewith.
<PAGE>
Schedule 3.2
Services and Supply Agreement
2. Applicable Price.
----------------
2.1 Sun Dock to Refinery
For each barrel of Coker Company crude oil delivered to the Refinery
through the Sun Dock each month, the Coker Company shall pay Clark
R&M the Sun Dock Fee plus the CPAP Tariff I during such month.
----
Where:
"Sun Dock Fee" means, for any month, the price per barrel
charged Clark R&M for use of the Sun Dock by Sunoco Oil, Inc.
"CPAP Tariff I" means, for any month, the per barrel tariff
charged Clark R&M by CPAP for crude oil delivered from the Sun
Dock known as the "Lucas Crude Petroleum Tariff"(origin
Nederland).
2.2 Sun Storage
For each barrel of Coker Company crude oil stored at Sun Storage each
month, the Coker Company shall pay Clark R&M the Sun Spot Fee for
each fifteen day period that such crude oil is stored at Sun Storage.
Where:
"Sun Spot Fee" means, for any month, the price per barrel
charged by Sunoco, Inc. for each fifteen day period that crude
oil is stored at the Sun Storage.
2.3 Clark Docks to Refinery (including interim storage, if necessary)
For each barrel of Coker Company crude oil delivered to the Refinery
through the Clark Docks each month, the Coker Company shall pay Clark
R&M the Sun Dock Fee plus the CPAP Tariff I.
----
2.4 Third Party Pipelines to Refinery (including interim storage, if
necessary)
For each barrel of Coker Company crude oil delivered to the Refinery
through Lucas Station from sources other than the Clark Docks or the
Sun Dock each month, the Coker Company shall pay Clark R&M the CPAP
Tariff II.
Where:
"CPAP Tariff II" means, for any month, the price per barrel
charged Clark R&M by CPAP during such month for crude oil
delivered from Lucas
-2-
<PAGE>
Schedule 3.2
Services and Supply Agreement
Station to the Refinery from sources other than the Clark
Docks or the Sun Dock and known as the "Lucas Crude Petroleum
Tariff" (origin Lucas Station).
3. Additional Terms.
----------------
The following are the applicable rates, as of the date hereof, for the
various fees to be charged the Coker Company by Clark R&M hereunder.
3.1 Sun Dock Fee: 7 cents/bbl for the first 70,000 BPD then 6
cents/bbl for each barrel over 70,000 BPD.
3.2 Sun Spot Fee 9.5 cents/bbl (for fifteen days)
3.3 CPAP Tariff I 23 cents/bbl.
3.4 CPAP Tariff II 11 cents/bbl.
-3-
<PAGE>
Schedule 3.3
Services and Supply Agreement
CRUDE UNIT FEEDSTOCK SUPPLY
1. Scope.
-----
1.1. Clark R&M shall supply the Coker Company's requirements of overhead
liquid from GFU 244 to AVU 146 ("Overhead Liquid") which is expected
to have the following specifications:
Property Typical Test Method
-------- ------- -----------
API Gravity 41.1 Typical ASTM D-1298
1.2 Clark R&M shall supply the Coker Company's requirement of refinery
slop oil to AVU 146 ("Slop Oil").
2. Measurement
-----------
2.1 Overhead Liquid
Clark R&M shall sell and Coker Company shall purchase the "Coker
Company Share" of the total input of this Overhead Liquid to AVU
146. The Coker Company Share is defined as the total input of this
Overhead Liquid multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
2.2 Slop Oil
Clark R&M shall sell and Coker Company shall purchase the "Coker
Company Share" of the total input of this Feedstock to AVU 146. The
Coker Company Share is defined as the total input of this Feedstock
multiplied by the Coker Company Crude Oil Volume divided by the
Total Crude Oil Volume.
3. Applicable Price
----------------
3.1 Overhead Liquid
The arithmetic average of the high/low Platt's Oilgram Price Report
U. S. Gulf Coast Waterborne posting for spot purchases of No. 2 (0.2
wt% S diesel) for each publication day less 3.0 cents/gallon
multiplied by the quantity of the Overhead Liquid delivered on that
day.The price for non-publication day deliveries shall be the
arithmetic average of the prices for the last proceeding publication
day and the next following publication day.
3.2 Slop Oil
The volume weighted average price of crude oil charged to AVU 146
for each day multiplied by the quantity of the Feedstock delivered
on that day.
<PAGE>
Schedule 3.3
Services and Supply Agreement
4. Delivery Point/Risk of Loss:
---------------------------
4.1 Overhead Liquid
This Overhead Liquid shall be delivered by pipeline to the Coker
Company and risk of loss shall pass at the battery limits of AVU 146.
4.2 Slop Oil
This Feedstock shall be delivered by pipeline to the Coker Company
and risk of loss shall pass at the battery limits of AVU 146.
5. Quantity Measurement:
--------------------
5.1 Overhead Liquid
Quantity measurements shall be taken at the battery limits of AVU 146
utilizing a meter to be designated upon completion of design
engineering.
5.2 Slop Oil
Quantity measurements shall be calculated by changes in Refinery Slop
inventory utilizing standard yield accounting methods.
6. Quality Measurement
-------------------
6.1 Overhead Liquid
Grab samples shall be taken as needed.
6.2 Slop Oil
None.
-2-
<PAGE>
Schedule 3.5
Services and Supply Agreement
CLARK PROCESSING FEE -- ANCILLARY EQUIPMENT
Clark R&M shall pay the Coker Company for the processing of Clark R&M-owned
crude oil each day according to the following formula:
Crude Unit Fee + GFU 243 Fee + GFU 242 Fee + CRU 1344 Hydrotreater Fee
Where:
1. Crude Unit Fee Definitions
--------------------------
"Clark R&M Crude Fraction" means, for any day, (i) Excess
------------------------
Crude Capacity on such day, divided by (ii) Actual Crude Capacity on
----------
such day.
"Crude Unit Fee" means, for any day, the sum of (i) Crude
--------------
Unit Fixed, (ii) Crude Unit Non-Fuel Variable, (iii) Crude Unit Fuel
Variable and (iv) Crude Unit Electricity Variable.
"Crude Unit Fixed" means, for any day, (i) 250,000
----------------
multiplied by (ii) Clark R&M Crude Fraction for such day, multiplied
------------- ----------
by (iii) $0.421, multiplied by (iv) the Inflation Factor for such
-- -------------
day.
"Crude Unit Non-Fuel Variable" means, for any day, (i)
----------------------------
Excess Crude Capacity for such day, multiplied by (ii) $0.005,
-------------
multiplied by (iv) the Inflation Factor for such day.
-------------
"Crude Unit Fuel Variable" means, for any day, (i) Excess
------------------------
Crude Capacity for such day, multiplied by (ii) $0.239, multiplied
------------- ----------
by (iii) (x) the Current Period Fuel Price, divided by (y) $2.24.
-- ----------
"Crude Unit Electricity Variable" means, for any day, (i)
-------------------------------
Excess Crude Capacity for such day, multiplied by (ii) $0.016,
-------------
multiplied by (iii) (x) the Current Period Electricity Price,
-------------
divided by (y) $0.029.
----------
<PAGE>
Schedule 3.5
Services and Supply Agreement
2. GFU 243 Fee Definitions
-----------------------
"Actual GFU 243 Capacity" means, for any day, the capacity,
-----------------------
stated in BPD, of GFU 243 to process feedstreams.
"Clark R&M GFU 243 Capacity" means, for any day, (i) Actual
--------------------------
GFU 243 Capacity, less, (ii) the capacity necessary for GFU 243 to
----
process Coker Company feedstreams from the Crude Unit on such day
"Clark R&M GFU 243 Fraction" means, for any day, (i) Clark
R&M GFU 243 Capacity for such day, divided by (ii) Actual GFU 243
----------
Capacity on such day.
"GFU 243 Fee" means, for any day, the sum of (i) GFU 243
------- ---
Fixed, (ii) GFU 243 Non-Fuel Variable, (iii) GFU 243 Fuel Variable
and (iv) GFU 243 Electricity Variable.
"GFU 243 Fixed" means, for any day, (i) 43,000 multiplied
------------- ----------
by (ii) Clark R&M GFU 243 Fraction for such day, multiplied by
-- -------------
(iii) $0.380, multiplied by (iv) the Inflation Factor for such day.
-------------
"GFU 243 Non-Fuel Variable" means, for any day, (i) Clark
-------------------------
R&M GFU 243 Capacity for such day, multiplied by (ii) $0.094,
-------------
multiplied by (iii) the Inflation Factor for such day.
-------------
"GFU 243 Fuel Variable" means, for any day, (i) Clark R&M
---------------------
GFU 243 Capacity for such day, multiplied by (ii) $0.330, multiplied
------------- ----------
by (iii) (x) the Current Period Fuel Price, divided by (y) $2.24.
-- ----------
"GFU 243 Electricity Variable" means, for any day, (i) Clark
----------------------------
R&M GFU 243 Capacity for such day, multiplied by (ii) 0.042,
-------------
multiplied by (iii) (x) the Current Period Electricity Price,
-------------
divided by (y) $0.029.
----------
6. GFU 242 Fee Definitions
-----------------------
"Actual GFU 242 Capacity" means, for any day, the capacity,
-----------------------
stated in BPD, of GFU 242 to process feedstreams.
"Clark R&M GFU 242 Capacity" means, for any day, (i) Actual
--------------------------
GFU 242 Capacity, less (ii) the capacity necessary for GFU 242 to
----
process Coker Company feedstreams from the Crude Unit on such day.
"Clark R&M GFU 242 Fraction" means, for any day, (i) Clark
--------------------------
R&M GFU 242 Capacity for such day, divided by (ii) Actual GFU 242
----------
Capacity on such day.
-2-
<PAGE>
Schedule 3.5
Services and Supply Agreement
"GFU 242 Fee" means, for any day, the sum of (i) GFU 242
-----------
Fixed, (ii) GFU 242 Non-Fuel Variable, (iii) GFU 242 Fuel Variable and
(iv) GFU 242 Electricity Variable.
"GFU 242 Fixed" means, for any day, (i) 32,000 multiplied
------------- ----------
by (ii) Clark R&M GFU 242 Fraction for such day, multiplied by (iii)
-- -------------
$0.386, multiplied by (iv) the Inflation Factor for such day.
-------------
"GFU 242 Non-Fuel Variable" means, for any day, (i) Clark
-------------------------
R&M GFU 242 Capacity for such day, multiplied by (ii) $0.017,
-------------
multiplied by (iii) the Inflation Factor for such day.
-------------
"GFU 242 Fuel Variable" means, for any day, (i) Clark R&M
---------------------
GFU 242 Capacity for such day, multiplied by (ii) $ 0.342,
-------------
multiplied by (iii) (x) the Current Period Fuel Price, divided by
------------- ----------
(y) $2.24.
"GFU 242 Electricity Variable" means, for any day, (i) Clark
----------------------------
R&M GFU 242 Capacity for such day, multiplied by (ii) $0.014,
-------------
multiplied by (iii) (x) the Current Period Electricity Price,
-------------
divided by (y) $0.029.
----------
7. CRU 1344 Hydrotreater Fee Definitions
-------------------------------------
"Actual CRU 1344 Hydrotreater Capacity" means, for any day,
-------------------------------------
the capacity, stated in BPD, of CRU 1344 Hydrotreater to process
feedstreams.
"Clark R&M CRU 1344 Hydrotreater Capacity" means, for any
----------------------------------------
day, (i) Actual CRU 1344 Hydrotreater Capacity, less, (ii) the
----
capacity necessary for CRU 1344 Hydrotreater to process Coker
Company feedstreams from the Crude Unit on such day
"Clark R&M CRU 1344 Hydrotreater Fraction" means, for any
----------------------------------------
day, (i) Clark R&M CRU 1344 Hydrotreater Capacity for such day,
divided by (ii) Actual CRU 1344 Hydrotreater Capacity for such day.
----------
"CRU 1344 Hydrotreater Fee" means, for any day, the sum of
-------------------------
(i) CRU 1344 Hydrotreater Fixed, (ii) CRU 1344 Hydrotreater Non-Fuel
Variable, (iii) CRU 1344 Hydrotreater Fuel Variable and (iv) CRU 1344
Hydrotreater Electricity Variable.
"CRU 1344 Hydrotreater Fixed" means, for any day, (i) 51,500
---------------------------
multiplied by (ii) Clark R&M CRU 1344 Hydrotreater Fraction for such
-------------
day, multiplied by (iii) $0.231, multiplied by (v) the Inflation
------------- -------------
Factor for such day.
-3-
<PAGE>
Schedule 3.5
Services and Supply Agreement
"CRU 1344 Hydrotreater Non-Fuel Variable" means, for any
---------------------------------------
day, (i) Clark R&M CRU 1344 Hydrotreater Capacity, (ii) $0.020,
multiplied by (iii) the Inflation Factor for such day.
-------------
"CRU 1344 Hydrotreater Fuel Variable" means, for any day,
-----------------------------------
(i) Clark R&M CRU 1344 Hydrotreater Capacity for such day,
multiplied by (ii) $0.159, multiplied by (iii) (x) the Current
------------- -------------
Period Fuel Price, divided by (y) $2.24.
----------
"CRU 1344 Hydrotreater Electricity Variable" means, for any
------------------------------------------
day, (i) Clark R&M CRU 1344 Hydrotreater Capacity for such day,
multiplied by (ii) $0.012, multiplied by (iii) (x) the Current
------------- -------------
Period Electricity Price, divided by (y) $0.029.
----------
8. General Definitions
-------------------
"Current Period Fuel Price" means, for any day, the MMBTU
-------------------------
Price (as defined in Schedule 5.5.3) for the month in which such day
occurs.
"Current Period Electricity Price" means, for any day, the
--------------------------------
KWH Price (as defined in Schedule 5.5.1) for the month in which such
day occurs.
-4-
<PAGE>
Schedule 4.1
Services and Supply Agreement
COKER COMPANY EMPLOYEES
1. Nineteen (19) Coker - Front-End Operators
Responsible for operating the charge/heater/fractionation/tank field
sections of the Coker in a safe, environmentally sound, and efficient
manner. This individual concentrates on the daily activities of operation.
His/her input is required to resolve problems and optimize the facility
along with the engineers and supervision of the facility. Daily duties
include monitoring, documenting, and adjusting process variables to achieve
the above. The functional operator assignments include Head Operators (4),
Board Operators (4), Outside Operators (8) and Pool Operators (3).
2. Eight (8) Coker - Coke Cutters
Responsible for operating the coke cutting operations of the Coker in a
safe, environmentally sound, and efficient manner. This individual
concentrates on the daily activities of operation. His/her input is
required to resolve problems and optimize the facility along with the
engineers and supervision of the facility. Daily duties include drum
opening/closing and coke cutting.
3. Nineteen (19) Hydrocracker/Sulfur Plant Operators
Responsible for operating the charge/heater/reactor/fractionation sections
of the Hydrocracker and Sulfur Plant in a safe, environmentally sound, and
efficient manner. This individual concentrates on the daily activities of
operation. His/her input is required to resolve problems and optimize the
facility along with the engineers and supervision of the facility. Daily
duties include monitoring, documenting, and adjusting process variables to
achieve the above. The functional operator assignments include Head
Operators (4) Board Operators (4), Outside Operators (8) and Pool Operators
(3).
4. One (1) Accounting Manager
Responsible for (i) for the accounting and administration of the
intercompany agreements between Clark R&M and the Coker Company and all
Financing Documents, (ii) reviewing and approving draft invoices and
issuing final invoices to Clark R&M under the Services and Supply Agreement
and the Product Purchase Agreement, (iii) making payments due to third
parties under the Financing Documents and the Project Documents, (v)
cooperating with any required third party audits, (vi) performing all Coker
Company reporting and recordkeeping requirements under the Financing
Documents, the Project Document and Applicable Law, (vii) administering
Coker Company payroll, (viii) administering all other general accounting
activities of the Coker Company including, without limitation, (a)
maintaining general ledger balance sheet and expense accounts pertaining to
the Heavy Oil Processing Facility, (b) processing and payment of invoices
<PAGE>
Schedule 4.1
Services and Supply Agreement
created by operation of the Heavy Oil Processing Facility and (c) ensuring
that all Federal and State Tax guidelines are incorporated.
Based on information to be provided to the Coker Company by Clark R&M, the
accounting manager will also be responsible for the following:
a. Quantifying and documenting feedstocks to and Products from each
Heavy Oil Processing Facility. Attaching value to each of these
feedstocks and Products based on applicable fees in the Services
and Supply Agreement and the Product Purchase Agreement.
Monitoring all the laboratory data for such feedstocks and
Products.
b. Monitoring and quantifying each Service provided to the Coker
Company by Clark R&M.
c. Providing reconciliation analysis of the Coker Company's
inventory, fixed assets and authorization for expenditures for
capital or turnaround documentation.
d. Preparing and distributing monthly cost analysis
e. Providing planning and budgeting guidelines and participating in
preparation of the Annual Budget and Operating Plan.
f. Coordinating the preparation and approval of unaudited quarterly
and audited annual financial statements.
-2-
<PAGE>
Schedule 4.2
Services and Supply Agreement
CLARK PROCESSING FEE -- COKER
Clark R&M shall pay the Coker Company for the processing of Clark R&M-owned
feedstreams each day according to the following formula:
Coker Fixed + Coker Non-Fuel Variable + Coker Fuel Variable + Coker
Electricity Variable
Where:
"Clark R&M Coker Fraction" means, for any day, (i) (x) Actual
------------------------
Coker Capacity on such day, less (y) Excess Coker Capacity on such
----
day, divided by (ii) Actual Coker Capacity on such day.
-------
"Coker Fixed" means, for any day, (i) 80,000 multiplied by
----------- -------------
(ii) Clark R&M Coker Fraction for such day, multiplied by (iii)
-------------
$4.114, multiplied by (iv) the Inflation Factor for such day.
-------------
"Coker Non-Fuel Variable" means, for any day, (i) Excess Coker
-----------------------
Capacity for such day, multiplied by (ii) $0.045, multiplied by
------------- -------------
(iii) the Inflation Factor for such day.
"Coker Fuel Variable" means, for any day, (i) Excess Coker
-------------------
Capacity for such day, multiplied by (ii) $0.483, multiplied by
------------- -------------
(iii) (x) the Current Period Fuel Price, divided by (y) $2.24.
----------
"Coker Electricity Variable" means, for any day, (i) Excess
--------------------------
Coker Capacity for such day, multiplied by (ii) $0.216, multiplied
------------- ----------
by (iii) (x) the Current Period Electricity Price, divided by (y)
-- ----------
$0.029.
"Current Period Fuel Price" means, for any day, the MMBTU
-------------------------
Price (as defined in Schedule 5.5.3) for the month in which such day
occurs.
"Current Period Electricity Price" means, for any day, the KWH
--------------------------------
Price (as defined in Schedule 5.5.1) for the month in which such day
occurs.
<PAGE>
Schedule 4.3
Services and Supply Agreement
CLARK PROCESSING FEE -- HYDROCRACKER
Clark R&M shall pay the Coker Company for the processing of Clark R&M-owned
feedstreams each day according to the following formula:
Hydrocracker Fixed + Hydrocracker Non-Fuel Variable + Hydrocracker Fuel
Variable + Hydrocracker Electricity Variable
Where:
"Actual Hydrocracker Capacity" means, for any day, the
----------------------------
capacity, stated in BPD, of the Hydrocracker to process feedstreams.
"Clark R&M Hydrocracker Capacity" means, for any day, the
-------------------------------
volume of Clark R&M-owned feedstreams, stated in BPD, processed by the
Hydrocracker on such day pursuant to Section 4.3 of the Services and
Supply Agreement.
"Clark R&M Hydrocracker Fraction" means, for any day, (i)
-------------------------------
Clark R&M Hydrocracker Capacity on such day, divided by (ii) Actual
-------
Hydrocracker Capacity on such day.
"Hydrocracker Fixed" means, for any day, (i) 35,000 multiplied
------------------ ----------
by (ii) Clark R&M Hydrocracker Fraction for such day, multiplied by
-- -------------
(iii) $4.888, multiplied by (iv) the Inflation Factor for such day.
-------------
"Hydrocracker Non-Fuel Variable" means, for any day, (i) Clark
------------------------------
R&M Hydrocracker Capacity for such day, multiplied by (ii) $0.221,
-------------
multiplied by (iii) the Inflation Factor for such day.
-------------
"Hydrocracker Fuel Variable" means, for any day, (i) Clark R&M
--------------------------
Hydrocracker Capacity for such day, multiplied by (ii) $0.430,
-------------
multiplied by (iii) (x) the Current Period Fuel Price, divided by
------------- ----------
(y) $2.24.
"Hydrocracker Electricity Variable" means, for any day, (i)
---------------------------------
Clark R&M Hydrocracker Capacity for such day, multiplied by (ii)
-------------
$0.308, multiplied by (iii) (x) the Current Period Electricity
-------------
Price, divided by (y) $0.029.
----------
"Current Period Fuel Price" means, for any day, the MMBTU
-------------------------
Price (as defined in Schedule 5.5.3) for the month in which such day
occurs.
"Current Period Electricity Price" means, for any day, the KWH
--------------------------------
Price (as defined in Schedule 5.5.1) for the month in which such day
occurs.
<PAGE>
Schedule 4.4
Services and Supply Agreement
HYDROGEN SUPPLY SERVICES
1. Scope.
-----
1.1 Clark R&M shall administer the Hydrogen Supply Agreement on behalf of
the Coker Company and otherwise perform the Coker Company's
obligations (other than payment obligations) and exercise its rights
thereunder including, without limitation, the following:
1. ordering the rate of flow and production of hydrogen needed by
the Coker Company for operation of the Heavy Oil Processing
Facility and, as necessary, requesting changes to such rates from
time to time.
2. coordinating scheduled maintenance shutdowns and other
maintenance activities at the Refinery and the Hydrogen Plant
with Air Products, Inc.
3. monitoring compliance with required contract specifications for
hydrogen delivered under the agreement including, without
limitation, requesting additional analyses of batch samples and
rejecting or waiving non-compliance with contract
specifications.
4. monitoring the measurement and metering of hydrogen quantities
delivered under the agreement including, without limitation,
inspecting meters and other measurement equipment, witnessing
recalibrations and challenging the accuracy of meters and other
measurement equipment by requesting that the accuracy of such
meters and other equipment be tested.
1.2 Clark R&M shall supply the Coker Company's first requirements for
hydrogen ("Clark High Pressure Hydrogen") for use at the Coker
Complex. Clark High Pressure Hydrogen shall be delivered to the Coker
Company for use in HCU 942 from the Spill Stream Hydrogen System
owned and operated by Air Products for Clark R&M up to the maximum
capacity of the Spill Stream Hydrogen System estimated to be 6.0
MMSCF/D. Clark High Pressure Hydrogen shall meet the following
specifications:
Property Specification Test Method
-------- ------------- -----------
Hydrogen 99.9% Mole Minimum UOP-539
1.3 Clark R&M shall supply the Coker Company's additional requirements
for hydrogen ("Clark Hydrocracker Purge Hydrogen") for use at the
Coker Complex. Clark Hydrocracker Purge Hydrogen shall be delivered
to the Coker Company for use in DCU 843 Naphtha Hydrotreater from the
High Pressure Hydrogen Purge
<PAGE>
Schedule 4.4
Services and Supply Agreement
Gas from HCU 942. Clark Hydrocracker Purge Hydrogen shall meet the
following specifications:
Property Specification Test Method
-------- ------------- -----------
Hydrogen 80.0% Mole Minimum UOP-539
Higher 500 BTU/SCF Typical UOP-539
Heating Value
1.4 Clark R&M shall supply the Coker Company's requirements for hydrogen
("Clark Low Pressure Hydrogen") for use at the Ancillary Equipment and
GFU 241. Clark Low Pressure Hydrogen shall be delivered to the
Ancillary Equipment and GFU 241 from the Clark Hydrogen Gathering
System. Clark Low Pressure Hydrogen shall meet the following
specifications:
Property Specification Test Method
-------- ------------- -----------
Hydrogen 70.0% Mole Minimum UOP-539
Higher 650 BTU/SCF Typical UOP-539
Heating Value
2. Meters/Measurement.
------------------
2.1 Clark High Pressure Hydrogen
Clark High Pressure Hydrogen quantity measurements shall be taken at
the Spill Stream Hydrogen System meter owned and operated by Air
Products for Clark R&M.
2.2 Clark Hydrocracker Purge Hydrogen
Clark Hydrocracker Purge Hydrogen is calculated as a portion of the
Total Hydrocracker Purge Hydrogen which quantity shall be measured at
DCU 843 meter FE-3636. The Clark Hydrocracker Purge Hydrogen is
calculated as follows:
Clark Hydrocracker
Purge Hydrogen = Total Hydrocracker Purge Hydrogen * (Light Cycle
Oil to HCU 942 + Heavy Gas Oil from DCU 843 to HCU
942 * (1 - Coker Company Crude Oil Volume / Total
Crude Oil Volume) + Heavy Gas Oil from AVU 146 to
HCU 942 * (1 - Coker Company Crude Oil Volume /
Total Crude Oil Volume )) / (Light Cycle Oil to
HCU 942 + Heavy Gas Oil from DCU 843 to HCU 942 +
Heavy Gas Oil from AVU 146 to HCU 942)
-2-
<PAGE>
Schedule 4.4
Services and Supply Agreement
Where:
Light Cycle Oil to HCU 942, Heavy Gas Oil from DCU 843 to HCU 942,
Heavy Gas Oil from AVU 146 to HCU 942, Coker Company Crude Oil Volume,
and Total Crude Oil Volume are defined in Exhibit A-18 of the Product
Purchase Agreement.
2.3 Clark Low Pressure Hydrogen
Clark R&M Low Pressure Hydrogen quantity measurements shall be
calculated for the Ancillary Equipment and GFU 241 as follows:
2.3.1 Coker Company GFU 241 Hydrogen
Coker Company GFU 241 Hydrogen is calculated as a portion of
the Total GFU 241 Make-up Hydrogen which quantity shall be
measured at GFU 241 meter FI-105M. The Coker Company GFU 241
Hydrogen is calculated as follows:
Coker Company GFU
241 Hydrogen = Total GFU 241 Make-up Hydrogen * Coker
Company Crude Oil Volume / Total Crude
Oil Volume
Where:
Coker Company Crude Oil Volume and Total Crude Oil Volume are
defined in the Product Purchase Agreement.
2.3.1 Coker Company GFU 242 Hydrogen
Coker Company GFU 242 Hydrogen is calculated as a portion of
the Total GFU 242 Make-up Hydrogen which quantity shall be
measured at GFU 242 meter FI-205M. The Coker Company GFU 242
Hydrogen is calculated as follows:
Coker Company GFU
242 Hydrogen = Total GFU 242 Make-up Hydrogen * Total
Feed to GFU 242 - Unfinished Jet from
AVU 146 drawn from inventory * Coker
Company Crude Oil Volume / Total Crude
Oil Volume
Where:
-3-
<PAGE>
Schedule 4.4
Services and Supply Agreement
Total Feed to GFU 242, Unfinished Jet from AVU 146 drawn from
inventory, Coker Company Crude Oil Volume, and Total Crude Oil
Volume are defined in Exhibit A-33 of the Product Purchase
Agreement.
2.3.3 Coker Company GFU 243 Hydrogen
Coker Company GFU 243 Hydrogen is calculated as a portion of
the Total GFU 243 Make-up Hydrogen which quantity shall be
measured at GFU 243 meter FIC-143. The Coker Company GFU 243
Hydrogen is calculated as follows:
Coker Company GFU
243 Hydrogen = Total GFU 243 Make-up Hydrogen *
((Total Volume of Diesel from AVU 146 -
Diesel Charge Volume to GFU 241 + Total
Volume of Light Gas Oil from DCU 843 ) *
Coker Company Crude Oil Volume / Total
Crude Oil Volume - Coker Company Share
of the Excessed Unfinished Diesel ) /
Total Charge Volume to GFU 243
Where:
Total Feed to GFU 243, Total Volume of Diesel from AVU 146,
Diesel Charge Volume to GFU 241, Total Volume of Light Gas Oil
from DCU 843, Coker Company Share of the Excessed Unfinished
Diesel, Coker Company Crude Oil Volume, and Total Crude Oil
Volume are defined in Exhibit A-37 of the Product Purchase
Agreement.
2.3.4 Coker Company 1344 Naphtha Hydrotreater Hydrogen
Coker Company 1344 Naphtha Hydrotreater Hydrogen is calculated
as a portion of the Total 1344 Naphtha Hydrotreater Make-up
Hydrogen which quantity shall be measured at 1344 Naphtha
Hydrotreater meter FR-857. The Coker Company 1344 Naphtha
Hydrotreater Hydrogen is calculated as follows:
Coker Company 1344
Naphtha
Hydrotreater
Hydrogen = Total 1344 Naphtha Hydrotreater Make-up
Hydrogen * (Coker Naphtha to Naphtha
Hydrotreater 1344 + Total Unfinished
Naphtha - Excessed Unfinished Naphtha) *
Coker Company
-4-
<PAGE>
Schedule 4.4
Services and Supply Agreement
Crude Oil Volume / Total Crude Oil Volume /
(Total Naphtha Hydrotreater Feed )
Where:
Total Naphtha Hydrotreater Feed Coker Naphtha to Naphtha
Hydrotreater 1344, Total Unfinished Naphtha, Excessed
Unfinished Naphtha, Coker Company Crude Oil Volume, and Total
Crude Oil Volume are defined in Exhibit A-26 of the Product
Purchase Agreement.
3. Delivery Point/Risk of Loss.
----------------------------
3.1 Clark High Pressure Hydrogen
Clark High Pressure Hydrogen shall be delivered by pipeline and
title to, and risk of loss for, such hydrogen shall pass to the
Coker Company at the battery limit of Air Products Hydrogen
Plant.
3.2 Clark Hydrocracker Purge Hydrogen
Clark Hydrocracker Purge Hydrogen shall be delivered by pipeline
and title to, and risk of loss for, such hydrogen shall pass to
the Coker Company at the battery limit of HCU 942.
3.3 Clark Low Pressure Hydrogen
Clark Low Pressure Hydrogen shall be delivered by pipeline and
title to, and risk of loss for, such hydrogen shall pass to the
Coker Company at the battery limit of each unit described in the
Ancillary Equipment Lease and GFU 241.
4. Applicable Price.
----------------
4.1 Hydrogen Supply Contract
The Coker Company shall pay Clark R&M for all Permitted
Reimbursable Expenses incurred by Clark R&M each month in
administering the Hydrogen Supply Contract.
4.2 Clark High Pressure Hydrogen
-5-
<PAGE>
Schedule 4.4
Services and Supply Agreement
The Coker Company shall pay Clark R&M for Clark High Pressure
Hydrogen supplied to the Coker Company each month the actual cost
paid for hydrogen under contract with Air Products.
4.3 Clark Hydrocracker Purge Hydrogen
The Coker Company shall pay Clark R&M for contained hydrogen in
the Clark Hydrocracker Purge Hydrogen supplied to the Ancillary
Equipment and GFU 241 each month the actual cost paid for
hydrogen under contract with Air Products. For the balance of the
contents in the Clark Hydrocracker Purge Hydrogen, the Coker
Company shall pay Clark R&M the weighted average delivered cost
of natural gas purchased by Clark R&M in dollars per MMBTU.
4.4 Clark Low Pressure Hydrogen
The Coker Company shall pay Clark R&M for contained hydrogen in
the Clark Low Pressure Hydrogen supplied to the Ancillary
Equipment each month the actual cost paid for hydrogen under
contract with Air Products. For the balance of the contents in
the Clark Low Pressure Hydrogen, the Coker Company shall pay
Clark R&M the weighted average delivered cost of natural gas
purchased by Clark R&M in dollars per MMBTU.
4.5 Power Charges and Credits.
4.5.1 Power Charges
The Coker Company shall pay Clark R&M for power consumed by Air
Products' for the manufacture and delivery of High Pressure
Hydrogen supplied to the Coker Company each month. The monthly
Power Charge is composed of a Capacity Charge, an operations and
maintenance charge (O&M Charge), and a Fuel Charge as follows:
Pc\\n\\ = (CC + OM\\n\\)* ACF\\n\\ / 0.95 * TKWH\\n\\ /
GKWH\\n\\ + FC\\n\\ * (TKWH\\n\\ -FALKWH\\n\\)
Where:
Pc\\n\\ = The Power Charge for billing month n.
CC = The monthly Capacity Charge of $321,333.
Om\\n\\ = The O&M Charge as calculated pursuant to Section
5.1.3 for billing month n.
ACF\\n\\ = The Average Capacity Factor calculated on a
rolling average basis for the most recent 36 month
period, including the current billing month n, or
for the actual number of billing months since the
Commencement Date, in accordance to Section 5.1.1.
-6-
<PAGE>
Schedule 4.4
Services and Supply Agreement
TKWH\\n\\ = The total KWH consumed by Air Products' 4.16 kV
loads as measured at the Air Products' 4.16 kV
switchgear for all hourly periods in billing month
n including those hourly periods when generator
CG-500 is not operating.
Fc\\n\\ = The Fuel Charge as calculated pursuant to Section
5.1.4 for billing month n.
GKWH\\n\\ = The gross KWH delivered by Air Products at the
Generator Terminal during billing month n.
FALKWH\\n\\ = The total KWH consumed by Air Products' Facility
Auxiliary Load as determined in accordance with
Section 5.1.2 during billing month n.
Commencement Date shall have the meaning given such term in
Section 2.1 of the Hydrogen Supply Agreement.
Generator Terminal shall mean Air Products' KW and KWH metering
point located in Air Products' 13.8 kV switchgear for Air
Products' gas turbine generator where the gross output of the gas
turbine generator unit is measured.
4.5.2 Average Capacity Factor
The Average Capacity Factor shall be calculated at the end of
each billing month as follows:
ACF\\n\\ = ((GKWH\\n\\ - (FALKWH\\n\\) / (Committed
Capacity- Facility Auxiliary Load) / (BMH
Where:
[GKWH\\n\\ = The cumulative sum of GKWH\\n\\ delivered by
Air Products for the most recent 36 billing
month period, including the current billing
month n, or for the actual number of billing
months since the Commencement Date if less
than 36 billing months have elapsed since
the Commencement Date.
[FALKWH\\n\\= The cumulative sum of FALKWH\\n\\ consumed
by Air Products for the most recent 36
billing month period, including the current
billing month n, or for the actual number of
billing months since the Commencement Date
if less than 36 billing months have elapsed
since the Commencement Date.
[BMH = The sum of (1) the total number of hourly
periods in the most recent 36 billing
months, including the current billing
-7-
<PAGE>
Schedule 4.4
Services and Supply Agreement
month n, or for the actual number of billing
months since the Commencement Date if less
than 36 billing months have elapsed since the
Commencement Date less (2) the number of
hourly periods in the above billing months
when Air Products was excused from delivering
power due to events of Force Majeure or Clark
R&M being unable to receive power from Air
Products at the Delivery Point due to
maintenance, testing, or forced outages.
For avoidance of doubt, any partial hourly period is counted
as one full hourly period for purposes of this calculation.
Notwithstanding the foregoing, the Average Capacity Factor
for the first twelve billing months following the
Commencement Date shall be deemed to be 95 percent. Beginning
with the thirteenth billing month following the Commencement
Date and for each billing month thereafter, the actual
Average Capacity Factor will be calculated. In the event that
the actual Average Capacity Factor calculated for the first
twelve (12) billing months is greater or less than ninety-
five percent (95%), Clark R&M shall retroactively adjust the
Power Charge payments Clark R&M received for the first twelve
(12) billing months.
4.5.3 Monthly Facility Auxiliary Load
The Facility Auxiliary Load shall include all load connected to
Air Products' 4.16 KV electrical distribution system except for
the electric load associated with (i) Air Products' two hydrogen
compressors (CM-250A and CM-250B), (ii) Air Products' spill gas
compressor (CM-255), and (iii) a fixed allowance of 32 KW per
hour for all auxiliary loads required to operate Air Products'
two hydrogen compressors and spill gas compressor. The KWH
consumed by the Facility Auxiliary Load each billing month is
calculated as follows:
FALKWH\\n\\ = TKWH\\n\\ - (CAKWH\\n\\ + CBKWH\\n\\ + SGKWH\\n\\
+ (32 KW * ABMH\\n\\))
Where:
FALKWH\\n\\ = The total KWH consumed by the Facility Auxiliary
Load for billing month n.
TKWH\\n\\ = The total KWH consumed by Air Products' 4.16 KV
loads as measured at the Air Products' 4.16 KV
switchgear for all hourly periods in billing month
n excluding those hourly periods when generator
CG-500 is not operating.
CAKWH\\n\\ = The total KWH consumed by Air Products' product
hydrogen compressor, plant load CM-250A, for all
hourly periods in billing
-8-
<PAGE>
Schedule 4.4
Services and Supply Agreement
month n excluding those hourly periods when
generator CG-500 is not operating.
CBKWH\\n\\ = The total KWH consumed by Air Products' product
hydrogen compressor, plant load CM-250B, for all
hourly periods in billing month n excluding those
hourly periods when generator CG-500 is not
operating.
SGKWH\\n\\ = The total KWH consumed by Air Products' spill gas
compressor, plant load CM-255for all hourly
periods in billing month n excluding those hourly
periods when generator CG-500 is not operating.
ABMH\\n\\ = The adjusted number of hourly periods in billing
month n excluding those hourly periods when
generator CG-500 is not operating.
Initially, the Facility Auxiliary Load is deemed to be 950 KW.
4.5.4 O&M Charge
The O&M Charge shall be adjusted each month after the
Commencement Date and for the duration of this contract in
accordance with the following formula:
Om\\n\\ = OM\\0\\ x [0.16 x LI\\n\\/LI\\c\\ + .16 x P\\n\\/P\\c\\
+ .34 x L\\n\\/L\\c\\ + .34 x PPI\\n\\/PPI\\c\\]]
Where:
Om\\n\\ = O&M Charge for billing month n
OM\\0\\ = $207,333/mo.
Li\\n\\ = Labor Index for billing month n
Li\\c\\ = Labor Index at the Commencement Date
P\\n\\ = Parts Index for billing month n
P\\c\\ = Parts Index for August 1998
PPI\\n\\ = PPI for billing month n.
PPI\\c\\ = PPI at the Commencement Date
L\\n\\ = Employment Cost Index for billing month n.
L\\c\\ = Employment Cost Index at the Commencement Date.
4.5.5 Fuel Charge
The Fuel Charge shall be adjusted each month after the
Commencement Date and for the duration of this contract based on
the average cost of natural gas consumed by the Facility in
accordance with the following formula:
-9-
<PAGE>
Schedule 4.4
Services and Supply Agreement
Fc\\n\\ = FC\\0\\ x (NG\\n\\/NG\\0\\)
Where:
Fc\\n\\ = Fuel Charge for billing month n
FC\\0\\ = $0.0074/KWH
Ng\\n\\ = Average cost of natural gas for the Facility
in billing month n
NG\\0\\ = $2.25/MMBTU
"Facility" shall mean the designed, fabricated, and installed
equipment necessary for Air Products to manufacture hydrogen for the
Coker Company on a leased site as described in the Clark Hydrogen
Supply Agreement.
4.5.6 Power Credits
To the extent Air Products consumes electric power for compression
of hydrogen supplied into the Pipeline Network, Clark R&M shall
credit the Coker Company for such power, whether such power was
produced by Air Products or, during periods of gas turbine generator
shutdown, provided by Clark R&M to Air Products. The credit shall
be calculated monthly on the basis of a specific power in KWH/MSCF,
for hydrogen compression, in accordance with the following:
Pipeline hydrogen compression credit = 1.184 KWH/MSCF x MSCF\\n\\ x
CPC\\n\\
Where:
MSCF\\n\\ = Quantity of hydrogen in MSCF compressed and supplied
into the Pipeline Network for billing month n.
CPC\\n\\ = Cost of power in $/KWH for billing month n; if supplied
by Air Products, to be based PC\\n\\ divided by the sum
of GKWH\\n\\ minus FALKWH\\n\\, or if supplied by Clark
R&M, Clark R&M's incremental cost for power for each
billing day.
"Pipeline Network" shall mean the pipeline system connected to the
Facility and constructed, owned, or operated by Air Products or its
affiliates, which is used to transport hydrogen in Texas.
4.6. Taxes.
------
The Coker Company shall reimburse Clark R&M for payments made by
Clark R&M to Air Products for taxes, charges and fees pursuant to
Section 12 of the Clark Hydrogen Supply Agreement.
-10-
<PAGE>
Schedule 5.1
Services and Supply Agreement
CONSTRUCTION MANAGEMENT SERVICES
1. Scope.
-----
In accordance with its obligations under Section 5.1 of the Services and
Supply Agreement, Clark R&M shall administer the EPC Contract on behalf of
the Coker Company and otherwise perform (or ensure that Coker Company
employees perform) the Coker Company's obligations (other than payment
obligations) and exercise its rights thereunder including, without
limitation, the following:
a. performing Start-up (as defined in the EPC Contract)
activities
b. supporting Start-up and performance testing under the EPC
Contract by making available and operating all testing and
laboratory equipment, tools, machinery and vehicles (including
trucks, mobile cranes, loaders, forklifts and other rolling
stock) necessary for normal operation of the Coker Complex
c. providing water and temporary utilities, at such times and in
such quantities as required for Contractor's prosecution of the
EPC Contract
d. providing Contractor with initial drafts of the Operating Manuals
(as defined in the EPC Contract) for the Coker Complex
e. performing the Coker Company's obligations with respect to spare
parts under Section 2.38 of the EPC Contract
f. reviewing and approving Applications for Payment (as defined in
the EPC Contract) in cooperation with the Independent Engineer
g. providing operations and maintenance personnel for Start-up and
Performance Testing (as defined in the EPC Contract)
h. providing all necessary feedstreams for operation of the Coker
Complex during Start-up and Performance Testing
i. preparing and delivering the Start-up Protocol (as defined in the
EPC Contract) to the Contractor and the Independent Engineer 90
days prior to Mechanical Completion (as defined in the EPC
Contract) and cooperating to develop a final Start-up Protocol
prior to Mechanical Completion
j. reviewing and approving each Notice of Mechanical Completion,
Notice of Coker Completion and Notice of Final Completion
submitted by the Contractor (as each term is defined in the EPC
Contract) together with the Independent Engineer
<PAGE>
Schedule 5.1
Services and Supply Agreement
k. initiating necessary Change Orders (as defined in the EPC
Contract) and reviewing and approving Change Orders requested by
the Contractor
2. Applicable Price.
-----------------
The Coker Company shall pay Clark R&M $2,700,000 on (i) the date (the
"Initial Payment Date") that is the later of (y) the first anniversary of
the Start-up Date and (z) January 1, 2002 for providing the Services
described in this Schedule, (ii) the date that is one year after the
Initial Payment Date and (iii) the date that is two years after the Initial
Payment Date.
-2-
<PAGE>
Schedule 5.3
Services and Supply Agreement
MAINTENANCE SERVICES
1. Scope.
-----
1.1 Routine Repair and Preventative Maintenance
Clark R&M shall provide (or engage third party subcontractors to
provide) all repair and preventative maintenance (including necessary
materials and labor) of a regular nature that must be performed
periodically and on an ongoing basis to maintain the Heavy Oil
Processing Facility including, without limitation, the services
described below.
a. Cleaning Slab Services
Removal of equipment from processing units for cleaning at Clark
R&M-owned cleaning slabs at the Refinery including (i) removing
such equipment from its unit, (i) draining it of all free
liquids, (iii) transporting it to a Clark R&M cleaning slab, (iv)
cleaning it so that acidic or caustic substances are neutralized,
flammable or explosive substances are eliminated and hydrocarbon
sludges or other hazardous materials are removed and the
equipment is otherwise thoroughly clean, (iv) disposing of the
resulting waste in accordance with Applicable Law and (v) re-
installing such equipment into its unit.
b. Shop Services
Repair and maintenance work performed by (i) Clark R&M employees
at one of the various Clark R&M-owned and operated maintenance
shops located at the Refinery including, without limitation,
Clark R&M's central shop, machine shop, instrument/electrical
shop and sandblasting/cleaning shop, or (ii) third party
subcontractors at maintenance shops located outside the Refinery.
c. Maintenance Supervision
Supervision of maintenance personnel for the Coker Company
including, (i) monitoring operations and working with the
operations personnel described on Schedule 5.8.1 to plan,
schedule, and set maintenance priorities, (ii) assisting in the
development and execution of preventative and predictive
maintenance practices, (iii) supervising maintenance mechanics on
a daily basis including oversight of the maintenance resource
pool of electricians, machinists, pipefitters, welders,
boilermakers and other crafts.
d. Fixed Equipment Analysis
<PAGE>
Schedule 5.3
Services and Supply Agreement
Monitoring, collecting data regarding and documenting the
condition of the Heavy Oil Processing Facility's stationary
equipment (including piping, vessels, and structural steel)
including, without limitation (i) maintaining an inspection
database of information, (ii) reviewing such data, (iii)
developing recommendations for equipment repair and improvement
and (iv) inspecting on-going repairs to assure applicable
industry standards are followed.
e. Rotating Equipment Analysis
Monitoring and improving the performance of each unit's rotating
equipment to assure reliability and uptime of rotating equipment,
including, without limitation, (i) routinely perform data
collection of vibration and operational performance, (ii)
analyzing such data, and (iii) making recommendations for repair
and improvements.
f. DCS Technology Support
Maintenance of the Coker Company's distributed control equipment
including, without limitation, (i) interacting with unit
operators to generate and tune simple control loops and (ii)
working with the Clark R&M control engineers in maintaining and
improving the overall performance of the Heavy Oil Processing
Facility's process control systems.
g. Rolling Stock Services
Provision of tractors, trucks, frontloaders, cherry pickers,
exchange pickers or other vehicles necessary for performing the
maintenance services described in this Schedule.
1.2 Maintenance Turnarounds, Unit Shutdowns and Other Capital Maintenance
a. As part of the Annual Budget and Operating Plan, Clark R&M shall
provide the Coker Company with a schedule of planned maintenance
shutdowns in the next Operating Year for any unit comprising the
Heavy Oil Processing Facility.
b. Clark R&M shall assess the on-going need for additional unplanned
maintenance shutdowns and capital maintenance of units comprising
the Heavy Oil Processing Facility.
c. Clark R&M shall perform (or engage third party subcontractors to
perform) all scheduled and unscheduled maintenance shutdowns and
other capital maintenance of the Heavy Oil Processing Facility.
1.3 Janitorial and Grounds Services
-2-
<PAGE>
Schedule 5.3
Services and Supply Agreement
a. Clark R&M shall provide (or engage third party subcontractors to
provide) all janitorial type services at the Heavy Oil Processing
Facility
b. Clark R&M shall maintain (or engage third party subcontractors to
maintain) all grounds, yards and roads located on the Coker
Complex Site and the Ancillary Equipment Site.
2. Applicable Price.
----------------
2.1 Coker Complex
a. The Coker Company shall reimburse Clark R&M for the direct costs
of all materials and other supplies and all subcontract labor or
services necessary for performance of the maintenance services
described herein each month for the Coker Complex and the Coker
Complex Site.
b. The Coker Company shall reimburse Clark R&M for the Labor Cost of
all hourly Clark R&M maintenance personnel necessary for the
performance of maintenance services described herein each month
for the Coker Complex and the Coker Complex Site. For the purpose
of this Schedule Labor Costs shall be deemed to equal a rate per
hour equal to (i) for any month prior to and including December
2000, $36.00 and (ii) for any other month, $36.00, multiplied by
-------------
the Inflation Factor.
c. For all supervisory and management services provided by Clark R&M
related to maintenance services for the Coker Complex described
herein each month, the Coker Company shall pay Clark R&M (i) for
any month after the Start-up Date and prior to and including
December 2000, $62,500.00 and (ii) for any month thereafter,
$62,500.00, multiplied by the Inflation Factor.
-------------
2.2 Ancillary Equipment
Consideration for maintenance services provided by Clark R&M to the
Coker Company related to the Ancillary Equipment and the Ancillary
Equipment Site is included in the Ancillary Equipment Operating Fee,
except to the extent that Clark R&M is required to perform capital
maintenance with respect to the Ancillary Equipment in order to comply
with a change in Applicable Law. In such case, the Coker Company shall
pay Clark R&M for its share of all Permitted Reimbursable Expenses
incurred by Clark R&M in performing all such unscheduled capital
maintenance related to the Ancillary Equipment. The Coker Company's
share of such Permitted Reimbursable Expenses shall be determined in
accordance with Section 7.4(a) of the Services and Supply Agreement.
-3-
<PAGE>
Schedule 5.5.1
Services and Supply Agreement
ELECTRICITY SERVICES
13. Scope.
-----
a. Coker Complex
Supply of electric energy requirements of the Coker Company for use at
the Coker Complex.
b. Ancillary Equipment
Supply of electric energy requirements of the Coker Company for use
at the Ancillary Equipment.
14. Metering/Measurement Methodology for Services to the Coker Complex.
------------------------------------------------------------------
3. 2.1 The following meters to be installed pursuant to the EPC Contract
shall be used to measure the number of kilowatt (1000 watts)
hours ("KWH") of electricity that are delivered to each distinct
area of the Coker Complex:
i. Main power station number 6
Meters located at:
a. Air Products Steam Methane Reformer
b. Gulf States #1 transformer
c. Gulf States #2 transformer
ii. DCU 843 Coker area main facilities.
Switch Gear -- 843-SG-01
iii. HCU 942 Hydrocracker/SRU 545 Sulfur Plant/SWS 8747 Sour Water
Stripper/ATU 7814 Amine Treating Unit
Switch Gear -- 942-SG-01
iv. Coker feed charge-pumps for tanks 108 and 109 and the Coker Complex
cooling tower
Substation 261
5. Flare No. 23 and other offsites
<PAGE>
Schedule 5.5.1
Services and Supply Agreement
Electricity delivered to flare no. 23 and other offsites comprising
the Coker Complex and not described above shall be measured by
subtracting metered usage in numbers 2 through 4 above from metered
usage in number 1 above.
2.2 Clark R&M shall read the Coker Complex meters described in 2.1 above
to determine the total KWH usage of the Coker Complex for each month
(the "Monthly Coker Complex Electricity Usage"); provided, however,
-------- -------
that at any time when such meters are not functioning the Monthly
Coker Complex Electricity Usage shall be determined (a) for any month
prior to three full calendar months after Final Completion, based on
the "typical" or expected usages described in the following chart, or
(b) for any other month, based on the average Monthly Coker Complex
Electricity Usage for the prior three calendar months.
- --------------------------------------------------------------------------------
Electrical Produced (Consumed), KWSD (68 oF)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Consumption
- --------------------------------------------------------------------------------
COKER COMPANY UNITS Typical Quantity Per Cent Usage
- --------------------------------------------------------------------------------
SRU 545 (2,128) 2.09
- --------------------------------------------------------------------------------
DCU 843 (20,550) 20.20
- --------------------------------------------------------------------------------
HCU 942 (13,326) 13.10
- --------------------------------------------------------------------------------
ATU 7841 (223) 0.22
- --------------------------------------------------------------------------------
SWS 8747 (194) 0.19
- --------------------------------------------------------------------------------
Sour Water Tank 78 (154) 0.15
- --------------------------------------------------------------------------------
C.T. 432 (602) 0.59
- --------------------------------------------------------------------------------
FLARE 23 (50) 0.05
- --------------------------------------------------------------------------------
Resid Tanks 108/109 (999) 0.98
- --------------------------------------------------------------------------------
Sub Total (38,226) 37.57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANCILLARY EQUIPMENT UNITS
- --------------------------------------------------------------------------------
AVU 146 (6,154) 6.05
- --------------------------------------------------------------------------------
GFU 242 (731) 0.72
- --------------------------------------------------------------------------------
GFU 243 (2,007) 1.97
- --------------------------------------------------------------------------------
Cooling Tower 136--SMR (200) 0.20
- --------------------------------------------------------------------------------
NHT 1344 (715) 0.70
- --------------------------------------------------------------------------------
Pump House 41 (559) 0.55
- --------------------------------------------------------------------------------
Offsites--P.S. and B.H.'s (6,593) 6.48
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sub Total (16,959) 16.67
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-5-
<PAGE>
- --------------------------------------------------------------------------------
OTHER CLARK UNITS
- --------------------------------------------------------------------------------
GFU 241 (971) 0.95
- --------------------------------------------------------------------------------
GFU 244 (3,506) 3.45
- --------------------------------------------------------------------------------
HFAU 443 (1,205) 1.18
- --------------------------------------------------------------------------------
SRU 543/544 (2,380) 2.34
- --------------------------------------------------------------------------------
FCCU 1241 (2,246) 2.21
- --------------------------------------------------------------------------------
CRU 1344 (7,499) 7.37
- --------------------------------------------------------------------------------
SGRU 1242 (1,483) 1.46
- --------------------------------------------------------------------------------
Offsites (11,315) 11.12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Clark Sub Total (30,604) 30.08
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Coker Company Plus Clark R&M (85,789) 84.32
Sub Total
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHEVRON CCC/PADC (5,781) 5.68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Refinery Plus CCC Sub Total (91,570) 90.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HT PSA Off Gas (920) 0.90
- --------------------------------------------------------------------------------
AIR PRODUCTS (9,255) 9.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Facility Consumption (101,745) 100.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Production or Purchases
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLARK R&M GENERATORS 43,498 42.75
- --------------------------------------------------------------------------------
AIR PRODUCTS 40,200 39.51
- --------------------------------------------------------------------------------
PURCHASED--ENTERGY 18,047 17.74
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Production or Purchased 101,745 100.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net 0
- --------------------------------------------------------------------------------
-6-
<PAGE>
Schedule 5.5.1
Services and Supply Agreement
15. Applicable Price.
----------------
a. Coker Complex
The Coker Company shall pay Clark R&M for the actual cost of providing
electric energy services to the Coker Complex each month based on the
following formula:
(KWH Price * Monthly Coker Complex Electricity Usage) +
Incremental Demand Charge
Where:
"KWH Price" means, for any month, the price per KWH charged Clark
R&M for electricity provided to Clark R&M by Air Products, Inc. in
such month.
"Incremental Demand Charge" means, for any month, the difference
between (i) the demand charge for standby electricity services
provided to Clark R&M by Entergy Corp. for use at the Refinery in
such month, less (ii) the average monthly demand charge for
----
standby electricity services provided to Clark R&M by Entergy
Corp. for use at the Refinery for one year period prior the date
hereof.
b. Ancillary Equipment
Consideration for electric energy provided by Clark R&M to the
Coker Company for use at the Ancillary Equipment is included in
the Ancillary Equipment Operating Fee.
Required Billing Information.
----------------------------
Clark R&M shall provide the following information as an attachment to its
monthly Reconciliation Statements:
a. Total KWH measured through each Coker Complex meter.
b. Calculation of the Incremental Demand Charge and current KWH Price
c. Total amount due from Coker Company for electric energy provided to
the Coker Complex
-7-
<PAGE>
Schedule 5.5.2
Services and Supply Agreement
STEAM SERVICES
1. Scope.
-----
a. Clark R&M shall supply the full steam requirements of the Coker
Company for use at the Heavy Oil Processing Facility. Such steam is
expected to have the typical properties and specifications set forth
in the Turnkey Specifications and the chart in 2.2 below.
b. Clark R&M shall take delivery of all excess steam not consumed during
operation of the Heavy Oil Processing Facility and route such steam to
other units at the Refinery.
c. Metering/Measurement Methodology for Services to the Coker Complex.
------------------------------------------------------------------
a. Meters to be installed pursuant to the EPC Contract and described on
Schedule 5.5(b) shall be used to measure the number of pounds per hour
of actual steam that are delivered to the Coker Complex and returned
to Clark R&M which will then be converted to pounds of Standard Steam
("MLBS SS"). "Standard Steam" is a measure used to express the value
of steam of differing temperatures and pressures in a uniform way. It
shall be determined by multiplying the pounds of actual steam supplied
by the standard steam factor for the relevant poundage as described
below under 5.
2.2 Clark R&M shall read the applicable Coker Complex meters described on
Schedule 5.5(b) on the last day of every month to determine the total
pounds of actual steam usage of the Coker Complex for such month and
convert such poundage to MLBS SS (the "Monthly Coker Complex Steam
Usage") and the total actual pounds of steam returned to Clark R&M
from the Coker Complex in such month and convert such poundage to MLBS
SS (the "Monthly Coker Complex Return Steam"); provided, however, that
-------- -------
at any time when such meters are not functioning the Monthly Coker
Complex Steam Usage shall be determined (a) for any month prior to
three full calendar months after Final Completion, based on the
"typical" or expected usages described in the following chart, or (b)
for any other month, based on the average Monthly Coker Complex Steam
Usage for the prior three calendar months.
<PAGE>
Schedule 5.5.2
Services and Supply Agreement
<TABLE>
<CAPTION>
Steam Produced (Consumed), M Pounds/Hour
- ----------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
COKER COMPLEX UNITS 850 650 PSIG, 500 PSIG, 225 PSIG, 170 PSIG, 125 PSIG, 50 PSIG, 15 PSIG, Net Mlbs of Percent
PSIG, Actual Actual Actual Actual Actual Actual Actual SS/hour Usage
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SRU 545 115.8 (25.4) 76.3 (2.0) 182.6
- -----------------------------------------------------------------------------------------------------------------------------------
DCU 843 (130.1) 21.1 (149.8)
- -----------------------------------------------------------------------------------------------------------------------------------
HCU 942 2.5 (9.6) (5.5)
- -----------------------------------------------------------------------------------------------------------------------------------
ATU 7841 (63.4)
- -----------------------------------------------------------------------------------------------------------------------------------
SWS 8747 (53.8)
- -----------------------------------------------------------------------------------------------------------------------------------
C.T. 432 (41.4) 41.4
- -----------------------------------------------------------------------------------------------------------------------------------
FLARE 23 (1.0)
- -----------------------------------------------------------------------------------------------------------------------------------
OFFSITES 74.8 55.4
- -----------------------------------------------------------------------------------------------------------------------------------
Sub Total (11.8) (56.3) 75.3 (2.0) (12.2) (0.4%)
- -----------------------------------------------------------------------------------------------------------------------------------
ANCILLARY UNITS
- -----------------------------------------------------------------------------------------------------------------------------------
AVU 146 (207.0) (137.2) (11.7) 23.9 (378.7)
- -----------------------------------------------------------------------------------------------------------------------------------
GFU 242 (21.0) (43.0) (21.0) (82.2)
- -----------------------------------------------------------------------------------------------------------------------------------
GFU 243 (54.2) (93.6) 14.8 (147.3)
- -----------------------------------------------------------------------------------------------------------------------------------
SGRU 1242 (117.7) (127.8) (35.5) 82.1 (247.3)
- -----------------------------------------------------------------------------------------------------------------------------------
Offsites (30.0) (27.5)
- -----------------------------------------------------------------------------------------------------------------------------------
Sub Total (192.9) (207.0) (431.6) (68.2) 120.8 (883.0) (27.6%)
- -----------------------------------------------------------------------------------------------------------------------------------
Clark R&M UNITS
- -----------------------------------------------------------------------------------------------------------------------------------
GFU 241 (18.2) (23.7)
- -----------------------------------------------------------------------------------------------------------------------------------
GRU 244 (300.2) 49.0 61.4 (285.8)
- -----------------------------------------------------------------------------------------------------------------------------------
HFAU 443 (19.9) (77.8) (168.9) (197.7)
- -----------------------------------------------------------------------------------------------------------------------------------
SRU 543/544 139.0 (201.9) (34.0) 29.0 (18.9)
- -----------------------------------------------------------------------------------------------------------------------------------
FCCU 1241 (687.9) (399.0) 465.1 133.8 (887.7)
- -----------------------------------------------------------------------------------------------------------------------------------
CRU 1344 90.1 (63.7) 0.1 58.9
- -----------------------------------------------------------------------------------------------------------------------------------
Offsites (30.0)
- -----------------------------------------------------------------------------------------------------------------------------------
Sub Total (936.1) (260.0) 49.0 153.1 (34.0) (6.0) (1,382.3) (43.2%)
- -----------------------------------------------------------------------------------------------------------------------------------
Clark R&M BOILERS 768.0 790.0 3.0 3.0 (31.0) 2,137.8
- -----------------------------------------------------------------------------------------------------------------------------------
Clark R&M Sub Total 768.0 (339.0) (467.0) 0.0 52.0 (275.5) (102.2) 83.8 (127.5)
- -----------------------------------------------------------------------------------------------------------------------------------
Coker Company Plus 768.0 (350.8) (467.0) 0.0 52.0 (331.8) (26.9) 81.8 (139.7)
- -----------------------------------------------------------------------------------------------------------------------------------
Clark R&M Sub Tiak
- -----------------------------------------------------------------------------------------------------------------------------------
CHEVRON CCC/PADC (768.0) (114.0) (8.0) (252.0) (24.0) (1,526.7) (47.7%)
- -----------------------------------------------------------------------------------------------------------------------------------
Refinery Plus CCC
Sub Total 0.0 (464.8) (475.0) 0.0 52.0 (583.8) (26.9) 57.8 (1,666.4)
- -----------------------------------------------------------------------------------------------------------------------------------
DESTEC 388.0 504.4
Destec + Refinery +
CCC Sub Total 0.0 (76.8) (475.0) 0.0 52.0 (583.8) (26.9) 57.8 (1,162.0)
- -----------------------------------------------------------------------------------------------------------------------------------
AIR PRODUCTS 443.5 (23.0) 555.5
- -----------------------------------------------------------------------------------------------------------------------------------
Total 0.0 366.7 (475.0) 0.0 52.0 (606.8) (26.9) 57.8 (12.7) (0.4%)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Producers of 100.0%
-----------
</TABLE>
3. Applicable Price.
----------------
a. Coker Complex
The Coker Company shall pay Clark R&M for the actual cost of providing
steam services to the Coker Complex each month based on the following
formula:
Average Monthly Refinery Steam Cost * (Monthly Coker Complex Steam
Usage - Monthly Coker Complex Return Steam).
Where:
"Average Monthly Refinery Steam Cost" means for any month, (a) the total
costs in dollars incurred by Clark R&M for the purchase, production and
distribution of
-2-
<PAGE>
Schedule 5.5.2
Services and Supply Agreement
steam at the Refinery during such month, divided by (b) the Total MLBS
----------
SS Distributed during such month.
"Total MLBS SS Distributed" means the total MLBS SS of steam
distributed between Clark R&M, affiliates of Clark R&M, Chevron
Chemical Company and affiliates of Chevron Chemical Company at the
Refinery and the adjacent facilities owned by Chevron Chemical Company
or the affiliates thereof.
b. Ancillary Equipment
Consideration for steam services provided by Clark R&M to the Coker
Company for use at the Ancillary Equipment is included in the
Ancillary Equipment Operating Fee.
4. Required Billing Information.
----------------------------
Clark R&M shall provide the following information as an attachment to its
monthly Reconciliation Statements:
a. Total actual steam measured through each Coker Complex meter described
above and conversion of such poundage to MLBS SS.
b. Calculation of the Average Monthly Refinery Steam Cost and the Total
MLBS SS Distributed
c. Total amount due from Coker Company for steam services provided to the
Coker Complex
5. Additional Terms.
----------------
5.1 Standard Steam Conversion Factors
---------------------------------
To convert steam to Standard Steam, the number of pounds of actual
steam shall be multiplied by the relevant standard steam factor.
-3-
<PAGE>
Schedule 5.5.2
Services and Supply Agreement
<TABLE>
<CAPTION>
Poundage of Steam Standard Steam Factor
----------------- ---------------------
<S> <C>
850 1.463
650 1.3
500 1.25
225 1.098
170 0.986
125 0.915
50 0.741
15 0.596
</TABLE>
5.2 Standard Steam Definition
-------------------------
The steam accounting system at the Refinery is based on energy
content. All actual pounds of steam are converted to Standard
Steam. All costs (from the appropriate cost centers in Clark
R&M's accounting system) in producing steam are then divided by
the pounds of Standard Steam.
One pound of Standard Steam is defined as the steam at the
conditions whereby ten pounds of steam generate 1 KWH of
electricity at 100% efficiency when exhausted through a turbine
to a pressure of 2.5" mercury absolute.
The Standard Steam conversion factors are then calculated as
illustrated in the following example.
(1) 850 PSIG, 800F steam at 100% efficiency requires
6.837 pounds of actual steam to generate a KWH of
electricity
(2) The Standard Steam factor equals 10 (the theoretical
steam rate of Standard Steam) divided by 6.837 (the
theoretical steam rate of 850 PSIG, 800F steam), or
1.463.
This means 100,000 pounds of 850 PSIG, 800F steam would equal
146,300 pounds of Standard Steam.
The energy basis for Standard Steam factors can be calculated by
the following formula:
Standard Steam Factor (energy basis) =
Ha - 568.409 Ea + 5.777
-----------------------
341.275
Where:
Ha = Enthalpy of actual steam (BTUs/lb)
-4-
<PAGE>
Schedule 5.5.2
Services and Supply Agreement
Ea = Entropy of actual steam (BTUs/lb F)
The basis for this formula is that enthalpy versus entropy for
steam-water mixture at 2.5" mercury absolute is a straight line
for values of entropy of 1.34 to 1.96 BTUs/lb F.
-5-
<PAGE>
Schedule 5.5.3
Services and Supply Agreement
NATURAL AND FUEL GAS SERVICES
1. Scope.
-----
a. Clark R&M shall supply the natural gas and fuel gas requirements of
the Coker Company for use at the Heavy Oil Processing Facility. Such
natural gas and fuel gas is expected to have the typical properties
and specifications set forth in the Turnkey Specifications and the
charts in 2 below.
1.2 Clark R&M shall take delivery of all natural gas and fuel gas not
consumed during operation of the Heavy Oil Processing Facility.
1.3 The Coker Company shall pay Clark R&M for the amount of natural gas
and fuel gas consumed by each unit of the Heavy Oil Processing
Facility and not returned to Clark R&M.
1.4 Pursuant to the Product Purchase Agreement, Clark R&M is purchasing
the fuel gas produced during operation of the units comprising the
Heavy Oil Processing Facility net of fuel gas supplied to such units.
2. Metering/Measurement Methodology for Services to the Coker Complex.
------------------------------------------------------------------
a. Monthly Natural Gas Consumption
Meters to be installed pursuant to the EPC Contract and described on
Schedule 5.5(b) shall be used to measure the millions of British
thermal units ("MMBTUs") of natural gas that are delivered to and
consumed by the Coker Complex each month ("Monthly Natural Gas
Consumption"); provided, however, that at any time when such meters
-------- -------
are not functioning the Monthly Coker Natural Gas Consumption Usage
shall be determined (a) for any month prior to three full calendar
months after Final Completion, based on the "typical" or expected
usages described in the following chart, or (b) for any other month,
based on the average Monthly Natural Gas Consumption for the prior
three calendar months.
<PAGE>
Schedule 5.5.3
Services and Supply Agreement
Consumed, MMBTU's/Hr.--HHV
- --------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Process Description Typical Volume Percent Usage
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COKER COMPLEX UNITS
SRU 545 77.5
DCU 843 37.1
HCU 942 7.8
ATU 7841 0
SWS 8747 0
C.T. 432 0
FLARE 23 0.19
DCU 843 Charge Tanks 0.01
Sub Total 123 2.6%
ANCILLARY EQUIPMENT UNITS
AVU 146 66
GFU 242 61.9
GFU 243 3.3
SGRU 1242 7.3
PRORATED, NG to Mix Drum 557
Sub Total 696 14.7%
Clark R&M UNITS
GFU 241 42.4
GFU 244 15.0
HFAU 443 42.0
SRU 543/4 62.2
FCCU 1241 36.0
CRU 1344 17.0
Miscellaneous 13.0
PRORATED, NG to Mix Drum 613.6
Reduced consumption (75.0)
Sub Total 766.2 16.2%
Clark R&M BOILERS 706 14.9%
Clark R&M Sub Total 2,168.1
Coker Complex Plus Clark R&M Sub Total 2291
CHEVRON CCC/PADC 295 6.2%
Refinery Plus CCC Sub Total 2,585.7
AIR PRODUCTS 2,156.0 45.5%
Total 4,741.7 100.0%
</TABLE>
b. Monthly Fuel Gas Consumption
Meters to be installed pursuant to the EPC Contract and described on
Schedule 5.5(b) shall be used to measure the MMBTUs of fuel gas
delivered to and consumed by, the Coker Complex each month ("Monthly
Fuel Gas Consumption"); provided, however, that at any time when such
-------- -------
meters are not functioning the Monthly Fuel Gas Consumption shall be
determined (a) for any month prior to three full calendar months after
Final Completion, based on the "typical" or expected usages described
in the following chart, or (b) for any other month, based on the
average Monthly Fuel Gas Consumption for the prior three calendar
months.
-2-
<PAGE>
Schedule 5.5.3
Services and Supply Agreement
Production (Consumption), MMBTU's/HR. (HHV)
- -------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Process Description Typical Volume Percent Usage
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COKER COMPANY UNITS
SRU 545 0.0
DCU 843 452.3
HCU 942 0.0
ATU 7841 0.0
SWS 8747 0.0
C.T. 432 0.0
FLARE 23 0.0
DCU 843 Charge Tanks 0.0
HT PSA (30.5)
Sub Total 421.8 (36.0%)
ANCILLARY EQUIPMENT UNITS
AVU 146 (597.4)
GFU 242 5.8
GFU 243 83.6
SGRU 1242 266.7
Sub Total (241.3) 20.6%
Clark R&M UNITS
GFU 241 53.9
GFU 244 157.8
HFAU 443 (83.4)
FCCU 1241 480.3
CRU 1344 (351.4)
Reduced production (129.0)
Miscellaneous consumption (34.0)
Sub Total 94.2 (8.0%)
Clark R&M BOILERS (1,737.0) 148.3%
Clark R&M Sub Total (1,884.1)
Coker Company Plus Clark R&M Sub Total (1,462.3)
CHEVRON CCC/PADC 519.0 (44.3%)
Refinery Plus CCC Sub Total (943.3)
AIR PRODUCTS
Refinery Fuel to SMR (228.0) 19.5%
Total (1,171.3) 100.0%
</TABLE>
3. Applicable Price.
----------------
a. Coker Complex
The Coker Company shall pay Clark R&M for the actual cost of
providing natural gas and fuel gas services to the Coker Complex each month
based on the following formula:
MMBTU Price * Monthly MMBTU Usage
Where:
"MMBTU Price" means, for any month the sum of (i) Gulf Coast NG for
such month, plus (ii) $.015.
----
<PAGE>
Schedule 5.5.3
Services and Supply Agreement
"Gulf Coast NG" means, for any month, the average Houston Ship
Channel (Large) Quote stated in MMBTUs in Inside FERCS Gas Market
Report (Trends in Spot Price Indicators) .
"Monthly MMBTU Usage" means for any month the sum of (a) Monthly
Natural Gas Consumption, and (b) Monthly Fuel Gas Consumption.
b. Ancillary Equipment
Consideration for natural and fuel gas services provided by Clark
R&M to the Coker Company for use at the Ancillary Equipment is
included in the Ancillary Equipment Operating Fee.
4. Required Billing Information.
----------------------------
Clark R&M shall provide the following information as an attachment to
its monthly Reconciliation Statements:
4.1 Total MMBTUs of natural gas and fuel gas delivered each unit of the
Coker Complex.
4.2 Total MMBTUs of natural gas and fuel gas produced by each unit of
the Coker Complex.
4.3 Calculation of the Monthly MMBTU Usage
4.4 Gulf Coast NG
4.5 Total amount due from Coker Company for natural gas and fuel gas
provided to the Coker Complex
-4-
<PAGE>
Schedule 5.5.4
Services and Supply Agreement
WATER SERVICES.
5. Scope.
-----
a. Supply of the Coker Company's requirements for the following
types of water for use at the Heavy Oil Processing Facility.
a. Boiler Feedwater
"Boiler Feedwater" means a combination of untreated water
and condensed steam meeting the specifications therefor set
forth in the Turnkey Specifications and under the heading
"BFW" on the chart in 4 below.
b. Filtered Water
"Filtered Water" means Clarified Water (as defined below)
that has been filtered to remove particulate matter and
meeting the specifications therefor set forth in the
Turnkey Specifications and under the heading "Filtered
Water" on the chart in 4 below.
c. Clarified Water
"Clarified Water" means untreated water purchased by Clark
R&M from the Lower Neches Valley Authority and meeting the
specifications therefor set forth in the Turnkey
Specifications and under the heading "Clarified Water" on
the chart in 4 below.
d. Potable Water
"Potable Water" means drinking water purchased by Clark R&M
from the City of Port Arthur.
e. Fire Water
"Fire Water" means Clarified Water used for fire fighting
purposes and purchased by Clark R&M from the City of Port
Arthur.
f. Demineralized Water
"Demineralized Water" means Clarified Water that has been
treated to remove particulate matter and meeting the
specifications therefor set forth in the Turnkey
Specifications and under the heading "Demineralized Water"
on the chart in 4 below.
<PAGE>
Schedule 5.5.4
Services and Supply Agreement
b. Offtake of all condensed steam ("Condensate") from
operation of the Heavy Oil Processing Facility.
6. Metering/Measurement Methodology for Services to the Coker Complex
------------------------------------------------------------------
The meters to be installed pursuant to the EPC Contract and described on
Schedule 5.5(b) shall be used to measure the thousands of gallons ("MGALs")
of each type of water that are delivered to the Coker Complex each month
and the MGALs of Condensate that are produced by the Coker Company each
month (the "Monthly Condensate MGALs"); provided, however, that at any time
-------- -------
when such meters are not functioning the Monthly Condensate MGALs shall be
determined (a) for any month prior to three full calendar months after
Final Completion, based on the "typical" or expected usages described in
the chart in number 4 below, or (b) for any other month, based on the
average Monthly Condensate MGALs for the prior three calendar months.
7. Applicable Price.
----------------
a. Coker Complex
The Coker Company shall pay Clark R&M for the supply of each type of
water described above to the Coker Complex each month according to the
following formula:
Boiler Feedwater Cost + Filtered Water Cost + Clarified Water
Cost + Demineralized Water Cost - Condensate Payment.
Where:
a. Boiler Feedwater Cost
The "Boiler Feedwater Cost" each month shall be determined
according to the following formula:
Average Monthly Refinery Boiler Feedwater Cost * Monthly
Boiler Feedwater MGALs
Where:
"Average Monthly Refinery Boiler Feedwater Cost" means, for any
month, (a) the actual costs in dollars incurred by Clark R&M for
the provision of Boiler Feedwater throughout the Refinery, divided
-------
by (b) the MGALs of Boiler Feedwater distributed in such month
--
throughout the Refinery.
-2-
<PAGE>
Schedule 5.5.4
Services and Supply Agreement
"Monthly Boiler Feedwater MGALs" means, for any month the total
metered MGALs of Boiler Feedwater distributed to the Coker
Complex in such month; provided, however, that at any time when
-------- -------
such meters are not functioning the Monthly Boiler Feedwater
MGALs shall be determined (a) for any month prior to three full
calendar months after Final Completion, based on the "typical" or
expected usages described in the chart in 4 below, or (b) for any
other month, based on the average Monthly Boiler Water MGALs for
the prior three calendar months.
b. Filtered Water Cost
The "Filtered Water Cost" each month shall be determined
according to the following formula:
Average Monthly Refinery Filtered Water Cost * Monthly Filtered
Water MGALs
Where:
"Average Monthly Refinery Filter Water Cost" means, for any
month, (a) the actual costs in dollars incurred by Clark R&M for
the provision of Filtered Water throughout the Refinery, divided
-------
by (b) the total MGALs of Filtered Water distributed in such
--
month throughout the Refinery.
"Monthly Filtered Water MGALs" means, for any month the total
metered MGALs of Filtered Water distributed to the Coker Complex
in such month; provided, however, that at any time when such
-------- -------
meters are not functioning the Monthly Filtered Water MGALs shall
be determined (a) for any month prior to three full calendar
months after Final Completion, based on the "typical" or expected
usages described in the chart in 4 below, or (b) for any other
month, based on the average Monthly Filtered Water MGALs for the
prior three calendar months. provided, however, that at any time
-------- -------
when the applicable meters are not functioning the Monthly
Filtered Water MGALs shall be determined based on the "typical"
or expected usages described in the chart in 4 below.
c. Clarified Water Cost
The "Clarified Feedwater Cost" each month shall be determined
according to the following formula:
Average Monthly Refinery Clarified Water Cost * Monthly Clarified
Water MGALs
Where:
-3-
<PAGE>
Schedule 5.5.4
Services and Supply Agreement
"Average Monthly Refinery Clarified Water Cost" means, for any
month, (a) the actual costs in dollars incurred by Clark R&M for
the provision of Clarified Water (including Fire Water)
throughout the Refinery, divided by (b) the total MGALs of
----------
Clarified Water distributed in such month throughout the
Refinery.
"Monthly Clarified Water MGALs" means, for any month the total
metered MGALs of Clarified Water distributed to the Coker
Complex in such month; provided, however, that at any time when
-------- -------
such meters are not functioning the Monthly Clarified Water
MGALs shall be determined (a) for any month prior to three full
calendar months after Final Completion, based on the "typical"
or expected usages described in the chart in 4 below, or (b) for
any other month, based on the average Monthly Clarified Water
MGALs for the prior three calendar months.
d. Potable Water Cost
The cost of Potable Water provided to the Coker Company each
month for use in connection with operation of the Coker Complex
and the Ancillary Equipment is included in the rent payable under
the Coker Complex Ground Lease and the Ancillary Equipment Site
Lease, respectively.
e. Demineralized Water Cost
The "Demineralized Feedwater Cost" each month shall be determined
according to the following formula:
Average Monthly Refinery Demineralized Water Cost * Monthly
Demineralized Water MGALs
Where:
"Average Monthly Refinery Demineralized Water Cost" means, for
any month, (a) the actual costs in dollars incurred by Clark R&M
for the provision of Demineralized Water throughout the Refinery,
divided by (b) the total MGALs of Demineralized Water distributed
----------
in such month throughout the Refinery.
"Monthly Demineralized Water MGALs" means, for any month the
total metered MGALs of Demineralized Water distributed to the
Coker Complex in such month; provided, however, that at any time
-------- -------
when such meters are non functioning the Monthly Demineralized
Water MGALs shall be determined (a) for any month prior to three
full calendar months after Final Completion,
-4-
<PAGE>
Schedule 5.5.4
Services and Supply Agreement
based on the "typical" or expected usages described in the
chart in 4 below, or (b) for any other month, based on the
average Monthly Demineralized Water MGALs for the prior
three calendar months.
f. Condensate Payment
The "Condensate Payment" each month shall be determined according
to the following formula:
Average Monthly Refinery Boiler Feedwater Cost * Monthly
Condensate MGALs
4.
-5-
<PAGE>
Schedule 5.5.4
Services and Supply Agreement
4. Additional Terms.
----------------
<TABLE>
<CAPTION>
Water Produced (Consumed)
- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COKER COMPLEX UNITS Clarified Filtered Demin Zeolite BFW Condensate Fire Potable Waste
Water, Water, Water, Water, Water Water Water,
Mlbs/Hr Mlbs/Hr. Mlbs/Hr Mlbs/Hr GPM
- ----------------------------------------------------------------------------------------------------------------------------------
SRU 545 (193.0) (193.0) 43.2 18.0
- ----------------------------------------------------------------------------------------------------------------------------------
DCU 843 (50.0) (68.0) 63.0 25.0
- ----------------------------------------------------------------------------------------------------------------------------------
HCU 942 (146.0) (84.0) 25.0
- ----------------------------------------------------------------------------------------------------------------------------------
ATU 7841 63.4 18.0
- ----------------------------------------------------------------------------------------------------------------------------------
SWS 8747 53.8 267.0
- ----------------------------------------------------------------------------------------------------------------------------------
C.T. 432 (492.0) 72.0
- ----------------------------------------------------------------------------------------------------------------------------------
FLARE 23 (23.0) (23.0)
- ----------------------------------------------------------------------------------------------------------------------------------
OFFSITES 10.0
- ----------------------------------------------------------------------------------------------------------------------------------
Sub Total (542.0) 0.0 (193.0) 0.0 (430.0) 116.4 435.0
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Usage Coker Company 6.6% 0.0% (26.9%) 0.0% 12.6% (3325.7%) #DIV/0! #DIV/0! 7.4%
- ----------------------------------------------------------------------------------------------------------------------------------
ANCILLARY EQUIPMENT
- ----------------------------------------------------------------------------------------------------------------------------------
AVU 146 103.7 420.0
- ----------------------------------------------------------------------------------------------------------------------------------
GFU 242 33.9 25.0
- ----------------------------------------------------------------------------------------------------------------------------------
GFU 243 41.7 0.0
- ----------------------------------------------------------------------------------------------------------------------------------
SGRU 1242 142.0 50.0
- ----------------------------------------------------------------------------------------------------------------------------------
Offsites--PH 41 30.0
- ----------------------------------------------------------------------------------------------------------------------------------
Sub Total 0.0 0.0 0.0 0.0 0.0 351.3 495.0
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Usage Ancillary 0.0% 0.0% 0.0% 0.0% 0.0% (10037.1%) #DIV/0! #DIV/0! 8.5%
- ----------------------------------------------------------------------------------------------------------------------------------
Clark R&M UNITS
- ----------------------------------------------------------------------------------------------------------------------------------
GFU 241 9.2 25.0
- ----------------------------------------------------------------------------------------------------------------------------------
GFU 244 (10.0) 59.4 25.0
- ----------------------------------------------------------------------------------------------------------------------------------
HFAU 443 114.1 62.0
- ----------------------------------------------------------------------------------------------------------------------------------
SRU 543/544 (140.0) (52.0) 100.0
- ----------------------------------------------------------------------------------------------------------------------------------
FCCU 1241 (228.0) (228.0) 237.4 90.0
- ----------------------------------------------------------------------------------------------------------------------------------
CRU 1344 (58.0) (186.0) 0.0 100.0
- ----------------------------------------------------------------------------------------------------------------------------------
SWS 8746 52.0 233.0
- ----------------------------------------------------------------------------------------------------------------------------------
Cleaning Slab 27.0
- ----------------------------------------------------------------------------------------------------------------------------------
P.S 194 60.0
- ----------------------------------------------------------------------------------------------------------------------------------
Cooling Tower Blowdown 800.0
- ----------------------------------------------------------------------------------------------------------------------------------
Offsites-PH 136 99.4
- ----------------------------------------------------------------------------------------------------------------------------------
No. 2 WTP 20.0
- ----------------------------------------------------------------------------------------------------------------------------------
Firewater Make-up (250.0) 250.0
- ----------------------------------------------------------------------------------------------------------------------------------
Fire Water to Sewer 400.0
for Cooling
- ----------------------------------------------------------------------------------------------------------------------------------
Scaltech 50.0
- ----------------------------------------------------------------------------------------------------------------------------------
Storm Water Tank, 2,500.0
T-1912
- ----------------------------------------------------------------------------------------------------------------------------------
Clark R&M Boilers (171.0) (1,687.0) (1,389.0)
- ----------------------------------------------------------------------------------------------------------------------------------
Filtered Water to Ref. (2,001.0)
Dist.
- ----------------------------------------------------------------------------------------------------------------------------------
To Filtered Water (3,936.0) 3,936.0
- ----------------------------------------------------------------------------------------------------------------------------------
To Demin./Zeolite (725.0) 422.0 303.0
System
- ----------------------------------------------------------------------------------------------------------------------------------
To SMR (718.0) 718.0
Reject (389.0) (42.0)
- ----------------------------------------------------------------------------------------------------------------------------------
Sub Total (6,480.0) 450.0 911.0 65.0 (2,241.0) (869.5) 4,492.0
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Usage Clark R&M 79.3% 100.0% 126.9% 100.0% 65.8% 24842.9% #DIV/0! #DIV/0! 76.8%
- ----------------------------------------------------------------------------------------------------------------------------------
Clark Subtotal 450.0 911.0 65.0 (2,241.0) (518.2) 4,987.0
- ----------------------------------------------------------------------------------------------------------------------------------
Coker Company & Clark R&M (7,022.0) 450.0 718.0 65.0 (2,671.0) (401.8) 5,422.0
Sub
- ----------------------------------------------------------------------------------------------------------------------------------
CHEVRON CCC/PADC (900.0) 0.0 0.0 (65.0) 0.0 340.0 425.0
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Usage Chevron 11.0% 0.0% 0.0% (100.0%) 0.0% (9714.3%) #DIV/0! #DIV/0! 7.3%
- ----------------------------------------------------------------------------------------------------------------------------------
Refinery Plus CCC (7,922.0) 450.0 718.0 0.0 (2,671.0) (61.8) 5,847.0
Sub Total
- ----------------------------------------------------------------------------------------------------------------------------------
DESTEC (450.0) 0.0 0.0 0.0 0.0 0.0
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Usage Destec 0.0% (100.0%) 0.0% 0.0% 0.0% 0.0% #DIV/0! #DIV/0! 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Ref. Plus CCC Plus (7,922.0) 450.0 718.0 0.0 (2,671.0) (61.8) 5,847.0
Destec
- ----------------------------------------------------------------------------------------------------------------------------------
AIR PRODUCTS (245.0) 0.0 (718.0) 0.0 (735.0) 58.3
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Usage Air Products 3.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Net (8,167.0) 450.0 718.0 65.0 (3,406.0) (3.5) 0.0 0.0 5,847.0
- ----------------------------------------------------------------------------------------------------------------------------------
Total Percent Usage 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% #DIV/0! #DIV/0! 100.0%
</TABLE>
-6-
<PAGE>
Schedule 5.5.5
Services and Supply Agreement
COMPRESSED AIR SERVICES
1. Scope.
-----
a. Supply of the full compressed air requirements of the Coker Company
for use at the Coker Complex. Such compressed air shall meet the
specifications set forth in the Turnkey Specifications.
b. Supply of the full compressed air requirements of the Coker Company
for use at the Ancillary Equipment.
2. Metering/Measurement Methodology for Services to the Coker Complex.
The meters to be installed pursuant to the EPC Contract and described on
Schedule 5.5(b) shall be used to measure the thousands of standard cubic
feet ("MSCF") of compressed air are delivered to the Coker Complex each
month (the "Monthly Coker Complex MCSF").
3. Applicable Price.
----------------
a. Coker Complex
The Coker Company shall pay Clark R&M for the actual cost of providing
compressed air to the Coker Complex each month based on the following
formula:
Total Average Refinery Compressed Air Cost * Monthly Coker
Complex MSCF
Where:
"Total Average Refinery Compressed Air Cost" means, for any month
(a) the actual costs in dollars incurred by Clark R&M for the
production and distribution of compressed air at the Refinery in
such month, divided by (b) the total amount, expressed in MSCF,
----------
of compressed air distributed throughout the Refinery in such
month.
b. Ancillary Equipment
Consideration for compressed air provided by Clark R&M to the Coker
Company for use at the Ancillary Equipment is included in the
Ancillary Equipment Operating Fee.
<PAGE>
Schedule 5.5.5
Services and Supply Agreement
4. Required Billing Information.
----------------------------
Clark R&M shall provide the following information as an attachment to its
monthly Reconciliation Statements:
4.1 Total MSCF of compressed air measured through each Coker Complex
meter.
4.2 Calculation of the Total Average Refinery Compressed Air Costs
4.3 Total amount due from Coker Company for compressed air provided to the
Coker Complex
-2-
<PAGE>
Schedule 5.5.6
Services and Supply Agreement
NITROGEN SERVICES
1. Scope.
-----
a. Supply of the full nitrogen requirements of the Coker Company for use
at the Coker Complex meeting the following specifications:
Component Specification
--------- --------------
Nitrogen and inerts 99.999 Mole % minimum
Oxygen 10.0 ppm maximum
8.0 ppm minimum
Moisture (dew point) - 80[degrees] Fahrenheit or below
b. Supply of the full nitrogen requirements of the Coker Company for use
at the Ancillary Equipment.
2. Metering/Measurement Methodology for Services to the Coker Complex.
The meters to be installed pursuant to the EPC Contract and described on
Schedule 5.5(b) shall be used to measure the volume of nitrogen, expressed
in thousands of standard cubic feet ("MSCF"), that are delivered to the
Coker Complex each month (the "Monthly Coker Complex MCSF").
3. Applicable Price.
----------------
a. Coker Complex
The Coker Company shall pay Clark R&M for the actual cost of providing
nitrogen to the Coker Complex each month based on the following
formula:
(Total Average Refinery Nitrogen Cost * Monthly Coker Complex
MSCF) + Coker Complex Nitrogen Distribution Allocation
Where:
"Total Average Refinery Nitrogen Cost" means, for any month, (a)
the total dollar charges in such month to Clark R&M for nitrogen
supplied to the Refinery by third party suppliers, divided by (b)
----------
the Monthly Refinery MSCF.
"Monthly Refinery MSCF" means, for any month, the total volume of
nitrogen, expressed in MSCF, purchased by Clark R&M from third
party suppliers and distributed through the Nitrogen Distribution
System (as defined in 5 below) in such month.
<PAGE>
Schedule 5.5.5
Services and Supply Agreement
"Coker Company Nitrogen Distribution Allocation" means, for
any month (a) the total costs in dollars incurred by Clark R&M in
such month to maintain the Nitrogen Distribution System (as
defined below), multiplied by (b) the ratio of (i) Monthly Coker
-------------
Complex MSCF to (ii) Monthly Refinery MSCF.
b. Ancillary Equipment
Consideration for nitrogen provided by Clark R&M to the Coker Company
for use at the Ancillary Equipment is included in the Ancillary
Equipment Operating Fee.
4. Required Billing Information.
----------------------------
Clark R&M shall provide the following information as an attachment to its
monthly Reconciliation Statements:
4.1 Total MSCF of nitrogen measured through each Coker Complex meter.
4.2 Calculation of Total Average Refinery Nitrogen Cost and Coker Complex
Nitrogen Distribution Allocation.
4.3 Total amount due from Coker Company for nitrogen provided to the Coker
Complex
5. Additional Terms.
----------------
As used herein "Nitrogen Distribution System" means the interconnective
piping system owned by Clark R&M and used to distribute nitrogen to Clark
R&M and its affiliates (including the Coker Company).
-2-
<PAGE>
Schedule 5.5(b)
Services and Supply Agreement
UTILITY METERS
The Coker Company and Clark R&M agree to promptly complete the following
tables upon completion of design engineering by the Contractor related to
the applicable meters.
ATU-7841
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Schedule Utility Description Movement Flow Meter Drawing
- ----------------------------------------------------------------------------------------------------------
Diagram # STREAM Source/Destination number Number
--------- ------ ------------------ ----- ------
7841/4623/
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
5.5.5 AIR
- ----------------------------------------------------------------------------------------------------------
6 Plant Air frm Offsites A401
----------------------------------------------------------------------------------------------
6 Instrument Air frm Offisites A401
----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
5.5.6 NITROGEN
- ----------------------------------------------------------------------------------------------------------
1 Nitrogen frm Offsites A401
----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
5.5.2 STEAM
- ----------------------------------------------------------------------------------------------------------
2 MP (125 psig) Steam frm SWS-8747 A400
----------------------------------------------------------------------------------------------
2 50 psig Steam frm SWS-8747 A400
----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
5.5.4 WATER
- ----------------------------------------------------------------------------------------------------------
3 50 psig Condensate to SWS-8747 A400
----------------------------------------------------------------------------------------------
3 Pumped Condensate frm SWS-8747 A400
----------------------------------------------------------------------------------------------
7 Filtered Water frm Offisites A401
----------------------------------------------------------------------------------------------
7 Clarified Water frm Offisites A401
----------------------------------------------------------------------------------------------
5 Cooling Water Supply frm Offsites A401
----------------------------------------------------------------------------------------------
5 Cooling Water Return to Offsites A401
----------------------------------------------------------------------------------------------
7 Potable Water frm Offisites A401
- ----------------------------------------------------------------------------------------------------------
5.5.1 ELECTRIC
- ----------------------------------------------------------------------------------------------------------
N/A Electric from Clark from PP6 to ATU-7841 3 N/A
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
</TABLE>
Note 1: Cooling Tower services all Coker Complex
Note 2: Natural Gas and Fuel Gas Meter are Reference in the Product
Purchase Agreements for Coker Complex
<PAGE>
Schedule 5.5(b)
Services and Supply Agreement
SRU-545
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Schedule Utility Description Movement Flow Meter Drawing
- --------------------------------------------------------------------------------------------------------------------------------
Diagram # STREAM Source/Destination number Number
--------- ------ ------------------ ------ ------
<S> <C> <C> <C> <C> <C>
- --------------------------
5.5.5 AIR
- --------------------------------------------------------------------------------------------------------------------------------
6 Plant Air
-----------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
5.5.6 NITROGEN
- --------------------------------------------------------------------------------------------------------------------------------
1 Nitrogen
-----------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
5.5.2 STEAM
- --------------------------------------------------------------------------------------------------------------------------------
2 650 psig Superheated Steam FI-1846 0041
-----------------------------------------------------------------------------------------------------------------
2 50 psig steam from SCOT WHB FI-1681 0034
-----------------------------------------------------------------------------------------------------------------
2 50 psig Steam from Cond - Tr1 FI-1161 0021
-----------------------------------------------------------------------------------------------------------------
2 50 psig Steam from Cond - Tr2
-----------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
5.5.4 WATER
- --------------------------------------------------------------------------------------------------------------------------------
3 LP BFW to Condenser - Tr1 FI-1160 0021
-----------------------------------------------------------------------------------------------------------------
3 LP BFW to Condenser - Tr2
-----------------------------------------------------------------------------------------------------------------
3 LP BFW to SCOT WFB FI-1680 0034
-----------------------------------------------------------------------------------------------------------------
3 HP BFW to 650# WHB - Tr1 FI-1090 0018
-----------------------------------------------------------------------------------------------------------------
3 HP BFW to 650# WHB - Tr2
-----------------------------------------------------------------------------------------------------------------
3 HP BFW to Incinerator Boiler FI-1840 0042
-----------------------------------------------------------------------------------------------------------------
3 HP BFW to Desuperheater FI-1845 0041
-----------------------------------------------------------------------------------------------------------------
Quench Water Makeup 0036
-----------------------------------------------------------------------------------------------------------------
Amine Makep Water 0032
-----------------------------------------------------------------------------------------------------------------
SCOT ATU SOUR Water FI-1771 0039
-----------------------------------------------------------------------------------------------------------------
7 Clarified Water
-----------------------------------------------------------------------------------------------------------------
7 Filtered Water
-----------------------------------------------------------------------------------------------------------------
5 Cooling Water Supply
-----------------------------------------------------------------------------------------------------------------
5 Cooling Water Return
-----------------------------------------------------------------------------------------------------------------
7 Potable Water
- --------------------------------------------------------------------------------------------------------------------------------
5.5.1 ELECTRIC
- --------------------------------------------------------------------------------------------------------------------------------
N/A Electric from Clark from PP6 to SRU-545 3 N/A
--------------
</TABLE>
Note 1: Cooling Tower services all Coker Complex
Note 2: Natural Gas and Fuel Gas Meter are Reference in the
Product Purchase Agreements for Coker Complex
-2-
<PAGE>
Schedule 5.5(b)
Services and Supply Agreement
HCU-942
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Schedule Utility Description Movement Flow Meter Drawing
- ---------------------------------------------------------------------------------------------------------------------------------
Diagram # STREAM Source/Destination number Number
--------- ------- ------------------ ------ ------
4612-2--50-
<S> <C> <C> <C> <C> <C>
- -----------------------------
5.5.5 AIR
- ---------------------------------------------------------------------------------------------------------------------------------
6 Plant Air frm Offsites 062
-------------------------------------------------------------------------------------------------------------
6 Instrument Air frm DCU-843 063
-------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.5.6 NITROGEN
- ---------------------------------------------------------------------------------------------------------------------------------
1 Nitrogen frm DCU-843 FI-3026 063
- ---------------------------------------------------------------------------------------------------------------------------------
5.5.2 STEAM
- ---------------------------------------------------------------------------------------------------------------------------------
2 HP (650 psig) Steam frm Offsites FI-3300 074
-------------------------------------------------------------------------------------------------------------
2 MP (125 psig) Steam frm Offsites FI-3325 075
-------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5.5.4 WATER
- ---------------------------------------------------------------------------------------------------------------------------------
3 Condensate to Offsites 076
-------------------------------------------------------------------------------------------------------------
3 Surf. Cond. Condensate to Offsites FI-3670 088
-------------------------------------------------------------------------------------------------------------
5 Cooling Water Sup/Ret frm Offsites 065
-------------------------------------------------------------------------------------------------------------
7 Clarified Water frm DCU-843 067
-------------------------------------------------------------------------------------------------------------
7 Filter Water frm DCU-843 067
-------------------------------------------------------------------------------------------------------------
3 HP Boiler Feed Water frm Offsites FI-3276 073
-------------------------------------------------------------------------------------------------------------
7 Potable Water frm Offsites 067
-------------------------------------------------------------------------------------------------------------
Sour Water frm DCU-843 054
-------------------------------------------------------------------------------------------------------------
Sour Water frm SRU-545 054
-------------------------------------------------------------------------------------------------------------
Sour Water to Tank 78 FC-2801 054
- ---------------------------------------------------------------------------------------------------------------------------------
5.5.1 ELECTRIC
- ---------------------------------------------------------------------------------------------------------------------------------
N/A Electric from Clark from PP6 to HCU-942 3 N/A
-------------------------------------------------------------------------------------------------------------
N/A Electric from Clark from PP6 to Cooling Twr 4 N/A
-------------------------------------------------------------------------------------------------------------
-------------------------------------------- ---------------------------------
</TABLE>
Note 1: Cooling Tower services all Coker Complex
Note 2: Natural Gas and Fuel Gas Meter are Reference in the
Product Purchase Agreements for Coker Complex
-3-
<PAGE>
Schedule 5.5(b)
Services and Supply Agreement
DCU-843
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Schedule Utility Description Movement Flow Meter Drawing
- -----------------------------------------------------------------------------------------------------------------------------------
Diagram # STREAM Source/Destination number Number
--------- ------ ------------------ ------ ------
<S> <C> <C> <C> <C> <C>
4611-2-50-
- -------------------------------
5.5.5 AIR
- -----------------------------------------------------------------------------------------------------------------------------------
6 Plant Air to DCU-843 FE-3615 171
------------------------------------------------------------------------------------------------------------------
6 Instrument Air to DCU-843 171
------------------------------------------------------------------------------------------------------------------
6 Plant Air to HCU-942 172
------------------------------------------------------------------------------------------------------------------
6 Instrument Air to HCU-942 172
------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.6 NITROGEN
- -----------------------------------------------------------------------------------------------------------------------------------
1 Nitrogen to DCU-843 FE-3616 171
------------------------------------------------------------------------------------------------------------------
1 Nitrogen to HCU-942 172
------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.2 STEAM
- -----------------------------------------------------------------------------------------------------------------------------------
2 MP (125 psig) Steam to/from DCU-843 FE-3623 171
------------------------------------------------------------------------------------------------------------------
2 HP (650 psig) Steam to DCU-843 FE-3624 171
------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.4 WATER
- -----------------------------------------------------------------------------------------------------------------------------------
5 Cooling Water Supply to DCU-843 FE-3621 171
------------------------------------------------------------------------------------------------------------------
5 Cooling Water Return frm DCU-843 171
------------------------------------------------------------------------------------------------------------------
3 High Pressure BFW to DCU-843 FE-3637 172
------------------------------------------------------------------------------------------------------------------
3 Medium Pressure BFW to DCU-843 FE-3638 172
------------------------------------------------------------------------------------------------------------------
3 High Pressure Condensate to Deaerator FE-3639 172
------------------------------------------------------------------------------------------------------------------
3 Low Pressure Condensate to Deaerator FE-3640 172
------------------------------------------------------------------------------------------------------------------
7 Oily Water to WWTU F? 171
------------------------------------------------------------------------------------------------------------------
9 Phenolic Sour Water to HCU-942 FE1853,1992 172
------------------------------------------------------------------------------------------------------------------
7 Potable Water to DCU-843 171
------------------------------------------------------------------------------------------------------------------
7 Clarified Water to DCU-843 FE-3620 171
------------------------------------------------------------------------------------------------------------------
7 Filtered Water to DCU-843 FE-3620 171
------------------------------------------------------------------------------------------------------------------
7 Clarified Water to HCU-942 172
------------------------------------------------------------------------------------------------------------------
7 Filtred Water to HCU-942 172
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.1 ELECTRIC
- -----------------------------------------------------------------------------------------------------------------------------------
N/A Electric from Clark from PP6 to DCU-843 2 N/A
------------------------------------------------------------------------------------------------------------------
N/A Electric from Clark from PP6 to Feed Tanks 4 N/A
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1: Cooling Tower services all Coker Complex
Note 2: Natural Gas and Fuel Gas Meter are Reference in the
Product Pruchase Agreements for Coker Complex
SWS-8747
-4-
<PAGE>
Schedule 5.5(b)
Services and Supply Agreement
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Schedule Utility Description Movement Flow Meter Drawing
- -----------------------------------------------------------------------------------------------------------------------------------
Diagram # STREAM Source/Destination number Number
--------- ------ ------------------ ------ ------
<S> <C> <C> <C> <C> <C>
8747/4622/
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.5 AIR
- -----------------------------------------------------------------------------------------------------------------------------------
6 Plant Air frm Offsites A401
------------------------------------------------------------------------------------------------------------------
6 Instrument Air frm Offisites A401
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.6 NITROGEN
- -----------------------------------------------------------------------------------------------------------------------------------
1 Nitrogen frm Offsites A401
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.2 STEAM
- -----------------------------------------------------------------------------------------------------------------------------------
2 MP (125 psig) Steam to SWS 8747 FI-1033 A400
------------------------------------------------------------------------------------------------------------------
2 50 psig Steam to SWS 8747 FI-1032 A400
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.4 WATER
- -----------------------------------------------------------------------------------------------------------------------------------
3 50 psig Condensate frm SWS 8747 A400
------------------------------------------------------------------------------------------------------------------
3 Pumped Condensate to SWS 8747 A400
------------------------------------------------------------------------------------------------------------------
7 Clarified Water frm Offisites A401
------------------------------------------------------------------------------------------------------------------
5 Cooling Water Supply frm Offsites A401
------------------------------------------------------------------------------------------------------------------
5 Cooling Water Return to Offsites A401
------------------------------------------------------------------------------------------------------------------
7 Potable Water frm Offisites A401
- -----------------------------------------------------------------------------------------------------------------------------------
5.5.1 ELECTRIC
- -----------------------------------------------------------------------------------------------------------------------------------
N/A Electric from Clark from PP6 to SWS-8747 3 N/A
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1: Cooling Tower services all Coker Complex
Note 2: Natural Gas and Fuel Gas Meter are Reference in the
Product Pruchase Agreements for Coker Complex
-5-
<PAGE>
Schedule 5.6
Services and Supply Agreement
WASTE MANAGEMENT AND WASTEWATER TREATMENT SERVICES
5. 1. Scope.
-----
Collection, processing, treatment, transportation, storage, disposal and
recycling of all waste generated by the Heavy Oil Processing Facility and
all rain water runoff, cooling tower blow down, sanitary sewage (but the
cost of sanitary sewage service is included in the rent payable under the
Coker Complex Ground Lease and the Ancillary Equipment Site Lease,
respectively), recovered oil, recovered residuals and all other hazardous
and solid waste originating at the Heavy Oil Processing Facility ("Waste
Management and Wastewater Treatment Services").
1.1 Wastewater Treatment Services
Clark R&M shall provide wastewater treatment services to the Coker
Company through operation of the following four systems of Clark R&M's
waste water treatment facility at the Refinery (the "WWTF").
f. Waste Treatment System ("WTS")
A contaminant based unit that is the main treatment facility at
the Refinery. It handles treatment of all flow from the Dirty
Water Collection System (defined below) and the dry weather
Surface Drainage System (defined below) and all cooling tower
blowdown at the Refinery.
g. Dirty Water Collection System ("DWCS")
All equipment at the Refinery used for collection and convergence
of dirty water to the WTS, including all pumping, tanks, piping,
and reservoirs.
h. Surface Drainage System ("SDS")
This system handles all surface drainage at the Refinery and
currently consist of Clark R&M's pump house no. 15 and tanks nos.
1912 and 1913.
d. Oil Recovery Unit ("ORU")
This system handles recovered oil, recovered residuals and
hazardous and solid wastes (including, without limitation, slop
oil emulsions) from the WTS and vacuum trucks.
1.2. Waste Management System ("WMS")
Clark R&M shall utilize its WMS to provide waste management services
for the Heavy Oil Processing Facility including, without limitation,
all labor, equipment, vehicles, administration, contract manpower and
other resources necessary for
<PAGE>
Schedule 5.6
Services and Supply Agreement
spill response, spill site remediation and the collection, storage,
treatment, transportation and disposal of non-hazardous and hazardous
waste.
6. Metering/Measurement Methodology for Services to the Coker Complex.
------------------------------------------------------------------
2.1 WTS
a. The monthly usage of the WTS by the Coker Complex ("Monthly WTS
Allocation") shall be deemed to equal sixteen percent (16%) of
the total monthly usage of the WTS.
b. Pursuant to Section 7.4(b) of this Services and Supply Agreement,
from time to time, the parties may modify the Monthly WTS
Allocation based on their best efforts to determine the actual
dirty water volume attributable to the Coker Complex.
2.2 DWCS
The monthly usage of the DWCS by the Coker Complex (the "Monthly DWCS
Allocation") shall be deemed to equal twenty five percent (25%) of the
total monthly usage of the DWCS.
2.3 SDS
The monthly usage of the SDS by the Coker Complex (the "Monthly SDS
Allocation") shall equal (i) 47.7 (which is the total number of acres
occupied by the Coker Complex), divided by (ii) 2300 (which is the
----------
total number of acres drained by Clark R&M's pump house no. 15 located
at the Refinery).
2.4 ORU
a. The monthly usage of the ORU by the Coker Complex (the "Monthly
ORU Allocation") shall be deemed to equal twenty five percent
(25%) of the total monthly usage of the ORU.
b. Pursuant to Section 7.4(b) of this Services and Supply Agreement,
from time to time, the parties shall use their best efforts to
modify the Monthly ORU Allocation based on the actual volume of
slop oil emulsions, solids, recovered oil, recovered residuals,
vacuum truck deliveries and other wastes handled by the ORU and
attributable to the Coker Complex.
2.5 Waste Management System
a. The monthly usage of the WMS by the Coker Complex (the "Monthly
WMS Allocation") shall be deemed to equal 15% of the total usage
of the WMS.
-2-
<PAGE>
Schedule 5.6
Services and Supply Agreement
b. Pursuant to Section 7.4(b) of this Services and Supply
Agreement, from time to time, the parties may modify the Monthly
WMS Allocation based on their best efforts to determine actual
waste volume attributable to the Coker Complex.
3. Applicable Price.
----------------
3.1 Coker Complex
c. WTS
The Coker Company shall pay Clark R&M for providing Waste
Management and Wastewater Treatment Services at the WTS each
month according to the following formula:
Total WTS Cost * Monthly WTS Allocation
Where:
"Total WTS Cost" means, for any month, the sum of (i) all
Permitted Reimbursable Expenses incurred by Clark R&M in
operating its waste water treatment unit designated WWTU 8743 at
the Refinery and (ii) without duplication, all Permitted
Reimbursable Expenses incurred by Clark R&M associated with the
treatment of dirty water at the Refinery and the processing of
oil, recovered oil, recovered residuals, emulsions, oily solids
and oily sludge generated at the WTS.
d. DWCS
The Coker Company shall pay Clark R&M for providing Waste
Management and Wastewater Treatment Services at the DWCS each
month according to the following formula:
Total DWCS Cost * Monthly DWCS Allocation
Where:
"Total DWCS Cost" means, for any month, all Permitted
Reimbursable Expenses incurred by Clark R&M in operating the
DWCS.
e. SDS
The Coker Company shall pay Clark R&M for providing Waste
Management and Wastewater Treatment Services at the SDS each
month according to the following formula:
-3-
<PAGE>
Schedule 5.6
Services and Supply Agreement
Total SDS Cost * Monthly SDS Allocation
Where:
"Total SDS Cost" means, for any month, the Permitted
Reimbursable Expenses incurred by Clark R&M in operating the
SDS.
f. ORU
The Coker Company shall pay Clark R&M for providing Waste
Management and Wastewater Treatment Services at the ORU each
month according to the following formula:
Total ORU Cost * Monthly ORU Allocation
Where:
"Total ORU Cost" means, for any month, the Permitted
Reimbursable Expenses incurred by Clark R&M in operating the
ORU.
WMS
The Coker Company shall pay Clark R&M for providing Waste
Management and Waste Water Treatment Services described above
under 1.2 each month according to the following formula:
Total WMS Cost * Monthly WMS Allocation
Where:
"Total WMS Cost" means, for any month, the Permitted
Reimbursable Expenses incurred by Clark R&M in operating its
WMS.
3.2 Ancillary Equipment
Consideration for Waste Management and Wastewater Services provided by
Clark R&M to the Coker Company for use at the Ancillary Equipment is
included in the Ancillary Equipment Operating Fee.
7.
-4-
<PAGE>
Schedule 5.7.1
Services and Supply Agreement
SULFUR AND COKE TRANSPORT SERVICES
1. Scope.
-----
1.1 Truck Weighing
Clark R&M shall maintain and operate truck scales at the Refinery
for the purposes of weighing sulfur trucks on behalf of the Coker
Company.
1.2 Rail Services
Clark R&M shall provide all railroad services necessary to
transport petroleum coke and sulfur from the Heavy Oil Processing
Facility, including, without limitation, (i) receiving inbound
railcars from serving railroad carriers, sorting and weighing
such cars and delivering them to the Coker Complex or Ancillary
Equipment, as the case may be; (ii) receiving outbound rail cars
from the Coker Complex and the Ancillary Equipment, sorting and
weighing such cars and delivering them to serving railroad
carriers; and (iii) providing switching to facilitate loading,
unloading and maintenance activities for such railcars.
1.3 Coker Handling
Clark R&M shall provide all coke handling services necessary to
transport petroleum coke to the delivery point for such Product
under the Product Purchase Agreement.
2. Applicable Price.
----------------
The cost to Clark R&M of providing sulfur and coke transport Services to
the Coker Company is reflected in the purchase price of such Products under
the Product Purchase Agreement.
<PAGE>
Schedule 5.7.2
Services and Supply Agreement
BROAD BAND AND NETWORK COMPUTING SERVICES
1. Scope.
-----
1.1 Clark R&M shall install all necessary coaxial cable connections
and television sets for Coker Company control rooms in order to
connect the Coker Company and its employees to the broad band
closed circuit televisions network at the Refinery which provides
video information throughout the Refinery, including, without
limitation, a bulletin board system, doppler radar, safety
information and information on operations meetings.
1.2 Clark R&M shall provide network computing services to the Coker
Company, including without limitation:
a. Installation of cable connections and desktop computers with
appropriate office software at the Coker Company's business
office and control room locations
b. Connection to Clark R&M's local area network, wide area
network, intranet, internet, e-mail system and the Refinery
information system.
1.3 Clark R&M shall provide routine hardware repairs, system problem
isolation and resolution, help desk service, network
administration and management, computer backup services and
testing for the Coker Company's broad band and computer network
connections and all equipment, hardware and software related
thereto.
2. Applicable Price.
----------------
2.1. The Coker Company shall reimburse Clark R&M for Permitted Reimbursable
Expenses in connection with equipment procurement and installation of
(a) the broad band cable connections for the Coker Company and (b)
desktop computer(s) and software and installation of the cable
connection(s) for the Coker Company.
2.2 The Coker Company shall pay Clark R&M the following fee each
month for all services provided by Clark R&M pursuant to 1.3
above: (a) for any month after the equipment described in 1.1 and
1.2 above is installed and connected and prior to and including
December 2000, $2100.00 and (b) for any month thereafter,
$2100.00, multiplied by the Inflation Factor.
-------------
<PAGE>
Schedule 5.7.3
Services and Supply Agreement
RADIO AND PHONE SERVICES
1. Scope.
-----
1.1 Trunked Radio Services
a. Clark R&M shall maintain (through a third party service
provider) and operate the radio antenna, computers, repeater
stations, mobile units and base stations used in connection
with the Refinery's 800 megaherz Federal Communications
Commission license (collectively, the "Trunked Radio
System").
b. Clark R&M shall provide the Coker Company with access to the
Trunked Radio System. Such access shall be limited to the
business purposes of the Coker Company and its affiliates.
c. Clark R&M shall procure all necessary portable 800 megahertz
radios on behalf of the Coker Company and provide on-going
repair and maintenance (through a third party service
provider) for such radios.
d. Trunked Radio Services and related portable radio services
are currently provided under Clark R&M's service contract
with Motorola Communications, Inc. All radios used by the
Coker Company shall be added to the inventory covered by
this service agreement.
1.2 Telephone Services
Clark R&M shall provide all labor for routine hardware and
software repairs, system problem isolation and resolution, cable
installation, telephone installation, PBX administration and
management, backup services, help desk services and testing for
the telephone environment at the Coker Complex and the business
offices of the Coker Company.
2. Applicable Price.
----------------
2.1 Trunked Radio Services
a. The Coker Company shall reimburse Clark R&M for the purchase
price of each radio procured on behalf of the Coker Company.
b. The Coker Company shall pay Clark R&M the following fee for
all other Services described in 1.1 above each month: (a)
for any month after the Start-up Date and prior to and
including
<PAGE>
Schedule 5.7.3
Services and Supply Agreement
December 2000, $670.00 and (b) for any month thereafter,
$670.00, multiplied by the Inflation Factor.
-------------
c. Upgrades to the Trunked Radio System agreed upon mutually by
Clark R&M and Coker Company to increase the reliability of
the system, the Coker Company will be responsible for a
percentage of the cost of any upgrade performed to increase
the reliability of the Trunked Radio System, provided that,
--------
prior to initiating such upgrade Clark R&M and the Coker
Company have agreed to (i) the undertaking of such upgrade,
(ii) the estimated cost of such upgrade and (iii) a
percentage sharing of such cost based on the number of
radios used by each party at such time.
2.2 Telephone Services
a. The Coker Company shall reimburse Clark R&M for all
Permitted Reimbursable Expenses incurred by Clark R&M in
connection with installation of phone lines at the Coker
Complex and the procurement of telephones and other
equipment in connection therewith on behalf of the Coker
Company.
b. The Coker Company shall pay Clark R&M the following fee for
all other Services described in 1.2 above each month: (a)
for any month after the Coker Company telephone environment
described in 1.2 above is installed and prior to and
including December 2000, $500.00 and (b) for any month
thereafter, $500.00, multiplied by the Inflation Factor.
-------------
-2-
<PAGE>
Schedule 5.7.4
Services and Supply Agreement
ANALYTICAL LABORATORY AND CUSTODY TRANSFER SERVICES
1. Scope.
-----
1.1 Analytical Laboratory Services
a. Clark R&M shall provide analytical laboratory services to
the Coker Company in a manner substantially similar to the
manner that such services have been provided at the Refinery
in the past.
b. Clark R&M shall provide (i) the analytical tests identified
in the Schedules to the Product Purchase Agreement under the
heading "Test Method" and (ii) such other tests that are
necessary to determine the quantity and quality of Products
produced by the Heavy Oil Processing Facility or to which
the parties otherwise mutually agree (collectively, "Coker
Company Lab Tests").
c. Clark R&M shall furnish the Coker Company with the results
obtained from all Coker Company Lab Tests within the same
time frame as results from similar tests have historically
been provided, typically 4 to 8 hours for routine tests and
typically 60 minutes for rush tests. The Coker Company (or
a party acting on behalf of the Coker Company) shall have
the right to audit the procedures used to perform each Coker
Company Lab Tests and to recommend changes thereto and to
the number and types of tests performed.
1.2 Custody Transfer Services
Clark R&M shall provide all other services related to
quantification of hydrocarbon receipts or deliveries,
coordination of third party inspections and maintain appropriate
procedures for Clark R&M and Coker Company employees to follow to
ensure accurate Product measurement.
2. Applicable Price.
----------------
2.1 Coker Complex
a. The Coker Company shall pay Clark R&M the following fee
analytical lab services provided under 1.1 above for the
Coker Complex: (a) for any month after the Start-up Date and
prior to and including December 2000, $35,000 and (ii) for
any month thereafter, $35,000, multiplied by the Inflation
-------------
Factor.
b. The Coker Company shall also reimburse Clark R&M for a
proportional share of the costs of any laboratory equipment
purchased for performing Coker Complex testing.
<PAGE>
c. The Coker Company shall pay Clark R&M the following fee for
providing custody transfer services described under 1.2
above related to the Coker Complex: (a) for any month after
the Start-up Date and prior to and including December 2000,
$11,700 and (ii) for any month thereafter, $11,700,
multiplied by the Inflation Factor.
-------------
2.2 Ancillary Equipment
Consideration for analytical lab provided by Clark R&M to the Coker
Company related to the Ancillary Equipment and the Ancillary Equipment
Site is provided for in the Ancillary Equipment Operating Fee.
-2-
<PAGE>
Schedule 5.7.5
Services and Supply Agreement
SECURITY SERVICES
1. Scope.
-----
1.1. Clark R&M security personnel will monitor entrance and access to
the Refinery to ensure the safety and security of all Coker
Company and Clark R&M employees.
1.2 Clark R&M security personnel will also ensure compliance with
Foreign Trade Zone regulations.
2. Applicable Price.
----------------
The Coker Company shall pay Clark R&M the following fee for security
services provided each month: (a) for any month prior to and including
December 2000, $25,000 and (b) for any month thereafter, $25,000,
multiplied by the Inflation Factor.
-------------
<PAGE>
Schedule 5.7.6
Services and Supply Agreement
OTHER SUPPORT SERVICES
1. Scope.
-----
1.1 Procurement and Contract Services
Clark R&M shall manage the day to day procurement of
equipment, materials, supplies and services provided to the
Coker Company by Clark R&M and use commercially reasonable
efforts to ensure that related procurement charges are
separately allocated to each unit comprising the Heavy Oil
Processing Facility and identifiable from any other charges to
Clark R&M.
1.2 Open Stores
Clark R&M shall coordinate and maintain open stores for
standard materials or equipment needed for operation of the
Heavy Oil Processing Facility (other than Coker Company Spare
Parts) either to be made readily available at Clark R&M's on-
site Refinery warehouse or at a reasonably accessible vendor
site.
1.3 General Supplies
Clark R&M shall maintain adequate supplies for the day to day
operation of the Heavy Oil Processing Facility including,
without limitation, janitorial supplies, lubricants, office
and copier supplies, toiletries, and specialty detergents
1.4 Warehousing
Clark R&M shall maintain segregated storage facilities for
Coker Company Spare Parts as required by Section 5.9(a) of the
Services and Supply Agreement. These warehousing facilities
shall be on either Refinery property or off-site warehousing
facilities depending on specialty storage requirements per the
equipment manufacturer specifications.
2. Applicable Price.
----------------
The Coker Company shall pay Clark R&M the following fee for providing the
Services described in this Schedule: (a) for any month prior to and
including December 2000, $24,000 and (b) for any month thereafter, $24,000,
multiplied by the Inflation Factor.
-------------
<PAGE>
Schedule 5.8.1
Services and Supply Agreement
OPERATIONS SERVICES
1. Scope.
-----
1.1 Operations Oversight
A Clark R&M operations manager shall be responsible for the
safe, environmentally sound, and profitable operation of the
Heavy Oil Processing Facility. Such individual (or
individuals) shall be responsible for (i) monitoring key
operational and organizational variables to assure that
adequate procedures, processes, and personnel are in place to
accomplish and set operational goals for the Heavy Oil
Processing Facility, (ii) asset management, including
monitoring and assuring the assets under his/her control are
operated and maintained in good working order in regards to
Prudent Industry Practices, (iii) optimization, including
working with other Refinery groups to assure units are
optimized to achieve the greatest return on investment and
(iv) personnel, including managing personnel associated with
the Coker Company in regards to performance and staffing.
1.2. Shift Supervision
a. A Clark R&M shift supervisor shall have primary
responsibility for the following related to the Heavy Oil
Processing Facility: (i) shift process coordination,
(ii) operation and maintenance, (iii) unit coordination
of products and feedstocks and (iv) initial response for
incidents. Such position shall be staffed continuously,
during off-hours and weekends.
b. Three Clark R&M process operating supervisors shall
supervise all unit operators at the Heavy Oil Processing
Facility to accomplish unit and Refinery objectives.
Such individuals shall assure that each unit is operated
in a safe, environmentally sound, and efficient manner
and shall monitor day to day operations, coordinate with
planning and scheduling groups, set maintenance
priorities, and manage unit operating personnel.
1.3 Feed and Product Scheduling
A Clark R&M feed and product scheduler shall have primary
responsibility for product inventory logistics that are
required to manage feedstocks, intermediates and finished
products for the Heavy Oil Processing Facility. Such
individual (or individuals) shall (a) monitor and /track feed
and product inventories, (b) schedule feed and product
movements based on input from the Clark R&M's planning and
economics group, and (c) serve as the primary contact with
product sales personnel in order to monitor current market
statistics.
2. Applicable Price.
----------------
2.1 Coker Complex
<PAGE>
Schedule 5.8.1
Services and Supply Agreement
a. The Coker Company shall pay Clark R&M the following fee
for providing the Services described in 1.1 above related
to the Coker Complex: (a) for any month after the Start-up
Date and to and including December 2000, $11,700 and (b)
for any month thereafter, $11,700, multiplied by the
Inflation Factor . -------------
b. The Coker Company shall pay Clark R&M the following fee
for providing the Services described in 1.1 above related
to the Coker Complex: (a) for any month after the Start-up
Date and prior to and including December 2000, $22,500 and
(b) for any month thereafter, $22,500, multiplied by
-------------
the Inflation Factor.
c. The Coker Company shall pay Clark R&M the following fee
for providing the Services described in 1.1 above related
to the Coker Complex: (a) for any month after the Start-
up Date and prior to and including December 2000, $4,200
and (b) for any month thereafter, $4,200, multiplied by
-------------
the Inflation Factor.
2.2 Ancillary Equipment
Consideration for operations services provided by Clark R&M to
the Coker Company related to the Ancillary Equipment and the
Ancillary Equipment Site is provided for in the Ancillary
Equipment Operating Fee.
-2-
<PAGE>
Schedule 5.8.2
Services and Supply Agreement
ENGINEERING SERVICES
1. Scope.
-----
Clark R&M engineers shall provide the following services:
1.1 Technical Support and Capital Planning
a. Provide oversight to ensure that engineering and industry
standards are followed at the Heavy Oil Processing
Facility
b. Complete routine technical inspections in accordance with
industry practice to help maintain unit reliability, plan
future turnarounds and capital upgrades at the Heavy Oil
Processing Facility
1.2 Optimization and Scheduling
a. Run unit models with input from Refinery optimization
group to set optimal process targets to achieve the
highest profitability
b. Review current and future feed and product markets,
current operating parameters and product specifications,
and set operating targets
c. Provide data to schedule operating rates and product
specification targets
1.3 Design, Drafting, Reproduction and Record Management
a. Provide engineering oversight/supervision necessary to
improve unit reliability and throughput.
b. Provide engineering design complete with calculations and
material/equipment selections consistence with most cost
effect technology and material available.
c. Provide drafting/graphics services required to capture and
convey engineering designs to construction, operation, and
maintenance forces. Maintain life cycle process safety
information (PSI) and drawings necessary to meet the needs
of the business and comply with the requirements of OSHA
1910.119.
d. Provide reproduction and distribution services for text
(8.5 x 11) through large format (E size) engineering
drawings and maps.
e. Maintain a central engineering file to meet the needs of
the business and comply with the requirements of OSHA
1910.119.
1.4 Project Management and Reliability Support
<PAGE>
Schedule 5.8.2
Services and Supply Agreement
a. Provide management of Services to be provided by Clark
R&M pursuant to Section 5.3 of the Services and Supply
Agreement.
b. Identify and resolve problems
c. Perform mechanical failure investigations.
d. Provide technical input for improving the long-term
reliability of the Heavy Oil Processing Facility.
e. Liaison with project management and project safety
management to plan for and execute major maintenance and
capital planning for the Heavy Oil Processing Facility.
1.5 Process and Control Engineering
a. Provide supplemental management support to process
engineering and optimization for Heavy Oil Processing
Facility.
b. Monitor and track unit performance by developing key
performance parameters.
c. Work with the operating supervisors and unit operators to
improve performance, develop improvement projects, and
develop and accomplish long term goals.
d. Provide control engineering including monitoring and
developing process control configurations to optimize
and maximize the utilization of the Coker Company's
assets.
e. Monitor and track computer control equipment and
instrumentation performance including simple loop and
advanced control software, and tracking and continually
improving system uptimes.
f. Interact with unit operational and maintenance personnel,
the optimization group at the Refinery and other
engineering personnel.
1.6 Engineering Studies and Strategic Planning
Provide long-term planning for management of the Heavy Oil
Processing Facility and analysis of performance of the Heavy
Oil Processing Facility.
2. Applicable Price.
----------------
2.1 Coker Complex
-2-
<PAGE>
Schedule 5.8.2
Services and Supply Agreement
a. The Coker Company shall reimburse Clark R&M for all
Permitted Reimbursable Expenses incurred by Clark R&M in
utilizing outside professional services and consultants
necessary for the performance of engineering support
services related to the Coker Complex each month
b. The Coker Company shall pay Clark R&M the following fee
for the performance of all other engineering support
services related to the Coker Complex: (i) for each month
after the Start-up Date and prior to and including
December 2000, $50,000 and (ii) for each month
thereafter, $50,000, multiplied by the Inflation Factor.
-------------
2.2 Ancillary Equipment
Consideration for engineering services provided by Clark R&M
to the Coker Company related to the Ancillary Equipment and
the Ancillary Equipment Site is provided for in the Ancillary
Equipment Operating Fee.
-3-
<PAGE>
Schedule 5.8.3
Services and Supply Agreement
HUMAN RESOURCES
1. Scope.
-----
Clark R&M shall provide the following human resource functions for the
benefit of Coker Company employees:
1.1 Labor Management
Negotiate and administer collective bargaining agreements for
represented employees of the Coker Company.
1.2 Payroll Administration
Oversee the full payroll process for Coker Company delivering
accuracy and timeliness by ensuring process system
effectiveness.
1.3 Employee Training
Ensure regulatory compliance and requisite skills training for
Coker Company employees associated with the safe and efficient
operation of the Coker Complex.
1.4 Benefits
Administer benefits for Coker Company employees in accordance
with applicable benefit plans for both exempt/non-exempt and
represented wage classifications.
1.5 Employee Relations
Handle daily human resources activities as required for
employees of Coker Company including, without limitation,
recruitment, litigation, wages, administration of collective
bargaining agreements, employee activities and other human
resources functions.
1.6 Medical Services
Provide pre-employment physicals, drug and alcohol screens,
and assessment that employees are "fit for duty" when
reporting back to work after illness or injury.
2. Applicable Price.
----------------
The Coker Company shall pay Clark R&M for providing human resource services
each month according to the following formula:
<PAGE>
Schedule 5.8.3
Services and Supply Agreement
Direct Coker Company Cost + Refinery Human Resources Cost *
Coker Company Employees
-----------------------
Refinery Employees
Where:
"Direct Coker Company Cost" means, for any month, Permitted
Reimbursable Expenses incurred by Clark R&M and directly
attributable to human resource functions provided exclusively
for the Coker Company or its employees including, without
limitation, recruitment agency fees for recruitment of Coker
Company employees, litigation relating exclusively to actions
of Coker Company employees and relocation expenses for Coker
Company employees.
"Refinery Human Resources Costs" means, for any month, the
difference between (a) the Permitted Reimbursable Cost
incurred by Clark R&M in providing the human resource
functions described above for Clark R&M and its affiliates
(including the Coker Company) at the Refinery, minus (b)
-----
Direct Coker Company Cost.
"Coker Company Employees" means, for any month, the average
number of individuals employed by the Coker Company.
"Refinery Employees" means, for any month, the sum of (a) the
average number of individuals employed by the Coker Company in
such month and (b) the average number of individuals employed
by Clark R&M and it affiliates (other than the Coker Company)
that are designated Refinery employees.
-2-
<PAGE>
Schedule 5.8.4
Services and Supply Agreement
ACCOUNTING SERVICES
1. Scope.
-----
Clark R&M shall provide the following accounting services in connection
with performance of its obligations under the Services and Supply
Agreement:
1.1. Billing Information
a. Products
Provide the Coker Company with all information necessary to (i)
quantify and document feedstocks to and Products from each Heavy
Oil Processing Facility unit, (ii) attach value to each of these
feedstocks and Products based on applicable fees in the Services
and Supply Agreement and the Product Purchase Agreement and (iii)
monitor all the laboratory data for such feedstocks and Products.
b. Services
Provide the Coker Company with all information necessary
to monitor and quantify each Service provided to the
Coker Company by Clark R&M
c. Invoices
Provide the Coker Company with drafts of invoices in
connection with payments to be made by Clark R&M to the
Coker Company pursuant to the Product Purchase Agreement.
1.2 General Accounting Information
Provide the Coker Company with information necessary to (i)
ensure that all Federal and State Tax guidelines are
incorporated into its accounting activities and (ii) prepare
reconciliation analysis of the its inventory, fixed assets and
authorization for expenditures for capital or turnaround
documentation.
1.3 Financial Reporting, Budget Coordination and Strategic Planning
Provide the Coker Company with drafts of monthly cost
analysis, planning and budgeting guidelines and the Annual
Budget and Operating Plan in a timely manner.
1.4 Yield Accounting
a. Maintain the Refinery inventory system database on
process unit meters and tank strapping data for the
purpose of documentation and reporting of
<PAGE>
Schedule 5.8.4
Services and Supply Agreement
Coker Company charges and yields, product inventories and
receipts and deliveries including, without limitation,
the tracking of product receipt or delivery documentation
of marine vessels, pipeline movements, rail cars and
deliveries by truck.
b. Provide governmental reporting services for the Coker
Company including, without limitation, to the Department
of Energy, the American Petroleum Institute, the Bureau
of the Census, and the Texas Railroad Commission relative
to Heavy Oil Processing Facility production and product
movements.
c. Track, reconcile and allocate distributed utilities
provided to the Coker Company pursuant to Section 5.5 of
the Services and Supply Agreement.
d. Provide specialty reporting including the capture and
reporting volumes related to any technology licenses held
by the Coker Company or otherwise related to the on-going
operation of the Heavy Oil Processing Facility.
1.5 Foreign Trade Zone
Administer all Foreign Trade Zone Subzone activities related
to the Heavy Oil Processing Facility including, without
limitation, (a) maintaining U.S. Customs Service and Foreign
Trade Zone Board Compliance Status, (b) providing weekly,
monthly and annual reporting, entries or submissions to the
appropriate governmental agencies, (c) maintaining inventory
control recordkeeping system records, (d) providing oversight
for the operational activities that are required to maintain
Foreign Trade Zone Subzone Status for the Heavy Oil Processing
Facility and (e) preparing such documentation as required for
optimizing Foreign Trade Zone Subzone benefits for the Heavy
Oil Processing Facility as required by Applicable Laws.
1.6 Property Tax Reporting and Management
Administer all property tax activities on behalf of the Coker
Company, including, without limitation maintaining asset or
contractor records for the purpose of filing annual tax
renditions and optimizing abatement benefits as required by
local, State and Federal laws
.
2. Applicable Price.
----------------
The Coker Company shall pay Clark R&M the following fee for providing
accounting services described in this Schedule: (a) for any month prior to
and including December 2000, $38,400 and (b) for any month thereafter,
$38,400, multiplied by the Inflation Factor.
-------------
-2-
<PAGE>
Schedule 5.8.5
Services and Supply Agreement
ADMINISTRATIVE SERVICES
1. Scope.
-----
Administrative and professional personnel from the headquarters office of
Clark R&M shall perform the following obligations of Clark R&M under the
Services and Supply Agreement.
1.1 Refining Support
a. Financial Services
Assisting the Coker Company accounting manager with
preparation of internal and external financial reporting and
analysis including, without limitation, providing such
accounting manager with information needed to prepare income
statements and balance sheets and providing market pricing
for yields and inventory and providing working capital
management.
b. Supply and Trading
Negotiation and execution of legal contracts necessary to
acquire crude oil and feedstocks to operate the Heavy Oil
Processing Facility and coordinating with plant personnel
to optimize supply of the Coker Company's requirements of
crude oil and feedstocks.
c. Emergency, Health & Safety
General legal and administrative support of Refinery
programs and liaison with governmental agencies that are
required for the Coker Company to comply with Applicable
Laws and provide guidelines for long-term planning for
compliance.
d. Executive Management
Clark R&M's Chief Operating Officer is responsible for
the oversight of profitable operation of the Heavy Oil
Processing Facility and shall provide strategic direction
that supports operational and organizational variables to
assure that resources, processes, and personnel are in
place to accomplish the Annual Budget and Operating Plan
for the Coker Company.
e. Business Development
Work with plant personnel that support the optimization
of Coker Complex units and the Ancillary Equipment
providing analytical support
<PAGE>
Schedule 5.8.5
Services and Supply Agreement
and industry benchmark studies and identification of
opportunities to optimize asset utilization.
1.2 Corporate Services
a. Income, Franchise, Sales & Use or Property Taxes
Responsible for ensuring (i) performance of Clark R&M's
obligations under Section 11.7 of the Services and Supply
Agreement and (ii) compliance by the Coker Company with all
reporting and other requirements of applicable state, local
and Federal tax laws.
b. General Insurance
Responsible for ensuring performance of Clark R&M's
obligations under Section 5.13 of the Services and Supply
Agreement.
c. Information Systems
Provide direction and systems support insuring year 2000
compliance and technology standards are followed to
manage information requirements of the Coker Company.
d. Investor and Public Relations
Provide specialty reporting and communication to the
Securities and Exchange Commission and any necessary
Public Notice and Liaison to Investors of the Coker
Company Assets.
e. Executive Management
Clark R&M's Chief Executive Officer and Chief Financial
Officer shall be responsible for providing for the
support of refining infrastructure to help insure the
profitable operation of the Heavy Oil Processing Facility
and shall provide strategic direction for financial
management and organizational variables to assure that
resources, processes, and personnel are in place to
accomplish the Annual Budget and Operating Plan for the
Coker Company.
f. Financial Services
Providing information needed by Coker Company for overall
consolidation of inter-company agreements for public
financial reporting of the Coker Company related to the
Heavy Oil Processing Facility.
2. Applicable Price.
----------------
-2-
<PAGE>
Schedule 5.8.5
Services and Supply Agreement
The Coker Company shall pay Clark R&M the following fee for the
support services described in this Schedule: (a) for any month prior to and
including December 2000, $60,000 and (b) for any month thereafter, $60,000,
multiplied by the Inflation Factor.
-------------
-3-
<PAGE>
Schedule 5.9
Services and Supply Agreement
COKER COMPANY SPARE PARTS
NONE.
<PAGE>
Schedule 5.10
Services and Supply Agreement
CATALYST, CHEMICALS AND CONSUMABLES
1. Scope.
-----
1.1. Coker Complex
a. Chemicals and Catalyst
Clark R&M shall provide the Coker Company's requirement of
chemicals and catalyst including, without limitation, the
following (or the commercial equivalent thereof):
<TABLE>
<CAPTION>
SRU 545 Description Estimated Quantity
------- ----------- ------------------
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
No. 1 Claus Reactor Alcoa S-501 117,600 lbs. (density 50lb/ft.3)-4 year life
---------------------------------------------------------------------------------------------------------
No. 2 Claus Reactor Alcoa S-201 108,200 lbs. (density 46 lb/ft.3)-4 year life
---------------------------------------------------------------------------------------------------------
No. 3 Claus Reactor Alcoa S-201 108,200 lbs. (density 46 lb/ft.3)-4 year life
---------------------------------------------------------------------------------------------------------
SCOT Catalyst Criterion 534 75,000 lbs (density 47 lb/ft.3)-4 year life
---------------------------------------------------------------------------------------------------------
Amine Solvent Huntsman MDEA 183,600 pounds (45% concentration) inventory
unit
10,000 lbs./year make-up, (0.8 lbs/MMSCF of
treated gas)
BFW Polymer Betz AP 0200 500 gallons
BFW O2 Scavenger Betz OS 2001 500 gallons
---------------------------------------------------------------------------------------------------------
BFW Neutralizing Betz NA 2440 500 gallons
amine
<CAPTION>
ATU 7841 Description Estimated Quantity
-------- ----------- ------------------
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Amine Solvent Huntsman MDEA 1.1 million pounds (45% concentration) to
inventory unit
<CAPTION>
DCU 843 Description Estimated Quantity
------- ----------- ------------------
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Silica Removal Alumina Based 160,000 lbs (density 36.4 lb/ft.3) once per year
Reactor Only
---------------------------------------------------------------------------------------------------------
Di-olefin Reactor Ni-Mo Alumina 30,000 lbs. (density 37.5 lb/ft.3) every two years
Based
---------------------------------------------------------------------------------------------------------
Amine Solvent Huntsman MDEA 164,000 pounds (45% concentration) to inventory
unit.
79,000 lbs./year make-up, (0.8 lbs./mmscf of
treated gas and 0.8 lbs./1,000 gals., circulating
treated liquid)
Caustic US Filter ARI- 190 Pounds per hour
Regeneration 100L or ARI-100
catalyst EXL
---------------------------------------------------------------------------------------------------------
Antifoam Silicon Betz Antifoam 2,000 gallons per year (2,000 gallon tank)
---------------------------------------------------------------------------------------------------------
De-emulsifier Betz De-emulsifier 3,250 gallons per year (500 gallon tote tank)
---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 5.10
Services and Supply Agreement
<TABLE>
<CAPTION>
HCU 942 Description Estimated Quantity/1/
------- ----------- ---------------------
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Chevron Catalyst SA 5517 6,000 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 122 Z5B 15,600 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 132 NAQ 19,500 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 135 KAQ 16,200 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 141 L32 88,200 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 141 L34 333,000 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 141 L38 108,000 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 154 KF 97,200 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 210L 93,500 pounds - every two years
---------------------------------------------------------------------------------------------------------
Chevron Catalyst ICR 114 ZF 45,900 pounds - every two years
---------------------------------------------------------------------------------------------------------
Amine Solvent Huntsman MDEA 270,000 pounds (45% concentration) to inventory
unit
3,600 lbs./year make-up, (0.8 lbs./mmscf of
treated gas).
---------------------------------------------------------------------------------------------------------
Catalyst Treatment Tri Butyl Amine 12,300 gallons every two years
---------------------------------------------------------------------------------------------------------
Catalyst Treatment Di-Methy Di-Sulfide 120,000 pounds every two years
---------------------------------------------------------------------------------------------------------
</TABLE>
1. The catalyst amounts listed include an additional 5% contingency and have
been rounded to the nearest whole drum or sack. These amounts will be precisely
defined upon loading the reactors.
b. Caustic
Clark R&M shall provide the Coker Company's requirement of
fresh caustic necessary for treatment of the Coker C3/C4
stream and shall provide for the disposal of spent caustic
from the Coker.
-2-
<PAGE>
Schedule 5.10
Services and supply Agreement
The expected specifications of fresh caustic to be supplied
by Clark R&M are described in the following table:
Fresh Caustic Properties
Component Element Basis Specification
------------------ --------------- ------ -------------
Sodium Oxide Na\\2\\O % 38.0 - 39.5
Sodium Hydroxide NaOH % 49.00 - 51.0
Sodium Chloride NaCl % 1.10 Max
Sodium Carbonate Na\\2\\CO\\3\\ % 0.20 Max
Sodium Sulfate Na\\2\\SO\\4\\ % 0.05 Max
Sodium Chlorate NaClO\\3\\ % 0.30 Max
Iron Fe ppm 10 Max
The following are the expected qualities of spent caustic from
the Coker:
Spent Caustic Properties
Component Element Basis Composition
--------- ------- ----- -----------
Water H\\2\\O Wt. % 82.8
Sodium Hydroxide NaOH Wt. % 6.9
Sodium Thiosulfate Na\\2\\S\\2\\O\\3\\ Wt. % 5.2
Sodium Carbonate Na\\2\\CO\\3\\ Wt. % 5.1
Di-Sulfide Oil DSO Wt. % Trace
1.2 Ancillary Equipment
Clark R&M shall provide all chemicals, catalyst, caustic and
other consumables required for the on-going operation of the
Ancillary Equipment.
2. Metering/Measurement Method for Supply to the Coker Complex.
-----------------------------------------------------------
2.1 Chemicals and Catalyst
The amount of catalyst or chemicals supplied to the Coker Company
for use at the Coker Complex each month shall be the amount of such
catalyst or chemicals actually purchased by Clark R&M in such month
for use in Coker Complex units.
2.2 Caustic
-3-
<PAGE>
Schedule 5.10
Services and Supply Agreement
The actual amount of fresh caustic supplied to the Coker Company
each month for use at the Coker Complex shall be measured by
gauging Tank 6790 located on DCU 843 each time fresh caustic is
received from the fresh caustic system at the Refinery.
3. Applicable Price.
----------------
3.1 Coker Complex
a. Chemicals and Catalyst
The Coker Company shall reimburse Clark R&M for all Permitted
Reimbursable Expenses incurred each month by Clark R&M in
providing chemicals and catalyst to the Coker Complex.
b. Caustic
The Coker Company shall pay Clark R&M for fresh caustic
supplied to the Coker Complex each month according to the
following formula:
Average Monthly Refinery Caustic Cost * Monthly Coker
Complex Usage
Where:
"Average Monthly Refinery Caustic Cost" means, for any
month (a) the actual costs incurred by Clark R&M in
purchasing, blending and delivering caustic for all
Refinery units in such month, divided by (b) the
----------
total volume of caustic supplied to Refinery units
in such month.
"Monthly Coker Complex Usage" means, for any month, the
metered usage of caustic by the Coker Complex units in
such month.
Consideration for disposal of spent caustic by Clark R&M is
included in the fees payable under Schedule 5.6 (Waste
Management and Waste Water Services)
3.2 Ancillary Equipment
Consideration for chemicals, catalyst, caustic and other
consumables provided by Clark R&M for the operation of the
Ancillary Equipment is provided for in the Ancillary Equipment
Operating Fee.
-4-
<PAGE>
Schedule 5.12.1
Services and Supply Agreement
ENVIRONMENTAL, HEALTH AND SAFETY SERVICES
1. Scope.
-----
1.1 Safety
Clark R&M shall provide safety and industrial hygiene support to
the Coker Company including, without limitation, safety
procedures, hygiene monitoring, injury recordkeeping, mandatory
employee training incident investigation, monitoring of
operations, OSHA and Texas Department of Health compliance
planning and budgeting, government agency liaisons during
inspections, enforcement actions and hearings, acquisition of all
required Permits and licenses, implementation and maintenance of
a structured safety process including internal audits and
inspections.
1.2 Process Safety Management ("PSM")
Clark R&M shall provide overall OSHA PSM compliance coordination
and oversight services for the Heavy Oil Processing Facility and
shall implement and maintain a structured PSM compliance program
that addresses (a) employee participation, (b) process safety
information, (c) process hazard analysis, (d) operating
procedures, (e) training, (f) contractor safety, (g) pre-start up
safety review, (h) mechanical integrity of units, (i) "hot work"
Permits, (j) management of change, (k) incident investigation,
(l) emergency planning and response, (m) compliance audits and
(o) trade secrets.
1.3 Environmental
Clark R&M shall provide environmental compliance coordination and
oversight services for the Heavy Oil Processing Facility
including, without limitation, regulatory and legislative
tracking, compliance planning and budgeting necessary to meet
current and future Environmental Protection Agency, Texas Natural
Resource Conservation Commission, Department of Transportation
and U.S. Coast Guard rules and regulations, mandatory employee
training, securing Permits and licenses, arranging for
performance tests, analyses and other measurements required by
Applicable Law, handling recordkeeping and reporting, providing
government agency liaisons during inspections, enforcement
actions and hearings and internal inspections and internal
audits.
2. Applicable Price.
----------------
2.1 Coker Complex
a. The Coker Company shall pay Clark R&M the following fee for
providing environmental, health and safety services the Coker
Company related to the Coker Complex each month: (i) for any
month prior to and
<PAGE>
Schedule 5.12.1
Services and Supply Agreement
including December 2000, $22,900 and (ii) for any month
thereafter, $22,900, multiplied by the Inflation Factor
-------------
b. The Coker Company shall pay, or reimburse Clark R&M for, all
fees in connection with the procurement or renewal of any
Permits or other governmental approvals related solely to the
operation of the Coker Complex or the existence of the Coker
Company.
2.2 Ancillary Equipment
Consideration for environmental, health and safety services provided
by Clark R&M in connection with the operation of the Ancillary
Equipment is provided for in the Ancillary Equipment Operating Fee.
-2-
<PAGE>
Schedule 5.12.2
Services and Supply Agreement
EMERGENCY RESPONSE SERVICES
1. Scope.
-----
1.1 General
a. Clark R&M shall maintain and operate (i) the underground
piping and distribution system, pumping system, post
indicator valves, hydrants, fire monitors, deluge systems
and related equipment for the purpose of delivering Fire
Water (as defined below) throughout the Refinery (the
"Fire Water System") and (ii) medical response equipment,
hazardous release equipment, spill response equipment,
fire trucks, ambulances, hazmat vans, communications
vans, extinguishers, hose carts, self-contained breathing
apparatus ("SCBA") equipment and other equipment
necessary or desirable to respond to emergencies at the
Refinery (together with the Fire Water System, "Emergency
Response Equipment").
b. Clark R&M shall supply the Coker Company with raw water
that has been pumped into the Fire Water System to a
nominal pressure of 100 psig ("Fire Water") for fire
control and other purposes.
c. Clark R&M shall flush the Fire Water System main as
necessary to maintain and inspect the system.
d. Clark R&M shall conduct performance tests of the fire
pumps at least annually.
e. Clark R&M shall develop and implement an emergency
response plan for the Coker Complex.
f. Clark R&M shall maintain and repair the following fixed
and portable Emergency Response Equipment to be located
at the Coker Complex.
i. hand portable extinguishes (dry chemical)
ii. hose cam - annual hydrostatic test for hoses
iii. fire mains, post indicator valves, hydrants and monitors
iv. SCBA equipment
g. Clark R&M shall maintain all Emergency Response Equipment
in accordance with the manufacturers' service schedule
and repair it in accordance with recommended practices.
Maintenance of such equipment shall include lubricating
and replacing parts to the fire trucks, ambulances,
hazmat vans, communications vans and other vehicles.
<PAGE>
Schedule 5.12.2
Services and Supply Agreement
h. Clark R&M shall calibrate, maintain and repair all gas
detection equipment located in the Coker Complex in
accordance with the manufacturers' service schedule and
repair it in accordance with recommended practices.
1.2 Emergency Response Team
a. Clark R&M shall designate a "Fire Chief" who shall be
responsible for managing the Coker Company's emergency
response plan, and for general management of any
emergency. Each party shall cooperate in maintaining a
plant emergency response team who shall perform the duties
set forth in the emergency response plan including,
without limitation, the following:
i. response to alarms and other emergency calls
ii. response to medical emergencies, hazardous chemical
releases and rescue situations
iii. attending regularly scheduled emergency drills
iv. performance Fire Water System main flushing
v. attending quarterly group training sessions as
scheduled by the Fire Chief
b. The Fire Chief shall train and effectively implement the
emergency response plan with the team. In addition, Clark
R&M will review with Coker Company or provide additional
training to Coker Company employees to ensure proper
coordination of emergency response plan. All emergency
response team members must meet minimum standards
specified by Applicable Law.
c. The emergency response team shall consist of the following
minimum complement of personnel per shift unless otherwise
decided by Clark R&M or Applicable Law:
i. 2 Fire Mechanics from Clark R&M
ii. 8 Brigade Members from Clark R&M
iii. 2 Brigade Members from Coker Company
d. Emergency response team members shall be issued car passes
to allow entry into the Refinery or the Coker Complex
property.
1.3 Emergency Communications
Clark R&M shall maintain the Refinery radio emergency channel
equipment and the refinery-wide emergency alarm and
notification system (beeper) in good operating condition and
provide the Coker Company with access to all emergency
communications equipment at the Refinery.
-2-
<PAGE>
Schedule 5.12.2
Services and Supply Agreement
2. Applicable Price.
----------------
2.1 Coker Complex
a. The Coker Company shall reimburse Clark R&M for the actual cost of
materials used by Clark R&M in maintaining and repairing Emergency
Response Equipment (including the Fire Water System) for the Coker
Complex during each month and for the actual cost for materials
actually used by Clark R&M in responding to and emergency
situations at the Coker Complex.
b. The Coker Company shall pay Clark R&M a monthly fee of $10,000 for
all other emergency response services provided to the Coker
Company by Clark R&M.
c. Each party shall bear its own Labor Costs incurred with respect to
its own employees, including emergency response team members, who
may be involved in performing emergency response services
hereunder.
2.2 Ancillary Equipment
Consideration for emergency response services provided by Clark
R&M to the Coker Company related to the Ancillary Equipment is
provided for in the Ancillary Equipment Operating Fee.
-3-
<PAGE>
Schedule 5.13
Service and Supply Agreement
INSURANCE
1. Scope of Coverages.
------------------
1.1 Coker Company Insurance
Clark R&M shall cause the insurance coverages listed under the
headings "Construction Period -- Partnership" and "Operational
Period--Partnership" on Exhibit J to the Common Security Agreement
to be maintained in the name of the Coker Company in accordance with
the provisions of such Exhibit and Article 7 of the Common Security
Agreement.
1.2 Clark R&M shall provide and maintain the insurance coverages listed
under the headings "Construction Period -- Operator" and
"Operational Period -- Operator" on Exhibit J to the Common Security
Agreement to be maintained in its name in accordance with the
provisions of such Exhibit and Article 7 of the Common Security
Agreement.
2. Applicable Price.
----------------
2.1. Consideration for obtaining and maintaining insurance is included in
the fees payable under Schedule 5.8.5.
2.2 The Coker Company shall pay directly, or reimburse Clark R&M for
payment of, premiums, fees or deductibles payable in connection with
the insurance coverages described in 1.1 above.
2.3 Consideration for maintenance of the insurance coverages described
in 1.2 above is included in the Ancillary Equipment Operating Fee.
<PAGE>
Schedule 5.14
Service and Supply Agreement
LICENSING, PERMITS AND APPROVALS
1. Scope.
-----
1.1. Licenses, Permits and Approvals held by Clark R&M
a. Federal Communications Commission 800 megahertz license for the
Trunked Radio System (as such term is defined on Schedule
5.7.3)
b. AIR EMISSION PERMITS FROM TEXAS NATURAL RESOURCE CONSERVATION
COMMISSION ("TNRCC")
i. TNRCC No.6825A/PSD 49 -- Flexible Permit
Covering the Marine docks for feed receipts, product &
coke shipping, Refinery Units, Tanks, boilers, flares.
ii. TNRCC No. 7600 -- Crude Tanks
iii. TNRCC No. 802 -- Gas Turbine Generator
iv. TNRCC No. 5491 -- Crude Tanks
v. TNRCC No. 8369 -- Amine Treating
vi. TNRCC No. 4478
TNRCC No. 1535
TNRCC No. 7585
Crude Tanks at Lucas
Product Tanks at Lucas
c. WATER PERMITS - (Federal & State)
i. Wastewater Discharge NPDES No. TX 0005991
ii. Wastewater Discharge TNRCC No. 00309
iii. Wastewater Permit Expansion Wavier
iv. TNRCC Stormwater Discharge- LUCAS
v. TNRCC Water Rights Adudification Certificate-FANNETT
d. WASTE MANAGEMENT PERMITS
i. TNRCC Solid Waste Notice of Registration No. 30004
ii. EPA Hazardous Waste Generator Permit
iii. EPA PCB Waste Generator Permit
iv. TNRCC Solid Waste Notice of Registration - LUCAS
v. EPA Hazardous Waste Generator I.D. No.- LUCAS
vi. Railroad Commission of Texas Brine Disposal Permit-
Fannett
e. OPERATING PERMITS
<PAGE>
Schedule 5.14
Service and Supply Agreement
i. Corps of Engineers Pipeline Operating Permit 217
ii. Corps of Engineers Pipeline Operating Permits 218
iii. Corps of Engineers Pipeline Operating Permits 219
iv. Railroad Commission of Texas Salt Dome Permit
v. Railroad Commission of Texas Brine Pit Permit
1.2 Licenses, Permits and Approvals held by Coker Company
a. Air Emissions Permit TNRCC No. 2303A
Authorization to construct the Coker Complex covering the
following:
DCU 843
HCU 942
SRU 545
SWS 8747
Flare 23
Crude Oil Tanks 106 - 109 (Four Total)
b. Standby Air Emissions Permit No. 6825Z/PSD - TX - 492
2. Applicable Price.
----------------
Consideration for obtaining and maintaining Permits is included in the fees
payable under Schedule 5.12.1.
-2-
<PAGE>
Schedule 6.1
Services and Supply Agreement
ANNUAL BUDGET AND OPERATING PLAN
- --------------------------------------------------------------------------
INCOME STATEMENT
-------------------------------------
2001
-------------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
Total Product Revenue $263.5 $298.5 $289.5 $298.7
Total Chargestock Cost 203.6 234.2 233.6 231.9
------ ------ ------ ------
Refinery Gross Margin 59.9 64.4 55.9 66.8
- - - -
Margin Stabilization 12.1 6.1 15.2 10.4
------ ------ ------ ------
Total Gross Margin 72.1 70.4 71.1 77.2
Variable Operating Expenses 6.3 6.5 6.9 6.8
Fixed Operating Expenses 8.6 8.6 8.6 8.6
Lease Fees 8.5 8.6 8.7 8.7
Operating Fees 13.2 13.0 13.0 14.0
Processing Fees (17.1) (17.3) (17.4) (17.7)
G&A Expense 0.2 0.2 0.2 0.2
------ ------ ------ ------
Total Expenses 19.6 19.6 20.0 20.5
EBITDA 52.4 50.8 51.0 56.6
Amortization - - - -
Depreciation 2.9 2.9 2.9 2.9
------ ------ ------ ------
EBIT 49.5 47.9 48.1 53.7
Interest Expense, Net 16.4 18.3 14.7 16.4
------ ------ ------ ------
Net Income 33.1 29.6 33.5 37.3
<PAGE>
Schedule 6.1
Services and Supply Agreement
GROSS MARGIN ASSUMPTIONS
<TABLE>
<CAPTION>
-------------------------------------------------
2001
-------------------------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
<S> <C> <C> <C> <C>
Products - Volume ('000 bpd)
DISTILLATES
LS Diesel 36.7 38.8 38.8 38.8
Jet Fuel 24.2 25.5 25.5 25.5
-------- -------- -------- --------
SUBTOTAL - Distillates 60.9 64.3 64.3 64.3
LPG
Propane 1.0 1.1 1.1 1.1
Isobutane 0.3 0.4 0.4 0.4
Normal Butane 2.0 2.1 2.1 2.1
-------- -------- -------- --------
SUBTOTAL - LPG 3.4 3.6 3.6 3.6
UNFINISHED
Coker Propane Propylene Mix 2.0 2.1 2.1 2.1
Coker Butane Butylene Mix 1.4 1.5 1.5 1.5
Penhex 8.7 9.2 9.2 9.2
Virgin Diesel 7.1 7.4 7.4 7.4
Naphtha - Sour 33.1 35.0 35.0 35.0
Heavy Naphtha 3.6 3.8 3.8 3.8
ULS VGO 9.7 10.3 10.3 10.3
VGO 41.9 44.2 44.2 44.2
-------- -------- -------- --------
SUBTOTAL - Unfinished 107.5 113.4 113.4 113.4
OTHER PRODUCTS
Sulfur 1.2 1.2 1.2 1.2
Coke 17.2 18.2 18.2 18.2
Produced Fuel 4.0 4.4 4.5 4.4
-------- -------- -------- --------
SUBTOTAL - Other Products 22.4 23.8 23.9 23.8
-------- -------- -------- --------
TOTAL PRODUCTS 194.1 205.1 205.1 205.1
======== ======== ======== ========
</TABLE>
-2-
<PAGE>
Schedule 6.1
Services and Supply Agreement
GROSS MARGIN ASSUMPTIONS
- ------------------------
<TABLE>
<CAPTION>
2001
------------------------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
<S> <C> <C> <C> <C>
Chargestock - Volume ('000 bpd)
- -------------------------------
CRUDE
-----
Arab Lt. 36.2 38.2 38.2 38.2
-------- ------- -------- ------- -------
Maya - Market 144.8 152.9 152.9 152.9
------------- ------- -------- ------- -------
SUBTOTAL - Crude 181.0 191.1 191.1 191.1
---------------- ======= ======== ======= =======
OTHER CHARGESTOCKS
------------------
GFU Feed 1.5 1.5 1.5 1.5
--------- ------- ------- ------- -------
Hydrogen 3.2 3.4 3.4 3.4
-------- ------- ------- ------- -------
SUBTOTAL - Other Chargestocks 4.7 4.9 4.9 4.9
----------------------------- ------- ------- ------- -------
TOTAL CHARGESTOCK 185.7 196.0 196.0 196.0
----------------- ======= ======= ======= =======
</TABLE>
-3-
<PAGE>
Schedule 6.1
Services and Supply Agreement
GROSS MARGIN ASSUMPTIONS
- ------------------------
<TABLE>
<CAPTION>
2001
-----------------------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
<S> <C> <C> <C> <C>
Products - Price ($/bbl)
- -----------------------
DISTILLATES
-----------
LS Diesel 18.65 18.64 18.52 19.95
--------- ------- ------- ------- -------
Jet Fuel 18.92 18.90 19.18 20.80
-------- ------- ------- ------- -------
LPG
---
Propane 11.48 11.63 11.42 12.13
------- ------- ------- ------- -------
Isobutane 14.82 15.67 14.94 15.09
--------- ------- ------- ------- -------
Normal Butane 13.24 11.27 11.11 14.17
------------- ------- ------- ------- -------
UNFINISHED
----------
Coker Propane Propylene Mix 13.30 13.99 14.03 14.45
--------------------------- ------- ------- ------- -------
Coker Butane Butylene Mix 14.30 17.48 15.47 14.40
--------------------------- ------- ------- ------- -------
Penhex 13.24 16.44 14.56 13.20
------ ------- ------- ------- -------
Virgin Diesel 16.69 16.79 16.74 18.32
------------- ------- ------- ------- -------
Naphtha - Sour 16.26 18.42 16.93 16.61
-------------- ------- ------- ------- -------
Heavy Naphtha 19.03 21.18 19.70 19.37
------------- ------- ------- ------- -------
ULS VGO 17.21 18.64 17.49 17.59
------- ------- ------- ------- -------
VGO 15.06 16.44 15.37 15.42
--- ------- ------- ------- -------
OTHER PRODUCTS
--------------
Sulfur 9.38 9.40 9.43 9.46
------ ------- ------- ------- -------
Coke (0.26) (0.19) (0.11) (0.11)
---- ------- ------- ------- -------
Produced Fuel 13.15 11.87 11.71 13.34
------------- ------- ------- ------- -------
</TABLE>
-4-
<PAGE>
Schedule 6.1
Services and Supply Agreement
GROSS MARGIN ASSUMPTIONS
- ------------------------
2001
------------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
Chargestocks - Price ($/bbl)
- ----------------------------
CRUDE
-----
Arab Lt. 14.27 15.15 14.81 15.06
-------- ----- ----- ----- -----
Maya - Market 11.22 12.26 12.13 11.86
------------- ----- ----- ----- -----
OTHER CHARGESTOCKS
------------------
GFU Feed 16.68 16.78 16.73 18.31
-------- ----- ----- ----- -----
Hydrogen 30.04 27.61 27.30 30.40
-------- ----- ----- ----- -----
Q1 Q2 Q3 Q4
-- -- -- --
DISTILLATES
-----------
LS Diesel $ 61.6 $ 65.8 $ 66.1 $ 71.2
--------- ------ ------ ------ ------
Jet Fuel 41.1 43.8 45.0 48.8
-------- ----- ----- ----- -----
SUBTOTAL - Distillates 102.8 109.6 111.0 119.9
---------------------- ----- ----- ----- -----
LPG
---
Propane 1.1 1.2 1.2 1.2
------- ----- ----- ----- -----
Isobutane 0.4 0.5 0.5 0.5
--------- ----- ----- ----- -----
Normal Butane 2.4 2.2 2.2 2.8
------------- ----- ----- ----- -----
SUBTOTAL - LPG 3.9 3.9 3.8 4.5
-------------- ----- ----- ----- -----
UNFINISHED
----------
Coker Propane Propylene Mix 2.4 2.7 2.7 2.8
--------------------------- ----- ----- ----- -----
Coker Butane Butylene Mix 1.8 2.4 2.1 2.0
------------------------- ----- ----- ----- -----
Penhex 10.4 13.8 12.3 11.2
------ ----- ----- ----- -----
Virgin Diesel 10.6 11.4 11.5 12.6
------------- ----- ----- ----- -----
Naphtha - Sour 48.5 58.6 54.4 53.4
-------------- ----- ----- ----- -----
Heavy Naphtha 6.1 7.2 6.8 6.7
------------- ----- ----- ----- -----
ULS VGO 15.1 17.4 16.5 16.6
------- ----- ----- ----- -----
VGO 56.7 66.1 62.5 62.7
--- ----- ----- ----- -----
SUBTOTAL - Unfinished 151.6 179.6 168.9 167.9
--------------------- ----- ----- ----- -----
OTHER PRODUCTS
--------------
Sulfur 1.0 1.1 1.1 1.1
------ ------ ------ ------ ------
Coke (0.4) (0.3) (0.2) (0.2)
---- ------ ------ ------ ------
Produced Fuel 4.7 4.8 4.8 5.4
------------- ------ ------ ------ ------
SUBTOTAL - Other Products 5.3 5.5 5.7 6.3
------------------------- ------ ------ ------ ------
TOTAL PRODUCT REVENUE $263.5 $298.5 $289.5 $298.7
--------------------- ------ ------ ------ ------
2001
---------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
GROSS MARGIN ASSUMPTIONS
- ------------------------
-5-
<PAGE>
Schedule 6.1
Services and Supply Agreement
Chargestock Cost ($ in millions)
- ---------------------------------
CRUDE
-----
Arab Lt. $ 46.5 $ 52.7 $ 52.1 $ 52.9
-------- ------ ------ ------ ------
Maya - Market 146.2 170.6 170.6 166.8
------------- ------ ------ ------ ------
SUBTOTAL - Crude 192.7 223.3 222.6 219.8
---------------- ------ ------ ------ ------
OTHER CHARGESTOCKS
------------------
GFU Feed 2.2 2.3 2.4 2.6
-------- ------ ------ ------ ------
Hydrogen 8.7 8.6 8.6 9.5
-------- ------ ------ ------ ------
SUBTOTAL - Other Chargestocks 10.9 10.9 10.9 12.1
-------------------------------------------------- ------ ------
TOTAL CHARGESTOCK COST $203.6 $234.2 $233.6 $231.9
---------------------- ====== ====== ====== ======
TOTAL PRODUCT GROSS MARGIN $ 59.9 $ 64.4 $ 55.9 $ 66.8
---------------------------------------------------- ------ ------
-6-
<PAGE>
Schedule 6.1
Services and Supply Agreement
- --------------------------------------------------------------------------------
VARIABLE & FIXED OPERATING EXPENSE
- ----------------------------------
<TABLE>
<CAPTION>
2001
---------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
<S> <C> <C> <C> <C>
Variable ($ in millions)
============================
Fuel Consumed $ 3.7 $ 3.5 $ 3.5 $ 4.0
- ------------- ------- ------ ------ -------
Electricity $ 2.4 $ 2.7 $ 3.2 $ 2.5
- ----------- ------- ------ ------ -------
Other 0.2 0.2 0.2 0.2
- ----- ------- ------ ------ -------
Total Variable expenses 6.3 6.5 6.9 6.8
- ----------------------- ------- ------ ------ -------
Fixed ($ in millions)
============================
Operating labor 2.8 2.8 2.8 2.8
- --------------- ------- ------ ------ -------
Cat / Chemicals 1.1 1.1 1.1 1.1
- --------------- ------- ------ ------ -------
Repairs & Maintenance 1.8 1.8 1.8 1.8
- --------------------- ------- ------ ------ -------
Environmental 0.2 0.2 0.2 0.2
- ------------- ------- ------ ------ -------
Insurance 0.5 0.5 0.5 0.5
- --------- ------- ------ ------ -------
Taxes 1.0 1.0 1.0 1.0
- ----- ------- ------ ------ -------
Other 1.2 1.2 1.2 1.2 Contingency
- ----- ------- ------ ------ ------- -----------
Total Fixed Operating expenses $ 8.6 $ 8.6 $ 8.6 $ 8.6
- ------------------------------ ------- ------ ------ -------
Total Operating expenses 14.9 15.1 15.5 15.3
- ------------------------ ------- ------ ------ -------
Processing Fees Paid to Clark 4.6 4.4 4.4 5.0
- ----------------------------- ------- ------ ------ -------
Contract Services 0.4 0.4 0.4 0.4
- ----------------- ------- ------ ------ -------
G&A Allocation 0.2 0.2 0.2 0.2
- -------------- ------- ------ ------ -------
Summary used to calculate accounts
- ----------------------------------
payable for operating expenses 30.0 30.3 30.9 31.2
- ------------------------------------------- ------ ------ -------
</TABLE>
Variable ($/bbl crude charge)
===================================
-7-
<PAGE>
Schedule 6.1
Services and Supply Agreement
<TABLE>
<S> <C> <C>
Fuel 0.00 0.00
- ---- ------- -------
Electricity 0.00 0.00
- ----------- ------- -------
Steam - -
- ----- ------- -------
Other - -
- ----- ------- -------
Total Variable expenses ($/bbl crude) 0.00 0.00
- -------------------------------------------- -------
Total Variable expenses ($) $ 0.00 $ 0.00
- --------------------------- ======= =======
Fixed ($/bbl crude charge)
============================================
Operating labor 0.00 0.00
- --------------- ------- -------
Cat / Chemicals 0.00 0.00
- --------------- ------- -------
Maintenance/Environmental 0.00 0.00
- ------------------------- ------- -------
0.00 0.00
------- -------
Taxes & insurance 0.00 0.00
- ----------------- ------- -------
Total fixed expenses ($/bbl crude)
- ----------------------------------
Total Fixed expenses ($) $ 0.00 $ 0.00
- ------------------------ ======= =======
$ 0.00 $ 0.00
------- -------
</TABLE>
-8-
<PAGE>
Schedule 6.1
Services and Supply Agreement
<TABLE>
<CAPTION>
2001
------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
<S> <C> <C> <C> <C>
License Fees (Cash) 0.9
- ------------------- ----
License Fees (Expense)
- ----------------------
Catalyst Chemicals (Cash)
- -------------------------
Catalyst Chemicals (Expense) 0.7 0.7 0.7 0.7
- ---------------------------- ----- ---- ---- ----
Total Cat & Chem Expense 1.1 1.1 1.1 1.1
- ------------------------ ----- ---- ---- ----
Amortized Financing Charges - 2.4 - 2.2
- --------------------------- ----- ---- ---- ----
</TABLE>
HDS Catalyst
- ------------
Diolifin Catalyst
- -----------------
SCOTT Catalyst
- --------------
HKG Catalyst
- ------------
SRU Catalyst
- ------------
-9-
<PAGE>
EXHIBIT A
Services and Supply Agreement
TABLE V-9
PORT ARTHUR COKER COMPANY L.P.
BASE CASE
CHARGES AND YIELDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2001 2002 2003 2004 2005 2006 2007 2008
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Products - Volume (bpd in thousands)
DISTILLATES
LS Diesel 38.3 40.6 40.8 38.5 40.8 40.6 40.8 38.5
Jet Fuel 25.2 26.3 26.8 25.3 26.8 26.3 26.8 25.3
----- ----- ----- ----- ----- ----- ----- -----
SUBTOTAL - Distillates 63.4 66.9 67.6 63.8 67.6 66.9 67.6 63.8
LPG
Propane 1.1 1.1 1.2 1.1 1.2 1.1 1.2 1.1
Isobutane 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4
Normal Butane 2.1 2.2 2.2 2.1 2.2 2.2 2.2 2.1
----- ----- ----- ----- ----- ----- ----- -----
SUBTOTAL - LPG 3.5 3.7 3.8 3.6 3.8 3.7 3.8 3.6
UNFINISHED
Coker Propane Propylene Mix 2.1 2.2 2.2 2.1 2.2 2.2 2.2 2.1
Coker Butane Butylene Mix 1.5 1.6 1.6 1.5 1.6 1.6 1.6 1.5
Penhex 9.1 9.5 9.7 9.1 9.7 9.5 9.7 9.1
Virgin Diesel 7.3 7.0 7.8 7.4 7.8 7.0 7.8 7.4
Naphtha - Sour 34.5 36.1 36.8 34.7 36.8 36.1 36.8 34.7
Heavy Naphtha 3.7 3.8 4.0 3.7 4.0 3.8 4.0 3.7
ULS VGO 10.1 10.6 10.8 10.2 10.8 10.6 10.8 10.2
VGO 43.6 45.8 46.5 43.9 46.5 45.8 46.5 43.9
----- ----- ----- ----- ----- ----- ----- -----
SUBTOTAL - Unfinished 112.0 116.5 119.4 112.5 119.4 116.5 119.4 112.5
OTHER PRODUCTS
Sulfur 1.2 1.3 1.3 1.2 1.3 1.3 1.3 1.2
Coke 17.9 18.8 19.1 18.0 19.1 18.8 19.1 18.0
Produced Fuel 4.3 4.3 4.4 4.2 4.4 4.3 4.4 4.2
----- ----- ----- ----- ----- ----- ----- -----
SUBTOTAL - Other Products 23.5 24.4 24.9 23.4 24.9 24.4 24.9 23.5
TOTAL PRODUCTS 202.4 211.5 215.7 203.3 215.7 211.5 215.7 203.3
Chargestocks - Volume (bpd in thousands)
CRUDE
Arab Lt. 37.7 39.5 40.2 37.9 40.2 39.5 40.2 37.9
Maya 150.9 157.8 160.9 151.7 160.9 157.8 160.9 151.7
----- ----- ----- ----- ----- ----- ----- -----
SUBTOTAL - Crude 188.6 197.3 201.1 189.6 201.1 197.3 201.1 189.6
OTHER CHARGESTOCKS
GFU Feed 1.5 1.6 1.6 1.5 1.6 1.6 1.6 1.5
Hydrogen 3.4 3.5 3.6 3.4 3.6 3.5 3.6 3.4
----- ----- ----- ----- ----- ----- ----- -----
SUBTOTAL - Other Chargestocks 4.9 5.1 5.2 4.9 5.2 5.1 5.2 4.9
TOTAL CHARGESTOCKS 193.5 202.4 206.3 194.5 206.3 202.4 206.3 194.5
</TABLE>
<PAGE>
TABLE V-10
PORT ARTHUR COKER COMPANY L.P.
BASE CASE
PRICE FORECAST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2001 2002 2003 2004 2005 2006 2007 2008
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Products - ($/bbl)
DISTILLIATES
LS Diesel 18.94 20.69 21.66 22.39 22.85 23.09 23.35 23.60
Jet Fuel 19.45 21.16 22.12 22.84 23.30 23.55 23.80 24.07
LPG
Propane 11.67 12.65 13.22 13.63 13.91 14.16 14.36 14.55
Isobutane 15.13 16.35 17.10 17.61 17.93 18.04 18.23 18.41
Normal Butane 12.45 13.57 14.27 14.73 15.02 15.12 15.28 15.44
UNFINISHED
Coker Propane Propylene Mix 13.94 15.28 16.39 16.88 17.22 17.48 17.71 17.91
Coker Butane Butylene Mix 15.41 16.87 17.72 18.36 18.78 19.01 19.23 19.46
Penhex 14.36 15.60 16.31 16.84 17.18 17.34 17.53 17.73
Virgin Diesel 17.14 18.84 19.79 20.50 20.95 21.18 21.43 21.68
Naphtha - Sour 17.05 18.73 19.61 20.27 20.70 20.93 21.17 21.42
Heavy Naphtha 19.82 21.50 22.38 23.05 23.47 23.70 23.95 24.19
ULS VGO 17.73 19.43 19.93 20.53 20.97 21.20 21.43 21.67
VGO 15.57 17.22 17.69 18.24 18.66 18.88 19.10 19.33
OTHER PRODUCTS
Sulfur 9.42 9.48 9.66 9.77 9.88 9.99 10.10 10.22
Coke (0.17) 0.00 0.06 0.07 0.13 0.16 0.19 0.21
Produced Fuel 12.51 12.85 13.08 13.26 13.38 13.46 13.62 13.77
Chargestocks - ($/bbl)
CRUDE
Arab Lt. 14.82 16.25 16.98 17.50 17.89 18.09 18.29 18.49
Maya 11.87 12.98 13.46 13.73 14.08 14.24 14.41 14.58
OTHER CHARGESTOCKS
GFU Feed 17.13 18.82 19.76 20.46 20.91 21.14 21.38 21.62
Hydrogen 28.84 29.20 29.49 30.33 30.26 30.50 30.79 31.51
</TABLE>
2
<PAGE>
TABLE V-11
PORT ARTHUR COKER COMPANY L.P.
BASE CASE
REVENUE AND FEEDSTOCK COST FORECAST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2001 2002 2003 2004 2005 2006 2007 2008
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Product Revenue (Dollars in Millions)
DISTILLATES
LS Diesel 264.6 306.5 322.6 315.2 340.4 342.1 347.7 332.3
Jet Fuel 178.7 203.3 216.6 211.4 228.2 226.3 233.2 222.8
------ ------ ------ ------ ------ ------ ------ ------
SUBTOTAL - Distillates 443.4 509.8 539.3 526.6 568.6 568.4 580.9 555.1
LPG
Propane 4.6 5.2 5.6 5.4 5.9 5.8 6.1 5.8
Isobutane 1.9 2.2 2.3 2.3 2.4 2.4 2.5 2.4
Normal Butane 9.5 10.8 11.7 11.4 12.3 12.1 12.5 11.9
------ ------ ------ ------ ------ ------ ------ ------
SUBTOTAL - LPG 16.1 18.2 19.6 19.1 20.6 20.3 21.0 20.1
UNFINISHED
Coker Propane Propylene Mix 10.6 12.1 13.2 12.9 13.9 13.8 14.3 13.7
Coker Butane Butylene Mix 8.4 9.6 10.3 10.1 10.9 10.8 11.2 10.7
Penhex 47.6 53.9 57.6 56.2 60.7 59.9 61.9 59.2
Virgin Diesel 46.0 48.4 56.6 55.4 59.9 54.4 61.3 58.6
Naphtha-Sour 214.9 246.8 263.4 257.3 278.0 275.8 284.3 271.8
Heavy Naphtha 26.8 29.8 32.3 31.4 33.9 32.9 34.6 33.0
ULS VGO 65.6 75.4 78.6 76.5 82.7 82.3 84.6 80.8
VGO 248.1 287.7 300.3 292.7 316.9 315.4 324.4 310.2
------ ------ ------ ------ ------ ------ ------ ------
SUBTOTAL - Unfinished 668.0 763.7 812.4 792.7 856.9 845.4 876.4 838.0
OTHER PRODUCTS
Sulfur 4.2 4.4 4.6 4.4 4.7 4.7 4.8 4.6
Coke (1.1) 0.0 0.4 0.5 0.9 1.1 1.3 1.4
Produced Fuel 19.6 20.3 21.1 20.1 21.6 21.3 21.9 21.1
------ ------ ------ ------ ------ ------ ------ ------
SUBTOTAL - Other Products 22.8 24.8 26.1 25.0 27.2 27.0 28.1 27.2
TOTAL PRODUCT REVENUE 1150.2 1316.5 1397.4 1363.4 1473.3 1461.2 1506.4 1440.4
CRUDE
Arab Lt. 204.2 234.0 249.3 242.8 262.7 260.5 268.5 256.7
Maya - Market 654.2 747.6 790.3 762.3 827.1 820.5 846.3 809.3
------ ------ ------ ------ ------ ------ ------ ------
SUBTOTAL - Crude 858.4 981.6 1039.6 1005.2 1089.8 1081.0 1114.8 1066.0
Chargestock Cost (Dollars in Millions)
OTHER CHARGESTOCK
GFU Feed 9.5 11.1 11.7 11.4 12.3 12.5 12.6 12.1
Hudrogen 35.3 37.4 38.6 37.5 39.6 39.1 40.3 39.0
------ ------ ------ ------ ------ ------ ------ ------
SUBTOTAL - Other Chargestocks 44.8 48.5 50.2 48.9 51.9 51.6 52.9 51.0
TOTAL CHARGESTOCK COST 903.2 1030.1 1089.8 1054.1 1141.7 1132.6 1167.7 1117.0
</TABLE>
3
<PAGE>
TABLE V-12
PORT ARTHUR COKER COMPANY L.P.
BASE CASE
CASH FLOW AND DEBT AMORTIZATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in Millions)
2001 2002 2003 2004 2005 2006 2007 2008
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Product Revenue 1,150.2 1,316.5 1,397.4 1,363.4 1,473.3 1,462.2 1,506.4 1,440.4
Total Chargestock Cost 903.2 1,030.1 1,089.8 1,054.1 1,141.7 1,132.6 1,167.7 1,117.0
------- ------- ------- ------- ------- ------- ------- -------
Refinery Gross Margin 247.0 286.4 307.5 309.3 331.6 328.6 338.7 323.4
PMI Contract Coker Gross Margin Guarantee 43.8 19.0 (2.7) (22.6) (28.0) (23.9)
------- ------- ------- ------- ------- ------- ------- -------
Total Gross Margin 290.8 305.4 304.8 286.7 303.6 304.6 338.7 323.4
Variable Operating Expenses 26.5 27.9 28.5 28.0 29.1 28.9 29.6 29.0
Fixed Operating Expenses 34.3 34.4 35.0 35.8 37.5 39.3 41.5 42.8
Lease Fees 31.6 32.2 32.8 33.6 34.2 34.8 35.5 36.4
Operating Fees 58.5 61.4 63.2 59.4 62.3 62.6 64.0 62.9
Processing Fees (69.7) (72.0) (73.4) (74.1) (76.1) (77.4) (78.9) (79.7)
G&A Expense 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.9
------- ------- ------- ------- ------- ------- ------- -------
Total Expenses 81.9 84.7 86.8 83.5 87.7 89.1 92.6 92.2
Operating Cash Flow 208.8 220.7 218.0 203.2 215.9 215.5 246.1 231.2
Other Cash Items
Interest Income 1.9 2.7 3.1 3.1 2.1 2.3 3.6 5.3
Cash Taxes (18.3) (32.1) (27.1) (48.5) (53.6) (68.1) (50.6)
Mandatory Capex (3.0) (2.3) (2.4) (2.4) (3.8) (3.9) (4.0) (4.1)
Turnaround Expense (7.5) (7.5) (7.5) (7.5) (9.9) (9.9) (9.9) (9.9)
Catalyst Adjustment 2.7 (2.1) 2.2 (2.9) 2.9 (2.9) 3.0 (3.1)
Other 1.6 5.7 5.4 5.0 1.4 (6.4) (0.7) (0.7)
------- ------- ------- ------- ------- ------- ------- ------
Total Other Cash Items (4.4) (21.9) (31.3) (31.9) (55.8) (74.4) (76.0) (63.0)
Cash Flow Available For Debt Service 204.4 198.9 186.7 171.3 160.0 141.2 170.1 168.2
Debt Service (1)
- ----------------
Interest / Financing Fees 70.4 57.1 44.4 33.3 28.2 22.4 16.8 11.1
Principal 12.4 44.5 29.0 30.6 46.4 46.4 40.3 61.7
------- ------- ------- ------- ------- ------- ------- -------
Total Debt Service 82.8 101.6 73.4 63.9 74.6 68.8 57.1 72.8
DSCR 2.5 2.0 2.5 2.7 2.1 2.1 3.0 2.3
Average 2.4
Minimum 2.0
Debt Amortization Schedule
- --------------------------
Capital Markets
Interest Payment 31.9 31.6 30.1 27.2 22.9 17.1 11.5 5.8
Principal Payment 8.7 20.9 30.6 46.4 46.4 40.3 61.7
Bank Debt
Interest Payment 31.6 20.1 9.0 0.8
Principal Payment - Scheduled 12.4 35.8 8.1
Principal Payment - Sweep 95.8 73.0 85.0 15.0
</TABLE>
(1) Annual debt service for a given year includes July 15 debt service for
subject year and January 15 debt service for following year.
4
<PAGE>
TABLE V-13
PORT ARTHUR COKER COMPANY L.P.
BASE CASE
SOURCES AND USES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Millions) Project Cost
Total PACC Total Clark Total Project
-----------------------------------------------------
<S> <C> <C> <C>
Uses of Funds
- ------------------------------------------------
EPC costs 543.9 92.0 635.9
Project Contingency 28.0 28.0
Taxes and Import Duties 5.0 5.0
Project Team Cost 26.0 26.0
Startup Cost (includes initial Cat & Chem) 14.6 14.6
------ ------ -------
Total Cash Construction Cost 591.5 118.0 709.5
Transfer of Value 2.2 (2.2)
Interesting during construction 89.7 89.7
Interest Income (0.9) (0.9)
Legal / Consulting / Other Fees 11.4 2.0 13.4
Financing expenses 21.1 21.1
------ ------ -------
Total Uses 715.0 117.8 832.8
Sources of Funds
- ------------------------------------------------
Bank Debt 325.0 325.0
Capital Markets 255.0 255.0
Cash Equity 135.0 117.8 252.8
------ ------ -------
Total Sources 715.0 117.8 832.8
</TABLE>
5
<PAGE>
Exhibit 10.33
EXECUTION COPY
================================================================================
PRODUCT PURCHASE AGREEMENT
BETWEEN
CLARK REFINING & MARKETING, INC.
AND
PORT ARTHUR COKER COMPANY L.P.
August 19, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS................................................................. 1
Section 1.1 Definitions..................................................... 1
Section 1.2 Other Definitional Provisions................................... 2
ARTICLE 2. PURCHASE AND SALE........................................................... 2
Section 2.1 Purchase and Sale Obligations................................... 2
Section 2.2 Required Product Mix............................................ 2
Section 2.3 Clark R&M's Obligations Absolute................................ 3
ARTICLE 3. DELIVERY; TITLE............................................................. 3
ARTICLE 4. PRICE, BILLING AND PAYMENT.................................................. 4
Section 4.1 Price........................................................... 4
Section 4.2 Billing......................................................... 4
Section 4.3 Payment......................................................... 4
Section 4.4 Recordkeeping; Access to Books and Records...................... 4
Section 4.5 Interest Rate for Late Payments................................. 4
Section 4.6 Price and Schedule Adjustments for Non-Specification Products... 4
ARTICLE 5. QUANTITY AND QUALITY DETERMINATION.......................................... 5
Section 5.1 Quantity Determinations; Metering Facilities.................... 5
Section 5.2 Quality Determinations.......................................... 5
Section 5.3 Disclaimer of Warranties........................................ 5
Section 5.4 Warranty of Title............................................... 5
ARTICLE 6. DEFAULTS, REMEDIES AND TERMINATION.......................................... 6
Section 6.1 Clark R&M's Right to Terminate.................................. 6
Section 6.2 Coker Company's Right to Terminate.............................. 6
Section 6.3 Right to Terminate and Other Remedies of the Coker Company...... 6
Section 6.4 Termination Option.............................................. 7
Section 6.5 Non-Exclusive Remedies; Specific Performance.................... 7
ARTICLE 7. TERM....................................................................... 7
ARTICLE 8. REPRESENTATIONS AND WARRANTIES.............................................. 7
Section 8.1 Representations and Warranties of the Coker Company............. 7
Section 8.2 Representations and Warranties of Clark R&M..................... 8
ARTICLE 9. MISCELLANEOUS............................................................... 9
Section 9.1 Taxes........................................................... 9
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 9.2 Intellectual Property; Confidentiality................... 9
Section 9.3 Maintenance Shutdowns.................................... 9
Section 9.4 Force Majeure............................................ 9
Section 9.5 Cooperation with Other Parties........................... 10
Section 9.6 Indemnity................................................ 10
Section 9.7 Dispute Resolution....................................... 11
Section 9.8 Relationship of Parties.................................. 11
Section 9.9 Third Party Beneficiaries................................ 11
Section 9.10 No Indirect Damages...................................... 12
Section 9.11 Assignments.............................................. 12
Section 9.12 Amendments............................................... 12
Section 9.13 Notices.................................................. 12
Section 9.14 GOVERNING LAW............................................ 13
Section 9.15 Submission to Jurisdiction; Forum Selection.............. 13
Section 9.16 Appointment of Agent for Service of Process.............. 14
Section 9.17 No Waiver................................................ 14
Section 9.18 Counterparts............................................. 14
Section 9.19 Integration.............................................. 14
Section 9.20 Severability............................................. 14
Section 9.21 Headings................................................. 15
Section 9.22 WAIVER OF JURY TRIAL..................................... 15
</TABLE>
APPENDIX A -- DEFINITION
EXHIBITS A-1 to A-42 -- PRODUCTS
-ii-
<PAGE>
PRODUCT PURCHASE AGREEMENT, dated as of August 19, 1999, between Clark
Refining & Marketing, Inc., a Delaware corporation ("Clark R&M") and Port Arthur
---------
Coker Company L.P., a Delaware limited partnership (the "Coker Company").
-------------
RECITALS
WHEREAS, the Coker Company is constructing the Coker Complex on land
within the Refinery leased from Clark R&M, which Coker Complex is intended to
have at least the Coker Complex Design Capacity;
WHEREAS, the Coker Company has leased the Ancillary Equipment located
within the Refinery, which Ancillary Equipment is being upgraded to have the
Crude Design Capacity to permit the production of at least the minimum volume of
feedstocks for the Coker Complex to operate at the Coker Complex Design
Capacity;
WHEREAS, the Heavy Oil Processing Facility, consisting of the Coker
Complex and the Ancillary Equipment, is expected to produce certain Target
Specifications of products;
WHEREAS, the Coker Company desires to sell, and Clark R&M desires to
purchase, all Coker Company products produced by the Heavy Oil Processing
Facility; and
WHEREAS, the obligations of Clark R&M and the rights of the Coker
Company hereunder will be assigned to the Financing Parties as security in order
to finance the construction of the Coker Complex.
NOW THEREFORE, for and in consideration of the mutual covenants,
premises and agreements set forth herein, and good and valuable consideration,
the receipt, sufficiency and adequacy of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Definitions. Except as contained in this Section 1.1
-----------
or as otherwise defined herein, the capitalized terms used herein shall have the
respective meanings assigned thereto in Appendix A. For all purposes of this
Agreement, the following terms shall have the following meanings:
"Delivery Point" means for each Product the specification under the
--------------
heading "Delivery Point" on the Schedule relating to such Product.
"Product Price" means for each Product the U.S. dollar amount obtained
-------------
pursuant to the formula under the heading "Price" on the Schedule relating to
such Product; provided, however, that to the extent that any Product is
-------- -------
purchased by Clark R&M and immediately resold to a non-affiliated third party,
the "Product Price" for such Product shall be (a) the U.S. dollar amount
received by Clark R&M for such Product, less (ii) the applicable marketing fee
----
for such Product described on the Schedule relating thereto.
<PAGE>
2
"Target Specification" means for each Product, the specification of
--------------------
such Product described under the heading "Target Specification" on the Schedule
relating to such Product.
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) The words "hereof," "herein", "hereto" and "hereunder" and words
of similar import when used in this Product Purchase Agreement shall refer to
this Product Purchase Agreement as a whole and not to any particular provision
of this Product Purchase Agreement, and Article, Section and Schedule references
are to this Product Purchase Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE 2. PURCHASE AND SALE
Section 2.1 Purchase and Sale Obligations. During the term of this
-----------------------------
Product Purchase Agreement the Coker Company shall sell and deliver to Clark R&M
and Clark R&M shall purchase and accept from the Coker Company all Coker Company
intermediate and final Products of the Heavy Oil Processing Facility, in
accordance with the terms and conditions herein.
Section 2.2 Required Product Mix.
--------------------
(a) Unless Clark R&M shall have exercised its option to request a
different mix of products pursuant to clause (b) below, the Coker Company agrees
to use commercially reasonable efforts to cause the quantity and quality of each
Product delivered to Clark R&M hereunder to meet the Target Specification for
such Product. Notwithstanding the foregoing, the Coker Company shall have no
liability hereunder for failure to deliver the Target Specification of any
Product.
(b) Clark R&M shall have the right to request the Coker Company, and
the Coker Company agrees to use commercially reasonably efforts, to alter the
quality or quantity specification of any Product or Products; provided that such
--------
adjustment shall be subject to the following conditions:
(i) for any calendar month, such request, or combination of
requests, shall not require processing by the Ancillary Equipment of
less than the Contract Quantity of Coker Company Maya and shall not
require processing by the Coker Complex of less than all VTBs produced
by the Ancillary Equipment from the processing of the Contract
Quantity of the Coker Company Maya;
<PAGE>
3
(ii) such adjustments will, in the reasonable good faith
judgment of Clark R&M, maximize the profitability of the Refinery as a
whole in a manner (A) that is mutually beneficial to Clark R&M and the
Coker Company and (B) that does not maximize the profit of Clark R&M
at the expense of the Coker Company;
(iii) Clark R&M shall supply to the Coker Company, pursuant to
the Services and Supply Agreement, the necessary feedstocks and shall
make (or direct the employees of the Coker Company to make, as the
case may be) the necessary operational and other adjustments under the
Services and Supply Agreement in order to fulfill such request;
(iv) such adjustments will not (A) materially increase the net
reimbursable costs of the Coker Company that are payable under the
Services and Supply Agreement, (B) adversely affect the reliability or
the useful life of either the Coker Complex or the Ancillary
Equipment, or (C) otherwise have a material adverse effect on the
physical condition of the Heavy Oil Processing Facility; and
(v) it is otherwise feasible for the Heavy Oil Processing
Facility to produce the quantity and quality of Products so requested.
Section 2.3 Clark R&M's Obligations Absolute. This is a "take and
--------------------------------
pay contract." The obligation of Clark R&M is to accept and actually take
delivery of Products tendered for delivery by the Coker Company and to pay for
such Products at the prices and on the other terms set forth herein, absolutely
and unconditionally without regard to (i) the validity, regularity or
enforceability of this Product Purchase Agreement or any other Project Document,
(ii) any defense, set-off or counterclaim (other than (a) a defense of payment
or performance and (b) the netting of sums payable under the Services and Supply
Agreement with sums payable hereunder as provided in Article 7 of the Services
and Supply Agreement) which may at any time be available to or be asserted by
Clark R&M against the Coker Company (whether in connection with this Product
Purchase Agreement or any other transaction between Clark R&M and the Coker
Company), or (iii) any other circumstance whatsoever which constitutes, or might
be construed to constitute, an equitable or legal discharge of Clark R&M from
its obligations under this Product Purchase Agreement, in bankruptcy or in any
other instance. Clark R&M hereby waives, to the extent permitted by Applicable
Law, any and all rights that it may now have or which at any time hereafter may
be conferred on it, by statute or otherwise, to terminate, cancel or rescind
this Product Purchase Agreement.
ARTICLE 3. DELIVERY; TITLE
The Coker Company shall deliver all Products to be sold hereunder, and
title to all such Products shall pass, to Clark R&M at the applicable Delivery
Point. At the Delivery Point for any Product, Clark R&M shall take delivery of
such Product and the Coker Company's responsibility with respect to such Product
shall cease and Clark R&M shall assume all
<PAGE>
4
responsibility for, all risk of loss of, or damage to, and deterioration or
evaporation of, such Product so delivered.
ARTICLE 4. PRICE, BILLING AND PAYMENT
Section 4.1 Price. Clark R&M shall pay the Product Price, from
-----
time to time, for each Product delivered in accordance with this Product
Purchase Agreement.
Section 4.2 Billing. Every three (3) calendar days, the Coker
-------
Company shall furnish an invoice to Clark R&M setting forth: (i) a calculation
of the Product Price for each Product delivered during the preceding three (3)
day period, (ii) the total amount payable by Clark R&M to the Coker Company for
all such Products for such three (3) day period, and (iii) a calculation of any
necessary adjustments to previous invoices pursuant to clause (d) of Section
5.11 of the Services and Supply Agreement or Section 4.6 hereof.
Section 4.3 Payment. Clark R&M shall pay each invoice within five
-------
(5) calendar days of receipt thereof. All invoices will be expressed and paid
without set-off, counterclaim, withholding or deduction, in immediately
available funds to the account listed on Schedule 4.3 hereto.
Section 4.4 Recordkeeping; Access to Books and Records.
------------------------------------------
(a) The Coker Company shall, in accordance with good business
practices, keep and maintain such books, records, accounts and other documents
which are sufficient to reflect accurately and completely all amounts which form
the basis for invoices submitted hereunder including, without limitation,
records maintained pursuant to clause (c) of Section 5.11 of the Services and
Supply Agreement.
(b) Clark R&M shall have the right to inspect and examine, during
regular business hours and on not less than five (5)calendar days notice to the
Coker Company all records maintained pursuant to clause (a) above.
Section 4.5 Interest Rate for Late Payments. All amounts payable
-------------------------------
hereunder if not paid when due will accrue interest daily at the annual rate of
interest announced from time to time for dollars by The Chase Manhattan Bank,
N.A. at its offices located in New York, New York as its prime commercial
interest rate for U.S. Dollar-denominated loans originated in the United States
plus two percent (2%) calculated from the due date of such payment until the
date of payment.
Section 4.6 Price and Schedule Adjustments for Non-Specification
----------------------------------------------------
Products. If a material amount of any Product produced by the Heavy Oil
- --------
Processing Facility fails to meet the specifications on the Schedule related to
such Product and such failure to meet specifications has a material adverse
affect on the fair market value of such Product (or any finished product derived
from such Product), then upon written request of either party the parties shall
meet to
<PAGE>
5
negotiate a good faith and equitable adjustment to the next invoice to be
delivered to Clark R&M under Section 4.2; provided, however, that (i) the
-------- -------
failure of such Product to meet its specifications was not caused by a failure
of Clark R&M to operate the Heavy Oil Processing Facility in accordance with its
obligations under Article 2 of the Services and Supply Agreement, (ii) such
lower Product specification was not requested by Clark R&M pursuant to Section
2.2 hereof and (iii) no such adjustment shall become effective until the
Independent Engineer issues a certificate approving the reasonableness of such
adjustment. If such failure of any Product to meet the specifications on the
Schedule related to such Product is due to a design or construction defect of
the Coker Complex such that the failure to meet specifications is expected to
continue on an on-going basis, the parties shall meet to negotiate a good faith
adjustment or adjustments to the applicable Schedule or Schedules; provided,
--------
however, that no such adjustment or adjustments shall become effective until the
- -------
Independent Engineer issues a certificate approving the reasonableness of such
adjustment.
ARTICLE 5. QUANTITY AND QUALITY DETERMINATION
Section 5.1 Quantity Determinations; Metering Facilities. The
--------------------------------------------
quantity of each Product delivered by the Coker Company to Clark R&M shall be
measured in accordance with the methods specified under the heading "Quantity
Measurement" on the Schedule related to such Product and Section 5.11 of the
Services and Supply Agreement.
Section 5.2 Quality Determinations. Necessary determinations of
----------------------
the quality of any Product shall be determined in accordance with the sampling
procedure for such Product specified under the heading "Quality Measurement" on
the Schedule related to such Product and Section 5.11 of the Services and Supply
Agreement.
Section 5.3 Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED
------------------------
IN SECTION 5.4, BELOW, THE COKER COMPANY MAKES NO WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE PRODUCTS TO BE SUPPLIED BY THE COKER COMPANY HEREUNDER,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
Section 5.4 Warranty of Title. The Coker Company warrants and
-----------------
represents to Clark R&M that the Coker Company has good title to, and the valid
right to transfer to Clark R&M, all Products delivered hereunder, free and clear
of all liens of persons claiming by, through or under the Coker Company.
<PAGE>
6
ARTICLE 6. DEFAULTS, REMEDIES AND TERMINATION
Section 6.1 Clark R&M's Right to Terminate. A material failure of
------------------------------
the Coker Company to deliver the Products substantially in accordance with the
terms contained herein, which remains uncured for a period of sixty (60)
consecutive days, shall constitute a Coker Company default hereunder.
If a Coker Company default occurs and is continuing, Clark R&M after
having given the Coker Company and the Financing Parties ninety (90) days prior
written notice may terminate this Product Purchase Agreement upon Coker
Company's and/or the Financing Parties' subsequent failure to cure such default
within such ninety (90) day cure period.
Section 6.2 Coker Company's Right to Terminate. Each of the
----------------------------------
following shall constitute a Clark R&M default hereunder:
(a) Failure by Clark R&M to pay any amount due under this Product
Purchase Agreement in excess of $250,000 on the date when payment of such amount
is required, which continues uncured for a period of five (5) consecutive days;
(b) Failure by Clark R&M to perform substantially any material
obligation under this Product Purchase Agreement, which failure continues
uncured for a period of thirty (30) consecutive days;
(c) Commencement of insolvency, receivership, reorganization or
bankruptcy proceedings by or against Clark R&M, which are not dismissed within
sixty (60) days;
(d) Any material breach of any covenant, representation or warranty
of Clark R&M herein that continues uncured for a period of sixty (60)
consecutive days;
(e) Default by Clark R&M under Section 8.2 of the Services and Supply
Agreement; or
(f) Failure by Clark R&M to perform substantially any material
obligation under the Ancillary Equipment Site Lease or the Coker Complex Ground
Lease, which failure continues uncured for a period of thirty (30) consecutive
days.
Section 6.3 Right to Terminate and Other Remedies of the Coker
--------------------------------------------------
Company.
- -------
(a) Upon the occurrence of a Clark R&M default hereunder and subject
to the consent of the Financing Parties, the Coker Company may (i) terminate
this Product Purchase Agreement and/or (ii) exercise any or all other remedies
available to it at law or in equity.
(b) In the event Clark R&M does not accept delivery of any Product,
for any reason, the Coker Company shall have the right to sell such Product to
any other purchaser.
<PAGE>
7
Section 6.4 Termination Option. Notwithstanding anything to the
------------------
contrary herein and subject to such consent as may be required under the
Financing Documents, this Product Purchase Agreement shall terminate at the
option of either party hereto should Final Completion (as such term is defined
in the EPC Contract) and completion of the Lessor Ancillary Equipment Upgrade
not occur on or before March 1, 2002 or such later date for completion of
construction of the Heavy Oil Processing Facility as may be contemplated by the
Financing Documents.
Section 6.5 Non-Exclusive Remedies; Specific Performance. (a) None
--------------------------------------------
of the provisions in this Article 6 are intended to be exclusive of, or to
limit, any rights available to either party at law or in equity.
(b) Each of the parties hereto acknowledges and agrees that (i)
monetary damages may be an inadequate remedy for a breach of any of the
provisions of this Product Purchase Agreement, (ii) in addition to being
entitled to exercise all of their rights granted by law, including recovery of
damages, the other party shall therefore be entitled to specific performance of
the other party's obligations under this Product Purchase Agreement and (iii) in
the event of any action for specific performance it shall waive the defense that
a remedy at law would be adequate.
ARTICLE 7. TERM
This Product Purchase Agreement shall become effective on the date
hereof and shall continue in effect until the earlier of (a) the date on which
this Product Purchase Agreement is terminated pursuant to Article 6, or (b) the
date that is thirty (30) years after the date hereof.
ARTICLE 8. REPRESENTATIONS AND WARRANTIES
Section 8.1 Representations and Warranties of the Coker Company.
---------------------------------------------------
The Coker Company represents and warrants to Clark R&M that:
(a) The Coker Company is a corporation duly formed and validly
existing under the laws of the State of Delaware; the Coker Company has the
power and authority to own its assets and to transact the business in which it
is now engaged or proposed to be engaged in; and the Coker Company is duly
qualified to do business in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.
(b) The execution, delivery and performance by the Coker Company of
this Product Purchase Agreement has been duly authorized by all necessary
corporate action and does not and will not: (1) require any further consent or
approval of the members of the Coker Company; (2) contravene the Coker Company's
partnership agreement or certificate of limited partnership; (3) violate any
provision of any law, rule, regulation, order, writ, judgment, decree,
<PAGE>
8
determination, or award presently in effect having applicability to the Coker
Company; (4) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to which
the Coker Company is a party or by which it or its properties may be bound or
affected; (5) result in, or require, the creation or imposition of any lien,
upon or with respect to any of the properties now owned or hereafter acquired by
the Coker Company; or (6) cause the Coker Company to be in default under any
such law, rule, regulation, order, writ, judgment, injunction, decree,
determination, or award or any such indenture, agreement, lease or instrument.
(c) This Product Purchase Agreement is in full force and effect and
is the legal, valid, and binding obligation of the Coker Company, enforceable
against the Coker Company in accordance with its terms, except to the extent
that such enforcement may be limited by applicable bankruptcy, moratorium,
insolvency or other similar laws affecting creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
Section 8.2 Representations and Warranties of Clark R&M. Clark R&M
-------------------------------------------
represents and warrants to the Coker Company that:
(a) Clark R&M is a corporation duly formed and validly existing under
the laws of Delaware; Clark R&M has the corporate power and authority to own its
assets and to transact the business in which it is now engaged or proposed to be
engaged in; and Clark R&M is duly qualified to do business in each jurisdiction
in which the character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary.
(b) The execution, delivery and performance by Clark R&M of this
Product Purchase Agreement has been duly authorized by all necessary corporate
action and does not and will not: (1) require any further consent or approval of
the members of Clark R&M; (2) contravene Clark R&M's certificate of
incorporation or by laws; (3) violate any provision of any law, rule,
regulation, order, writ, judgment, decree, determination, or award presently in
effect having applicability to Clark R&M; (4) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Clark R&M is a party or by which
it or its properties may be bound or affected; (5) result in, or require, the
creation or imposition of any lien, upon or with respect to any off the
properties now owned or hereafter acquired by Clark R&M; or (6) cause Clark R&M
to be in default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or award or any such indenture, agreement,
lease or instrument.
(c) This Product Purchase Agreement is in full force and effect and
is the legal, valid, and binding obligation of Clark R&M, enforceable against
Clark R&M in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, moratorium, insolvency, or
other similar laws affecting creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
<PAGE>
9
ARTICLE 9. MISCELLANEOUS
Section 9.1 Taxes.
-----
(a) Each party shall be solely responsible for payment of (i) any
federal, state or local taxes based on upon or measured by such party's income
and (ii) personal property taxes levied on or measured by the value of the
Products to the extent such taxes are applicable or allocable to periods in
which such party had title to the Products so taxed.
(b) Any sales, use, transfer or similar taxes, now or hereafter
imposed, levied or assessed by any governmental authority directly upon the
transactions herein provided for shall, if collectible or payable by the Coker
Company, be paid or reimbursed by Clark R&M. If Clark R&M claims exemption for
any of the aforesaid taxes, then it shall furnish the Coker Company with a
properly completed exemption certificate. On items that are to be resold, Clark
R&M shall furnish the Coker Company with a properly executed resale certificate.
If, at any time, Clark R&M holds a Texas direct payment permit, it shall issue
to the Coker Company a properly completed direct payment exemption certificate
and thereafter hold harmless and indemnify the Coker Company for any sales or
use taxes assessed against the Coker Company by any taxing authority in respect
to any taxable sales, including the amounts of any penalties, interest and
reasonable attorneys' fees.
Section 9.2 Intellectual Property; Confidentiality. Clark R&M
--------------------------------------
agrees to be bound by all confidentiality agreements and all agreements with
respect to intellectual property rights contained in the other Project
Documents.
Section 9.3 Maintenance Shutdowns. The parties agree to cooperate
---------------------
in scheduling planned maintenance shutdowns of operating units within the Heavy
Oil Processing Facility and within the Clark Equipment in order to minimize the
impact on the operations of the other party. Notwithstanding the foregoing, no
maintenance shutdown of any unit comprising part of the Clark Equipment shall
relieve Clark R&M of its obligation to purchase and take delivery of Products
hereunder.
Section 9.4 Force Majeure.
-------------
(a) If an Event of Force Majeure causes a material adverse effect on
a party's ability to carry out its obligations under this Product Purchase
Agreement, other than the obligation to pay money, such party shall give to the
other party prompt notice of such Event of Force Majeure with reasonably full
particulars thereof, and its obligations so far as they are affected by such
Event of Force Majeure shall be suspended during but not longer than the
continuance of such Event of Force Majeure and such further period thereafter as
shall be reasonable in the circumstances.
(b) As soon as practicable after giving notice under clause (a)
above, the claiming party shall provide to the other party confirmation of the
particulars required to be given under clause (a) above.
<PAGE>
10
(c) Nothing in this Section 9.4 shall suspend, excuse or delay any
party's obligation to pay under this Product Purchase Agreement.
(d) The non-performing party shall use reasonable diligence to remedy
its inability to perform or to minimize the impact of the Event of Force Majeure
as quickly as possible.
Section 9.5 Cooperation with Other Parties. Purchaser shall
------------------------------
reasonably cooperate with the Coker Company, the Independent Engineer and the
Financing Parties in connection with the Financing Documents and/or any
refinancing thereof including, without limitation, the furnishing of such
information, the giving of such certificates and the furnishing of a reasonable
consent and such reasonable opinions of counsel and other matters as the Coker
Company, the Independent Engineer or the Financing Parties may reasonably
request in connection with the transactions contemplated hereby or by the
Financing Documents.
Section 9.6 Indemnity.
---------
(a) The Coker Company shall protect, indemnify, defend and hold
harmless Clark R&M, and Clark R&M shall protect, indemnify, defend and hold
harmless the Coker Company and the Financing Parties, together with in each case
the respective indemnitee's directors, officers, employees and agents (including
but not limited to affiliates and their employees) from and against all
liabilities, damages, losses, penalties, claims, judgments, awards, costs,
expenses (including reasonable legal fees and any fines or assessments charged
against it), demands, suits and proceedings of any nature whatsoever for death,
injury or property damage that arise out of or are in any manner connected with
the negligence or willful misconduct of that party in its performance of this
Product Purchase Agreement.
(b) Each party's obligations with respect to claims and suits covered
by this Section are subject to the conditions that (i) the indemnitee gives the
indemnitor reasonably prompt notice of any such claim or suit, (ii) the
indemnitee cooperates in the defense of any such claim or suit and (iii) the
indemnitor has sole control of the defense and settlement to the extent of the
indemnitor's liability for any such claim or suit, provided that indemnitor
--------
shall confirm in writing its obligation to indemnify the indemnitee with respect
to all costs and expenses with respect to such claim or suit. Nothing contained
in this clause, however, shall preclude the indemnitee from (x) being
represented by its own counsel at its own expense or (y) participating in the
settlement if the claimed relief is non-monetary in nature.
(c) The Coker Company hereby agrees that, notwithstanding any
provision in this Product Purchase Agreement to the contrary, with respect to
any loss that is or would be covered by the policies of insurance specified in
Section 5.13 of the Services and Supply Agreement, Clark R&M shall first seek to
recover insurance proceeds under such policies, through submission of a claim
and exercise of good faith efforts over the ensuing sixty (60) day period toward
recovery of damages under this Product Purchase Agreement.
<PAGE>
11
Section 9.7 Dispute Resolution.
------------------
(a) In the event of any dispute arising out of or in connection with
this Product Purchase Agreement, Clark R&M or the Coker Company may notify the
other party of the nature of the dispute and the parties shall, in good faith
and using all reasonable efforts, seek to settle the dispute amicably through
negotiation between senior executives. Within twenty (20) days after delivery of
such notice, such senior executives shall meet at a mutually acceptable time and
place, and thereafter as often as reasonably deemed necessary, to exchange
relevant information and to attempt to resolve the dispute. All discussions
pursuant to this clause (a) shall be confidential and shall be treated as
compromise and settlement negotiations for all purposes including the admission
of evidence in any subsequent arbitration. If the matter has not been resolved
within sixty (60) days of the delivery of notice of the dispute, or if the
parties fail to meet within the twenty-day period referred to above, either
party may initiate arbitration of the dispute pursuant to the terms of clause
(b) of this Section.
(b) All claims and disputes arising out of or in connection with this
Product Purchase Agreement shall be settled finally by arbitration under rules
applicable to arbitrations of the American Arbitration Association (the "AAA
---
Rules") in effect at such time. The arbitration shall take place in New York
- -----
City. Subject to the provisions of paragraph (c) below, the arbitral tribunal
shall consist of three arbitrators, one designated by each of the parties and
the third, who shall be the chairman of the tribunal, selected by agreement of
the two designated arbitrators. In the event the two arbitrators fail to agree
on the selection of the chairman, the chairman shall be selected in accordance
with AAA Rules. The substantive law applicable to the subject matter of the
arbitration shall be the law indicated in Section 12.8. Copies of the request
for arbitration and the answer thereto shall be served by a party on the other
party in accordance with Section 9.13. Subject to paragraph (c) below, the
award of the arbitral tribunal shall be rendered within one hundred eighty (180)
days from signature or approval of the terms of reference, subject to extension
for good cause only. The award shall be final and binding on the parties, and
may be confirmed or embodied in any order or judgment of any court of competent
jurisdiction.
(c) In the case of any claim for damages in a principal amount of two
hundred fifty thousand U.S. dollars (U.S.$250,000) or less, (i) the claim shall
be resolved by a sole arbitrator selected in accordance with AAA Rules, (ii) the
terms of reference shall be signed and any hearing of the matter shall be held
within one hundred twenty (120) days following the later of service of the
answer and transmission of the file to the arbitrator, and (iii) the arbitrator
shall render the award within thirty (30) days after the hearing or, in the
event a hearing is not held, signature or approval of the terms of reference,
subject extension for good cause only.
Section 9.8 Relationship of Parties. Nothing in this Product
-----------------------
Purchase Agreement shall be deemed to constitute either party hereto a partner,
joint venturer, agent or legal representative of the other party or to create
any fiduciary relationship between or among the parties.
Section 9.9 Third Party Beneficiaries. (a) The Financing Parties
-------------------------
are intended third party beneficiaries of this Product Purchase Agreement and
the representations, warranties,
<PAGE>
12
covenants and agreements of the parties hereto are made for the benefit of, and
may be relied upon by, the Financing Parties.
(b) The rights and obligations created under this Product Purchase
Agreement shall apply exclusively to the parties hereto and their successors and
permitted assigns, and no right shall be created in any third party by reason of
this Product Purchase Agreement or separate act or action taken independently by
either party.
Section 9.10 No Indirect Damages. Notwithstanding anything to the
-------------------
contrary herein, in no event shall either party be liable for consequential,
incidental, indirect, special or punitive damages hereunder including, without
limitation, any damages measured by the principal amount of the Coker Company's
obligations under the Financing Documents.
Section 9.11 Assignments. (a) Clark R&M shall not assign its rights
-----------
hereunder without the prior written consent of the Coker Company and the
Financing Parties. The Coker Company may assign its rights hereunder to the
Financing Parties, as collateral security for its obligations under the
Financing Documents, but otherwise shall not assign its rights hereunder without
the prior written consent of Clark R&M and the Financing Parties. Clark R&M
hereby expressly authorizes the Financing Parties, or the Collateral Trustee
acting on behalf of the Financing Parties, as a secured party, to exercise all
rights of the Coker Company under this Product Purchase Agreement and to
subsequently assign such rights in connection therewith.
(b) This Product Purchase Agreement shall be binding upon and shall
inure to the benefit of, the successors and permitted assigns of Clark R&M and
the Coker Company.
(c) This Product Purchase Agreement shall inure to the benefit of the
Collateral Trustee, the Financing Parties and any subsequent transferee or
assignee thereof.
Section 9.12 Amendments. No amendment, modification or alteration
----------
of the terms hereof shall be binding unless the same is in writing and duly
executed by each of the parties hereto.
Section 9.13 Notices. Any notice, request, consent, waiver or other
-------
communication required or permitted hereunder shall be effective only if it is
in writing and personally delivered by hand or by overnight courier or sent by
certified or registered mail, postage prepaid, return receipt requested,
addressed as follows:
If to Clark R&M:
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: Richard A. Keffer
<PAGE>
13
If to the Coker Company:
Port Arthur Coker Company L.P.
Port Arthur Refinery
1801 S. Gulfway Drive
Office Number 36
Port Arthur, Texas 77640
Attention: K.W. Isom
(or if sent by U.S. Mail:
Port Arthur Coker Company L.P.
P.O. Box 908
Port Arthur, Texas 77641-0908
Attention: K.W. Isom)
Any such notice, request, consent, waiver or other communication
required or permitted hereunder, whether to Clark R&M or the Coker Company,
shall also be personally delivered by hand or by overnight courier or sent by
certified or registered mail, postage prepaid, return receipt requested, to the
Collateral Trustee on behalf of the Financing Parties, addressed as follows:
Bankers Trust Company
Corporate Trust & Agency Services
Four Albany Street, 4/th/ Floor
New York, New York 10006
Attention: James McDonough
Section 9.14 GOVERNING LAW. THE PLACE OF EXECUTION, DELIVERY OR
-------------
PERFORMANCE OF THIS AGREEMENT OR OF THE DOMICILE OF THE PARTIES HERETO
NOTWITHSTANDING, THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 9.15 Submission to Jurisdiction; Forum Selection.
-------------------------------------------
(a) Each of the parties hereto submits to the non-exclusive
jurisdiction of the courts of the State of New York, the State of Texas and the
courts of the United States of America located in the State of New York and the
State of Texas over (i) any suit, action or proceeding with respect to this
Product Purchase Agreement or the transactions contemplated hereby if not
settled by arbitration pursuant to Section 9.7 above and (ii) the enforcement of
any arbitral award issued pursuant to Section 9.7 above.
<PAGE>
14
(b) Except for an arbitration award under Section 9.7 hereof, any
suit, action or proceeding with respect to this Product Purchase Agreement or
the transactions contemplated hereby, or the enforcement of any arbitral award
in connection therewith, may be brought only in the courts of the State of New
York or the courts of the United States of America located in the State of New
York, in each case located in the Borough of Manhattan, City of New York, State
of New York. Each of the parties hereto waives any objection that it may have to
the venue of such suit, action or proceeding in any such court or that such
suit, action or proceeding in such court was brought in an inconvenient court
and agrees not to plead or claim the same.
Section 9.16 Appointment of Agent for Service of Process. Each
-------------------------------------------
party hereto irrevocably appoint CT Corporation, at 1633 Broadway, New York, New
York 10019, as its authorized agent in the State of New York upon which process
may be served in any suit, action or proceeding with respect to this Product
Purchase Agreement or the transactions contemplated hereby, and agrees that
service of process upon such agent, and written notice of said service to such
party by the person serving the same to the address provided in Section 9.13,
shall be deemed in every respect effective service of process upon such party in
any such suit or proceeding. Each party hereto further agrees to take any and
all action as may be necessary to maintain such designation and appointment of
such agent in full force and effect so long as this Product Purchase Agreement
is in effect pursuant to Article 7.
Section 9.17 No Waiver. The waiver of either party of a default or
---------
breach of any provision of this Product Purchase Agreement by the other party
shall not operate or be construed to operate as a waiver of any subsequent
defaults or breaches of the same or different kind. The failure of a party to
exercise any rights hereunder in a particular instance shall not operate as a
waiver of such party's right to exercise the same or different rights in
subsequent instances. The making or acceptance of a payment by either party
with knowledge of the existence a default or breach shall not operate or be
construed to operate as a waiver of any default or breach.
Section 9.18 Counterparts. This Product Purchase Agreement may be
------------
executed by one or more of the parties to this Product Purchase Agreement on any
number of separate counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument. Delivery of an
executed signature page of this Product Purchase Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.
Section 9.19 Integration. This Product Purchase Agreement and the
-----------
other Project Documents represent the agreement of the Coker Company and Clark
R&M with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Coker Company or Clark R&M
relative to subject matter hereof not expressly set forth or referred to herein
or in the other Project Documents.
Section 9.20 Severability. Any provision of this Product Purchase
------------
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the
<PAGE>
15
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 9.21 Headings. Captions and headings in this Product
--------
Purchase Agreement are for reference only and do not constitute a part of the
substance of this Product Purchase Agreement.
Section 9.22 WAIVER OF JURY TRIAL. THE COKER COMPANY AND CLARK R&M
--------------------
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER PROJECT DOCUMENT AND FOR
ANY COUNTERCLAIM THEREIN.
<PAGE>
16
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Product Purchase Agreement to be signed by their respective
officers thereunto duly authorized as of the day and year first set forth above.
CLARK REFINING & MARKETING, INC.
By: /s/ Maura J. Clark
----------------------------------------
Name: Maura J. Clark
Title: Exec. Vice Pres. and CFO
PORT ARTHUR COKER COMPANY L.P.
By: SABINE RIVER HOLDING CORP.,
General Partner
By: /s/ Maura J. Clark
----------------------------------
Name: Maura J. Clark
Title: Exec. Vice Pres. and CFO
<PAGE>
APPENDIX A -- DEFINITIONS TO THE:
Services and Supply Agreement
Product Purchase Agreement
Coker Complex Ground Lease
Ancillary Equipment Site Lease
Transfer and Assignment Agreement
General Provisions
------------------
The following terms shall have the following meanings for all purposes
of the Services and Supply Agreement, the Product Purchase Agreement, Coker
Complex Ground Lease, the Ancillary Equipment Site Lease and the Transfer and
Assignment Agreement, each referred to below, unless otherwise defined in such
agreements or the context thereof shall otherwise require, and such meanings
shall be equally applicable to both the singular and the plural forms of the
terms herein defined. In the case of any conflict between the provisions of
this Appendix A and the provisions of the main body of any of the above
agreements, the provisions of the main body of such agreement shall control the
construction of such agreement.
Unless the context otherwise requires, references to (i) agreements
shall include sections, schedules, exhibits and appendices thereto and shall be
deemed to mean and include such agreement (and sections, schedules, exhibits and
appendices) as the same may be amended, supplemented and otherwise modified from
time to time, (ii) parties to agreements or government agencies shall be deemed
to include the permitted successors and assigns of such parties and the
successors and assigns of such agencies and (iii) laws or regulations shall be
deemed to mean such laws or regulations as the same may be amended from time to
time and any superseding laws or regulations covering the same subject matter.
"Actual Coker Capacity" means with respect to the Coker, its capacity,
---------------------
from time to time, to process feedstreams.
"Actual Crude Capacity" means with respect to the Ancillary Equipment,
---------------------
its capacity, from time to time, to process crude oil.
"Actual Hydrocracker Capacity" means with respect to the Hydrocracker,
----------------------------
its capacity, from time to time, to process gas oil.
"Adjacent Refinery Property" means the land described on Exhibit B to
--------------------------
the Coker Complex Ground Lease and also on Exhibit C to the Ancillary Equipment
Site Lease.
"Amine Treating Unit" means the amine treating unit to be constructed
-------------------
at the Refinery and designated ATU 7841.
"Ancillary Equipment" means, collectively, the Crude Unit and the
-------------------
other processing units described on Exhibit B to the Ancillary Equipment Site
Lease.
"Ancillary Equipment Easement" has the meaning given such term in
----------------------------
Section 2.2 of the Ancillary Equipment Site Lease.
<PAGE>
18
"Ancillary Equipment Operating Fee" has the meaning given such term in
---------------------------------
Section 13.2(b) of the Ancillary Equipment Site Lease.
"Ancillary Equipment Site" has the meaning given such term in Section
------------------------
2.1 of the Ancillary Equipment Site Lease.
"Ancillary Equipment Site Initial Term" means the period commencing on
-------------------------------------
the August 19, 1999 and ending on August 19, 2029.
"Ancillary Equipment Site Lease" means the Ancillary Equipment Site
------------------------------
Lease and Easement Agreement, dated as of August 19, 1999, between Clark R&M and
the Coker Company.
"Ancillary Equipment Site Leasehold" has the meaning given such term
----------------------------------
in Section 2.1 of the Ancillary Equipment Site Lease.
"Ancillary Equipment Site Lease Term" has the meaning given such term
-----------------------------------
in Article XX of the Ancillary Equipment Site Lease.
"Ancillary Equipment Site Renewal Term" means each period following
-------------------------------------
the end of the Ancillary Equipment Initial Term with respect to which Lessee has
the option to renew the Ancillary Equipment Site Lease pursuant to Article XX of
the Ancillary Equipment Site Lease.
"Ancillary Equipment Upgrade Contract" means the Reimbursable Contract
------------------------------------
for Engineering, Procurement and Construction, dated as of March 24, 1998,
between Clark R&M and the Contractor, as amended by Amendment No. One, dated as
of August 19, 1999, as further amended, supplemented or otherwise modified from
time to time.
"Annual Budget and Operating Plan" means, for any Operating Year, the
--------------------------------
budget and operating plan in effect pursuant to Section 6 of the Services and
Supply Agreement.
"Applicable Law" means, collectively, (i) all Permits and (ii) all
--------------
laws, treaties, ordinances, judgments, decrees, injunctions, writs, orders and
stipulations of any court, arbitrator or governmental agency or authority and
statutes, rules, regulations, orders and interpretations thereof of any federal,
state, county, municipal, regional, environmental or other governmental body,
instrumentality, agency, authority, court or other body applicable from time to
time to the Refinery, the operation or maintenance of the Refinery, or the
performance of any obligations under the Clark R&M Agreements, any other Project
Document or any other agreement entered into in connection therewith.
"Appraisal Procedure" with respect to any renewal option of any lease,
-------------------
means a procedure whereby two independent Qualified Appraisers, one appointed by
the lessor and one by the lessee, shall agree upon the value, period, amount or
determination then the subject of an appraisal, as follows: If either the
lessor or the lessee shall determine that a value, period or amount of
determination to be determined under such lease or any related document cannot
<PAGE>
19
timely be established by agreement, such party shall appoint its Qualified
Appraiser and give notice thereof to the other party, which shall appoint its
Qualified Appraiser within 10 days thereafter. If such other party does not
appoint its Qualified Appraiser within such ten day period, the determination of
the first Qualified Appraiser made within 20 days thereafter shall be conclusive
and binding on the lessor and the lessee. If within 20 days after appointment
of the second of the two Qualified Appraisers, such Qualified Appraisers are
unable to agree upon the value, period, amount or determination in question,
they jointly shall appoint a third Qualified Appraiser within 10 days
thereafter, or, if they do not do so, either the lessor or the lessee may
request the American Arbitration Association office in Houston, Texas (or if no
such office exists at such time, the American Arbitration Association office in
New York, New York), or any organization successor thereto, to appoint the third
Qualified Appraiser from a panel of arbitrators knowledgeable on the subject of
refinery land and asset valuations in the Texas Gulf Coast area. The decision
of the third Qualified Appraiser shall be given within 20 days after his
appointment. If three Qualified Appraisers shall be so appointed, the average
of all three determinations shall be conclusive and binding on the lessor and
the lessee unless the determination of one Qualified Appraiser is disparate from
the middle determination by more than twice the amount by which the third
determination is disparate from the middle determination, in which case the
determination of the most disparate Qualified Appraiser shall be excluded and
the average of the remaining two determinations shall be conclusive and binding
on the lessor and the lessee. The obligation to pay the fees and expenses of
Qualified Appraisers incurred in connection with any Appraisal Procedure shall
be divided equally between the lessor and the lessee.
"Auxiliary Facilities" has the meaning given such term in Article VI
--------------------
of the Coker Complex Ground Lease.
"Auxiliary Rights" has the meaning given such term in Article VI of
----------------
the Coker Complex Ground Lease.
"Available Coker Company Maya" means, for any day, the sum of (a) the
----------------------------
Contract Quantity for such day, plus (b) the extent, if any, that the Available
----
Coker Company Maya for the preceding day exceeds the Actual Crude Capacity for
such preceding day.
"Available Coker Company VTBs" means, for any day, the sum of (a) the
----------------------------
Coker Company VTBs produced by the Crude Unit on such day, plus (b) the extent,
----
if any that Available Coker Company VTBs for the preceding day exceeds Actual
Coker Capacity for such preceding day.
"Base Case Financial Model" shall mean the financial model described
-------------------------
on Exhibit A to the Services and Supply Agreement.
"BPD" has the meaning given such term in the Long-Term Oil Supply
---
Agreement.
"Business Day" means any day other than Saturday, Sunday or a legal
------------
holiday in the United States of America.
<PAGE>
20
"Clark Equipment" means all Clark Refinery Property other than the
---------------
Ancillary Equipment.
"Clark Hydrogen Supply Contract" means the Product Supply Agreement,
------------------------------
dated as of August 1, 1999, between Clark R&M and Air Products, Inc.
"Clark Maya" means Maya Crude Oil purchased by Clark R&M.
----------
"Clark Processing Fee" means, for any monthly period, the total fees
--------------------
due the Coker Company from Clark R&M for processing services provided pursuant
to Sections 3.5, 4.2 and 4.3.
"Clark R&M" means Clark Refining & Marketing, Inc., a Delaware
---------
corporation.
"Clark R&M Agreements" means, collectively, (i) the Services and
--------------------
Supply Agreement, (ii) the Product Purchase Agreement, (ii) the Coker Complex
Ground Lease and (iv) the Ancillary Equipment Site Lease.
"Clark Refinery Property" means all real and personal property owned
-----------------------
by Clark R&M and located at the Refinery.
"Coker" means the delayed coker to be constructed at the Refinery and
-----
designated DCU 843.
"Coker Company" means Port Arthur Coker Company L.P., a Delaware
-------------
limited partnership.
"Coker Company Crude Oil Volume" means, on any day, the volume, stated
------------------------------
in BPD, of Coker Company-owned crude oil processed through the Crude Unit.
"Coker Company Maya" means Maya Crude Oil purchased by the Coker
------------------
Company.
"Coker Complex"means, collectively, the Coker, the Hydrocracker, the
-------------
Sulfur Plant, the Sour Water Stripper, the Amine Treating Unit and the Coker
Complex Offsites.
"Coker Complex Design Capacity" means with respect to the Coker
-----------------------------
Complex, its nameplate capacity, stated in BPD, to process feedstocks.
"Coker Complex Ground Lease" means the Coker Complex Ground Lease and
--------------------------
Blanket Easement Agreement, dated as of August 19, 1999, between Clark R&M and
the Coker Company.
"Coker Complex Ground Lease Term" has the meaning given such term in
-------------------------------
Article XX of the Coker Complex Ground Lease.
<PAGE>
21
"Coker Complex Initial Term" means the period commencing on August 19,
--------------------------
1999 and ending on August 19, 2029.
"Coker Complex Leasehold" has the meaning given such term in Section
-----------------------
2.1 of the Coker Complex Ground Lease.
"Coker Complex Offsites" means, collectively, (a) the control room,
----------------------
flare, cooling tower, sulfur loading facilities and power station no. 6 that are
being constructed pursuant to the EPC Contract and (b) the coker feed tank nos.
108 and 109 that are being modified pursuant to the EPC Contract.
"Coker Complex Renewal Term" means each period following the end of
--------------------------
the Initial Term with respect to which Lessee has the option to renew the Coker
Complex Ground Lease pursuant to Article XX of the Coker Complex Ground Lease.
"Coker Complex Site" has the meaning give such term in Section 2.1(a)
------------------
of the Coker Complex Ground Lease.
"Coker Design Capacity" means with respect to the Coker, its nameplate
---------------------
capacity, stated in BPD, to process feedstocks.
"Collateral Trustee" means the collateral trustee granted a security
------------------
interest, on behalf of the Financing Parties, in the Senior Debt pursuant to the
Financing Documents and any successor collateral trustee thereunder.
"Common Security Agreement" means the Common Security Agreement, dated
-------------------------
as of August 19, 1999, among the Coker Company, the Funding Company, Sabine,
Neches, Bankers Trust Company, as Collateral Trustee and Depositary Bank,
Deutsche Bank AG, New York Branch, as Administrative Agent, Winterthur
International Insurance Company Limited, as Oil Payment Insurers Administrative
Agent and HSBC Bank USA, as Capital Markets Trustee,
"Contract Quantity" means (a) for any day when the Long-Term Oil
-----------------
Supply Agreement is in effect and PMI has not reduced the volume of Maya
available to the Coker Company pursuant thereto, the "Contract Quantity" in
effect on such day pursuant to the Long-Term Oil Supply Agreement or such lesser
amount of Maya Crude Oil as may be purchased thereunder pursuant to Section 8.2
of the Long-Term Oil Supply Agreement, and (b) for any other day, the amount of
Maya Crude Oil sufficient to operate the Coker at eighty percent of Actual Coker
Capacity.
"Contractor" means Foster Wheeler USA Corporation, a Delaware
----------
corporation.
"Crude Design Capacity" means with respect to the Ancillary Equipment,
---------------------
its nameplate capacity, stated in BPD, to process heavy crude oil.
<PAGE>
22
"Crude Unit" means the crude unit and vacuum tower located at the
----------
Refinery and collectively designated AVU-146.
"CRU 1344 Hydrotreater" means the naphtha hydrotreater located at the
---------------------
Refinery and designated CRU 1344.
"Easements" has the meaning given such term in Section 2.2 of the
---------
Coker Complex Ground Lease.
"EPC Contract" means the Contract for Engineering, Procurement and
------------
Construction Services, dated as of July 12, 1999, between the Coker Company and
the Contractor, as amended, supplemented or otherwise modified from time to
time.
"Event of Force Majeure" means any event or circumstance if (i) such
----------------------
event or circumstance is beyond the reasonable control of the affected party and
(ii) such event or circumstance is not the direct or indirect result of a
party's negligence or the failure of such party to perform any of its
obligations under the applicable Clark R&M Agreement, including, without
limitation:
1. any interruption or cessation in delivery of Coker Company Maya to
the Refinery, whether or not due to an event of force majeure under the
Long-Term Oil Supply Agreement;
2. acts of God, epidemic, earthquake, landslide, lightning, fire,
explosion, accident, tornado, drought, blight, famine, flood, hurricane, or
other extraordinary weather conditions more severe than those experienced
at any time in the last thirty (30) years for the geographic area of the
Refinery;
3. acts of a public enemy, war (declared or undeclared), blockade,
insurrection, riot or civil disturbance, sabotage, quarantine, or any
exercise of the power of eminent domain, police power, condemnation or
other taking by or on behalf of any public, quasi-public or private entity;
4. laws, rules, regulations, orders, judgments or other acts of any
foreign, federal, state or local court, administrative agency, governmental
body or authority;
5. strikes, boycotts or lockouts, except any such strike, boycott or
lockout that is not national or industry-wide that involves the employees
of Clark R&M; and
6. a partial or entire interruption or other failure of (a) the
supply of electricity, water, wastewater treatment, steam, hydrogen or
other utilities
<PAGE>
23
to the Refinery or any part thereof, or (b) pipeline service, ship
or barge service, dock access or usage or other transportation
facilities.
"Excess Coker Capacity" means, for any day, the extent that Actual
---------------------
Coker Capacity for such day exceeds the capacity necessary for the Coker to
process the Available Coker Company VTBs for such day.
"Excess Coker Capacity Option" has the meaning given such term in
----------------------------
Section 4.2(a) of the Services and Supply Agreement.
"Excess Crude Capacity" means, for any day, the extent that Actual
---------------------
Crude Capacity for such day exceeds the capacity necessary for the Ancillary
Equipment to process the Available Coker Company Maya for such day and the light
crude oil necessary to process such Available Coker Company Maya.
"Excess Crude Capacity Option" has the meaning given such term in
----------------------------
Section 3.5(b) of the Services and Supply Agreement.
"Excess Hydrocracker Capacity" means, for any day, the extent that
----------------------------
Actual Hydrocracker Capacity for such day exceeds the capacity necessary for the
Hydrocracker to process Coker Company VGO produced by the Coker on such day.
"Excess Hydrocracker Capacity Option" has the meaning given such term
-----------------------------------
in Section 4.3(a) of the Services and Supply Agreement.
"Fair Market Rental Value" shall mean, with respect to any land and/or
------------------------
equipment to be leased pursuant to a lease, the value, which shall not in any
event be less than zero, that would be obtained in an arm's length transaction
for cash between an informed and willing lessee and an informed and willing
lessor, neither of whom is under any compulsion to lease, for the use of such
land and/or equipment for a given period, without regard, in the case of land,
(i) to the value of any equipment or improvements that are not included in such
lease but which are located on such land, (ii) to the value of any reversionary
interest of the lessor in any equipment or improvements located on such land,
whether or not included in such lease, or (iii) to the highest and best use of
such land.
"Final Completion" has the meaning given such term in the EPC
----------------
Contract.
"Financial Close" means the date when the initial funding of the
---------------
Senior Debt has occurred.
"Financing Documents" has the meaning given such term in the Common
-------------------
Security Agreement.
"Financing Parties" means any lender or note purchaser that may at any
-----------------
time be party to the Financing Documents and any trustee or agent acting on
their behalf.
<PAGE>
24
"Funding Company" means Port Arthur Finance Corp., a Delaware
---------------
corporation.
"GFU 241" means the distillate hydrotreater located at the Refinery
-------
and designated GFU 241.
"GFU 242" means the distillate hydrotreater located at the Refinery
-------
and designated GFU 242.
"GFU 243" means the distillate hydrotreater located at the Refinery
-------
and designated GFU 243.
"Guaranteed Values" has the meaning given such term in the EPC
-----------------
Contract.
"Heavy Oil Processing Facility" means, collectively, the Coker Complex
-----------------------------
and the Ancillary Equipment.
"Hydrocracker" or "HCU 942" means the hydrocracker to be constructed
------------ -------
at the Refinery and designated HCU 942.
"Hydrogen" means hydrogen purchased by the Coker Company pursuant to
--------
the Hydrogen Supply Agreement.
"Hydrogen Supply Agreement" means the Supply Agreement, dated as of
-------------------------
August 1, 1999, between the Coker Company and Air Products, Inc.
"Independent Engineer" means Purvin & Gertz, Inc., or successor
--------------------
thereto appointed pursuant to the Financing Documents.
"Inflation Factor" shall mean, for any month, (a) the most current
----------------
Producer Price Index published by the U.S. Department of Labor, Bureau of
Statistics, divided by, (b) the Producer Price Index on August 19, 1999.
----------
"Labor Costs" shall mean, with respect to any service provided by
-----------
Clark R&M, all reasonable direct labor costs of Clark R&M in performing such
service including wages, salaries, overtime charges, reasonable and customary
bonuses, payroll insurance and taxes and holidays, vacations, group medical,
dental and life insurance and other employee benefits.
"LCO" means light cycle oil.
---
"Lessor Ancillary Equipment Upgrade" shall have the meaning given such
----------------------------------
term in Section 6.1 of the Ancillary Equipment Site Lease.
"Lien" any mortgage, security interest, pledge, hypothecation,
----
encumbrance or lien (statutory or other) of any kind or nature whatsoever.
<PAGE>
25
"Long-Term Oil Supply Agreement" means the Maya Crude Oil Sale
------------------------------
Agreement, dated as of March 10, 1998, between PMI and Clark R&M, as amended by
the First Amendment and Supplement to the Maya Crude Oil Sales Agreement, dated
as of August 19, 1999, and as assigned by Clark R&M to the Coker Company
pursuant to the Long-Term Oil Supply Agreement Assignment.
"Long-Term Oil Supply Agreement Assignment" means the Assignment of
-----------------------------------------
the Long-Term Oil Supply Agreement, dated as of August 19, 1999, by Clark R&M to
the Coker Company.
"Maya Crude Oil" means Mexican crude oil of the "Maya" type, as more
--------------
particularly described in the Long-Term Oil Supply Agreement and, to the extent
necessary, such alternative crude oil(s) and/or other feedstock(s) that may be
used to produce the Required Product Mix.
"Neches" mean Neches River Holding Corp., a Delaware corporation.
------
"Operating Year" means (i) the period beginning on the Start-up Date
--------------
and ending on the last day of the calendar year in which the Start-up Date
occurs and (ii) each calendar year thereafter. All annual amounts set forth in
the Clark R&M Agreements shall be adjusted pro rata for the first Operating
Year.
"Performance Test Standards" has the meaning given such term in the
--------------------------
EPC Contract.
"Permit" means any valid waiver, exemption, variance, franchise,
------
permit, authorization, license or similar order of or from any federal, state,
county, municipal, regional, environmental or other governmental body,
instrumentality, agency, authority, court or other body having jurisdiction over
the Refinery, the Coker Complex or the Ancillary Equipment or the performance of
any obligation under any Clark R&M Agreement, any Project Document or any other
agreement in connection therewith.
"Permitted Liens" means (i) the respective rights and interests
---------------
created by or under the Financing Documents and the Project Documents, (ii)
Liens for Taxes that either are not delinquent or are being contested in good
faith and by appropriate proceedings diligently conducted, so long as such
proceedings do not (a) involve a substantial risk of foreclosure, forfeiture,
loss or sale of any portion of the Clark Refinery Property subject to the
Ancillary Equipment Site Lease or the Coker Complex Ground Lease or interest
therein, (b) interfere with the use, possession or disposition of any Clark
Refinery Property subject to the Ancillary Equipment Site Lease or the Coker
Complex Ground Lease or interest therein or (c) interfere with the payment of
rent under the Ancillary Equipment Site Lease or the Coker Complex Ground Lease;
(iii) materialmen's, mechanics', workmen's, repairmen's, employees', carriers',
warehousemen's and other like Liens arising in the ordinary course of business
for amounts that either are not more than 30 days past due or are being
contested in good faith by appropriate proceedings, so long as such proceedings
satisfy the conditions for the continuation of
<PAGE>
26
proceedings to contest Taxes set forth in clause (ii) above; (iv) Liens of any
of the types referred to in clauses (ii) and (iii) above that have been bonded
for the full amount in dispute (or as to which other security arrangements
reasonably satisfactory to the Collateral Trustee have been made); (v) Liens
securing judgments, decrees or orders of any court (i) that are not currently
dischargeable or (ii) that have been discharged or stayed or appealed within
thirty (30) days after the date of such judgment, decree or order (in the case
of a stay or appeal, during the period of such stay or appeal); (vi) other Liens
that would not impair (x) the ability of the Coker Company or its successors,
assigns or subtenants to operate the Coker Complex in accordance with the Base
Case Financial Model or (y) any of the security interests granted, or to be
granted, by the Coker Company to the Financing Parties pursuant to the Financing
Documents, (vii) with respect to the Ancillary Equipment Site Lease, the Liens
listed on Schedule I thereto; and (viii) with respect to the Coker Complex
Ground Lease, the Liens listed on Schedule I thereto.
"Permitted Reimbursable Expenses" shall mean, with respect to any
-------------------------------
service provided by Clark R&M, any reasonable expense or expenditure incurred in
performance of such service including, without limitation, (i) Labor Costs, (ii)
purchases of spare parts, tools, equipment, consumables, materials and other
supplies necessary for performance of such service and (iii) direct cost of
subcontract labor or services needed to perform such service.
"Person" an individual, partnership, corporation, business trust,
------
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"PMI" means P.M.I. Comercio Internacional, S.A. de C.V., a corporation
---
organized under the laws of Mexico.
"Product Purchase Agreement" means the Product Purchase Agreement,
--------------------------
dated as of August 19, 1999, between Clark R&M and the Coker Company, as
amended, supplemented or otherwise modified from time to time.
"Products" means each product described under the heading "Product" on
--------
Exhibits A-1 through A-42 to the Product Purchase Agreement.
"Project Documents" means, collectively, the Services and Supply
-----------------
Agreement, the Product Purchase Agreement, the Long-Term Oil Supply Agreement,
the EPC Contract, the Coker Complex Ground Lease, the Ancillary Equipment Site
Lease and the Hydrogen Supply Agreement.
"Prudent Industry Practice" means those practices, methods, equipment,
-------------------------
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used in refinery facilities in the United
States of a type and size similar to the Refinery.
"Qualified Appraiser" means an appraisal firm with a national
-------------------
reputation and experience in appraising facilities of a nature and type similar
to the Refinery.
<PAGE>
27
"Reconciliation Statement" has the meaning given such term in Section
------------------------
7.2(a) of the Services and Supply Agreement.
"Refinery" means, collectively, the existing oil refinery owned by
--------
Clark R&M located in Port Arthur, Texas, the Ancillary Equipment and the Coker
Complex.
"Regulated Utilities" has the meaning given such term in Section
-------------------
5.5(f) of the Services and Supply Agreement.
"Required Product Mix" means, from time to time, the quantity and
--------------------
quality specifications of products to be produced by the Heavy Oil Processing
Facility pursuant to Section 2.2 of the Product Purchase Agreement.
"Sabine" means Sabine River Holding Corp., a Delaware corporation.
------
"Senior Debt" has the meaning given such term in the Common Security
-----------
Agreement.
"Senior Debt Obligations" means the obligations to pay principal and
-----------------------
interest on the disbursed Senior Debt, and all commissions, fees, indemnitees,
prepayment premiums and other amounts payable to the senior lenders under the
Financing Documents.
"Services" has the meaning set forth in Section 2.1 of the Services
--------
and Supply Agreement.
"Services and Supply Agreement" means the Services and Supply
-----------------------------
Agreement, dated as of August 19, 1999, between Clark R&M and the Coker Company,
as amended, supplemented or otherwise modified from time to time.
"Sour Water Stripper" means the sour water stripper to be constructed
-------------------
at the Refinery and designated SWS-8747.
"Standards" means, in addition to any other standards set forth in the
---------
EPC Contract, the technical requirements of the Project Documents, generally
accepted standards of professional care, skill, diligence and competence
applicable to engineering and construction and project management practices,
good refinery and petrochemical industry practices for oil refineries of similar
size, type and design to the Refinery, manufacturer's specifications and
warranty requirements and all Applicable Laws .
"Start-up Date" means the date on which hydrocarbons are first
-------------
introduced into the Coker Complex for the processing of test runs under the EPC
Contract.
"Start-up Period" means the period from the Start-up Date until Final
---------------
Completion.
<PAGE>
28
"Sulfur Plant" means the sulfur plant to be constructed at the
------------
Refinery and designated SRU 545.
"Supplies" has the meaning set forth in Section 2.1 of the Services
--------
and Supply Agreement.
"Tax" means, with respect to any site or parcel of land and the
---
improvements thereon, all real estate taxes and assessments, including
substitutes therefor or supplements thereto, assessed upon, levied against or
imposed on such land and improvements located thereon which accrue and are due
and payable during the term of the Coker Complex Ground Lease. Notwithstanding
anything to the contrary contained herein, the term "Taxes" shall not include
any franchise, income, corporation, inheritance, succession, gift, estate,
realty transfer, capital or other tax which may be charged or assessed against
Lessor or any income, excess profit or revenue tax or any other tax which may be
assessed against or become a lien upon the Coker Complex Site or the rent
accruing therefrom.
"Total Crude Oil Volume" means, for any day, the total daily volume,
----------------------
stated in BPD, of crude oil processed by the Crude Unit.
"Transfer and Assignment Agreement" means the Transfer and Assignment
---------------------------------
Agreement, dated as of August 19, 1999, between Clark R&M and the Coker Company,
as amended, supplemented or otherwise modified from time to time.
"VGO" means vacuum gas oil.
---
"VTBs" means vacuum tower bottoms.
----
"Warranties" means the requirements of all warranties and guarantees
----------
applicable to equipment and structures constituting the Coker Complex or the
Ancillary Equipment provided by the Contractor, subcontractors, vendors,
suppliers or others.
<PAGE>
EXHIBIT A-1
Product: Wet Gas from AVU 146
- -------
Target Specification:
- --------------------
Component Typical Test Method
--------- ------- -----------
Methane and Ethane 11.00% LV ASTM D-2163
Propane 27.21% LV ASTM D-2163
Normal Butane 50.28% LV ASTM D-2163
Isobutane 11.51% LV ASTM D-2163
Pentanes and Heavier 0.00% LV ASTM D-2163
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the total output of this Product multiplied by the Coker Company Crude Oil
Volume divided by the Total Crude Oil Volume.
Price: For contained Methane: The weighted average delivered cost of natural
- -----
gas purchased by Clark converted into dollars per FOEB where 6.0 MMBTU is
equivalent to 1.0 FOEB less Fractionation Fee. The conversion of contained
methane to FOEB is as follows: Contained Methane (MSCF/D) * 0.0425 (LB/SCF) *
23,840 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB).
For contained Ethane: The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per FOEB where 6.0 MMBTU is equivalent
to 1.0 FOEB less Fractionation Fee. The conversion of contained ethane to FOEB
is as follows: Contained Ethane (MSCF/D) * 0.0800 (LB/SCF) * 22,169 (BTU/LB) /
1000 / 6.0 (MMBTU/FOEB).
For contained Propane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu, Texas Eastern Pipeline posting for spot
purchases of propane for each publication day less 0.10 cents/gallon marketing
fee multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of propane in the delivered Product.
For contained Normal Butane delivered from October through February: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Normal Butane delivered from March through September: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day less 3.0 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Isobutane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu posting for spot purchases of isobutane for
each publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of isobutane in the delivered Product.
For contained Pentanes and Heavier: The arithmetic average of the high/low Oil
Price Information Service Mont Belvieu posting for spot purchases of natural
gasoline Non-Dynegy for each publication day less 1.5 cents/gallon less 0.10
cents/gallon marketing fee multiplied by the
Product Purchase Agreement Page 1 August 3, 1999
<PAGE>
EXHIBIT A-1
Inflation Factor less Fractionation Fee multiplied by the quantity of the
Product delivered on that day weighted by the respective volume of pentanes and
heavier in the delivered Product.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per
MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be taken at AVU 146 meter FI-
- --------------------
500.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by gas chromatography.
Product Purchase Agreement Page 2 August 3, 1999
<PAGE>
EXHIBIT A-2
Product: Penhex from AVU 146
- -------
Target Specification:
- --------------------
Property Typical Test Method
-------- ------- -----------
IBP 90 degrees F ASTM D-86
5% 128 degrees F ASTM D-86
10% 140 degrees F ASTM D-86
30% 168 degrees F ASTM D-86
50% 189 degrees F ASTM D-86
70% 209 degrees F ASTM D-86
90% 235 degrees F ASTM D-86
95% 249 degrees F ASTM D-86
FBP 267 degrees F ASTM D-86
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the output of this Product boiling at or below 195 degrees F. The
Coker Company Share is defined as the output of this Product boiling at or below
195 (degrees)F multiplied by the Coker Company Crude Oil Volume divided by the
Total Crude Oil Volume.
Price: For material boiling at or below 195 degrees F: The arithmetic average
- -----
of the high/low Oil Price Information Service Mont Belvieu posting for spot
purchases of natural gasoline Non-Dynegy for each publication day less 1.5
cents/gallon less 0.10 cents/gallon marketing fee multiplied by the Inflation
Factor less 0.5 cents/gallon terminalling fee multiplied by the Inflation Factor
less Fractionation Fee. The marketing fee and terminalling fee shall only be
assessed if Penhex is sold to a 3/rd/ party.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per
MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be taken at AVU 146 meter FE-
- --------------------
461.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by distillation.
Product Purchase Agreement Page 3 August 3, 1999
<PAGE>
EXHIBIT A-3
Product: Unfinished Naphtha
- -------
Target Specification: Target specifications for each component are described in
- --------------------
Attachments I and II below.
Quantity: For days that Unfinished Naphtha is excessed to inventory, Coker
- --------
Company shall sell and Clark shall purchase the "Coker Company Share" of the
excessed Unfinished Naphtha. The Coker Company Share is defined as the excessed
Unfinished Naphtha multiplied by the Coker Company Crude Oil Volume divided by
the Total Crude Oil Volume.
The excessed Unfinished Naphtha is assumed to be composed of Light Naphtha from
AVU 146 boiling above 195 (degrees)F and Heavy Naphtha from AVU 146 in exact
proportion to the total production of each.
Price: The price is computed for each component as described in Attachments I
- -----
and II below.
Delivery Point/Risk of Loss: The delivery point and risk of loss for each
- ---------------------------
component are described in Attachments I and II below.
Quantity Measurement: Quantity measurements shall be calculated by changes in
- --------------------
Unfinished Naphtha inventory utilizing standard yield accounting methods.
Quality Measurement: Quality measurements for each component are described in
- -------------------
Attachments I and II below.
Attachment I
------------
Component: Light Naphtha from AVU 146
- ---------
Target Specification:
- --------------------
Property Typical Test Method
-------- ------- -----------
IBP 90 degrees F ASTM D-86
5% 128 degrees F ASTM D-86
10% 140 degrees F ASTM D-86
30% 168 degrees F ASTM D-86
50% 189 degrees F ASTM D-86
70% 209 degrees F ASTM D-86
90% 235 degrees F ASTM D-86
95% 249 degrees F ASTM D-86
FBP 267 degrees F ASTM D-86
N+A 27.7% LV ASTM D-5134 - Modified to C-15
Quantity: For days that Unfinished Naphtha is excessed to inventory, Coker
- --------
Company shall sell and Clark shall purchase the "Coker Company Share" of the
partial output of this Product boiling above 195 degrees F as defined above.
Price: For material boiling above 195 degrees F: The arithmetic average of the
- -----
high/low Oil Price Information Service posting for spot purchases of U.S. Gulf
Coast Naphtha (Domestic 40 N+A) for each publication day less 0.15
cents/gallon/N+A number below 40 N+A plus 0.15 cents/gallon/N+A number above 40
N+A less 2.5 cents/gallon less 0.10 cents/gallon marketing fee multiplied by the
Inflation Factor less 0.5 cents/gallon terminalling fee multiplied by the
Inflation Factor less Fractionation Fee. The marketing fee and terminalling fee
shall only be assessed if
Product Purchase Agreement Page 4 August 3, 1999
<PAGE>
EXHIBIT A-3
Unfinished Naphtha is sold to a 3/rd/ party.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per
MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be taken at AVU 146 meter FE-
- --------------------
461.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by gas chromatography and distillation.
Attachment II
-------------
Component: Heavy Naphtha from AVU 146
- ---------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
FBP 390 degrees F Maximum ASTM D-86
N+A 34.7% LV Typical ASTM D-5134 - Modified to C-15
Quantity: For days that Unfinished Naphtha is excessed to inventory, Coker
- --------
Company shall sell and Clark shall purchase the "Coker Company Share" of the
partial output of this Product as defined above.
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U.S. Gulf Coast Naphtha (Domestic 40 N+A) for
each publication day less 0.15 cents/gallon/N+A number below 40 N+A day plus
0.15 cents/gallon/N+A number above 40 N+A less 2.5 cents/gallon less 0.10
cents/gallon marketing fee multiplied by the Inflation Factor less 0.5
cents/gallon terminalling fee. The marketing fee and terminalling fee shall only
be assessed if Unfinished Naphtha is sold to a 3/rd/ party.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be taken at AVU 146 meter FI-
- --------------------
436.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by gas
Product Purchase Agreement Page 5 August 3, 1999
<PAGE>
EXHIBIT A-3
chromatography and distillation.
Product Purchase Agreement Page 6 August 3, 1999
<PAGE>
EXHIBIT A-4
Product: Unfinished Jet from AVU 146
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
API Gravity 37.0 Minimum ASTM D-1298, ASTM D-287,
or ASTM D-4052
API Gravity 51.0 Maximum ASTM D-1298, ASTM D-287,
or ASTM D-4052
Freezing Point -40 Degrees C Maximum ASTM D-2386 or ASTM D-5972
Flash Point 108 Degrees F Minimum ASTM D-56
10% 400 Degrees F Maximum ASTM D-86
FBP 572 Degrees F Maximum ASTM D-86
Target specifications are based on current fungible aviation fuel namely
Colonial 54 Grade Jet Fuel. To the extent the specifications change for
Colonial 54 Grade Jet Fuel the target specifications will be changed
accordingly.
Quantity: For days that Unfinished Jet is excessed to inventory, Coker Company
- --------
shall sell and Clark shall purchase the "Coker Company Share" of the excessed
Unfinished Jet. The Coker Company Share is defined as the excessed Unfinished
Jet multiplied by the Coker Company Crude Oil Volume divided by the Total Crude
Oil Volume.
Price: The arithmetic average of the high/low Platt's Oilgram Price Report U. S.
- -----
Gulf Coast Waterborne posting for spot purchases of No.2(0.2 wt% S diesel) for
each publication day less 1.5 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less 0.5 cents/gallon terminalling fee
multiplied by the quantity of the Product delivered on that day. The marketing
fee and terminalling fee shall only be assessed if Unfinished Jet is sold to a
3/rd/ party.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be calculated by changes in
- --------------------
Unfinished Jet inventory utilizing standard yield accounting methods.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by distillation, gravity, freeze point, and flash.
Product Purchase Agreement Page 7 August 3, 1999
<PAGE>
EXHIBIT A-5
Product: Unfinished Diesel
- -------
Target Specification: : Target specifications for each component are described
- --------------------
in Attachments I and II below.
Quantity: For days that Unfinished Diesel is excessed to inventory, Coker
- --------
Company shall sell and Clark shall purchase the "Coker Company Share" of the
excessed Unfinished Diesel only if the calculated Coker Company Share is a
positive volume. The Coker Company Share is defined as the excessed Unfinished
Diesel less the excessed Light Cycle Oil from FCCU 1241 multiplied by the Coker
Company Crude Oil Volume divided by the Total Crude Oil Volume.
The excessed Light Cycle Oil from FCCU 1241 is calculated as follows:
Total Light Cycle Oil from FCCU 1241 - Light Cycle Oil to Cutter - Light
Cycle Oil to HCU 942
The excessed Unfinished Diesel is composed of Diesel from AVU 146, Light Gas Oil
from DCU 843, and Light Cycle Oil from FCCU 1241. The Coker Company Share of the
Unfinished Diesel is composed only of Diesel from AVU 146 and Light Gas Oil from
DCU 843. The composition of the Coker Company Share of the Unfinished Diesel is
calculated as follows:
Fraction of Diesel from AVU 146 = ( Total volume of Diesel from AVU 146 -
Diesel charge volume to GFU
241 ) / (Total volume of
Diesel from AVU 146 - Diesel
charge volume to GFU 241 +
Total volume of Light Gas Oil
from DCU 843 )
Fraction of Light Gas Oil from DCU 843 = Total volume of Light Gas Oil
from DCU 843 / (Total volume
of Diesel from AVU 146 -
Diesel charge volume to GFU
241 + Total volume of Light
Gas Oil from DCU 843 )
Price: The price is computed for each component as described in Attachments I
- -----
and II below.
Delivery Point/Risk of Loss: The delivery point and risk of loss for each
- ---------------------------
component are described in Attachments I and II below.
Quantity Measurement: Quantity measurements shall be calculated by changes in
- --------------------
Unfinished Diesel inventory utilizing standard yield accounting methods. The
following meters shall be used as input to the above calculations:
Total Light Cycle Oil from FCCU 1241: FCCU 1241 FC-1247
Light Cycle Oil to Cutter: Pump St. 379 FRC-201
Light Cycle Oil to HCU 942: XX-XXXX
Diesel Charge to GFU 241: XX-XXXX
Diesel from AVU 146: See Attachment I
Light Gas Oil from DCU 843: See Attachment II
Quality Measurement: Quality measurements for each component is described in
- -------------------
Attachments I and II below.
Attachment I
------------
Component: Diesel from AVU 146
- ---------
Product Purchase Agreement Page 8 August 3, 1999
<PAGE>
EXHIBIT A-5
Target Specification:
- ---------------------
Property Specification Test Method
-------- ------------- -----------
90% 540 Degrees F Minimum ASTM D-86
90% 640 Degrees F Maximum ASTM D-86
FBP 690 Degrees F Maximum ASTM D-86
Flash Point 130 Degrees F Minimum ASTM D-93
Target specifications are based on current fungible transportation diesel
fuel namely Colonial 74 Grade Low Sulfur Diesel Fuel. To the extent the
specifications change for Colonial 74 Grade Low Sulfur Diesel Fuel the
target specifications will be changed accordingly.
Quantity: For days that Unfinished Diesel is excessed to inventory, Coker
- --------
Company shall sell and Clark shall purchase the "Coker Company Share" of the
partial output of this Product as defined above.
Price: The arithmetic average of the high/low Platt's Oilgram Price Report
- -----
U. S. Gulf Coast Waterborne posting for spot purchases of No.2(0.2 wt% S
diesel) for each publication day less 3.0 cents/gallon less 0.10 cents/gallon
marketing fee multiplied by the Inflation Factor less 0.5 cents/gallon
terminalling fee multiplied by the quantity of the Product delivered on that
day. The marketing fee and terminalling fee shall only be assessed if Unfinished
Diesel is sold to a 3/rd/ party.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be taken at AVU 146 meter FI-
- --------------------
448.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by distillation and flash.
Attachment II
-------------
Component: Light Gas Oil from DCU 843
- ---------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
90% 540 Degrees F Minimum ASTM D-86
90% 640 Degrees F Maximum ASTM D-86
FBP 690 Degrees F Maximum ASTM D-86
Flash Point 130 Degrees F Minimum ASTM D-93
Target specifications are based on current fungible transportation diesel
fuel namely Colonial 74 Grade Low Sulfur Diesel Fuel. To the extent the
specifications change for Colonial 74 Grade Low Sulfur Diesel Fuel the
target specifications will be changed accordingly.
Quantity: For days that Unfinished Diesel is excessed to inventory, Coker
- --------
Company shall sell and
Product Purchase Agreement Page 9 August 3, 1999
<PAGE>
EXHIBIT A-5
Clark shall purchase the "Coker Company Share" of the partial output of this
Product as defined above.
Price: The arithmetic average of the high/low Platt's Oilgram Price
- -----
Report U.S. Gulf Coast Waterborne posting for spot purchases of No.2(0.2 wt% S
diesel) for each publication day less 5.0 cents/gallon less 0.10 cents/gallon
marketing fee multiplied by the Inflation Factor less 0.5 cents/gallon
terminalling fee multiplied by the quantity of the Product delivered on that
day. The marketing fee and terminalling fee shall only be assessed if Unfinished
Diesel is sold to a 3/rd/ party.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of DCU 843.
Quantity Measurement: Quantity measurements shall be taken at DCU 843 meter FE-
- --------------------
3599.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by distillation and flash.
Product Purchase Agreement Page 10 August 3, 1999
<PAGE>
EXHIBIT A-6
Product: Atmospheric Gas Oil from AVU 146
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
Flash Point 165 Degrees F Minimum ASTM D-93
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U. S. Gulf Coast VGO (High Sulfur) Cargo for each
publication day less 2.0 cents/gallon multiplied by the quantity of the Product
delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be taken at AVU 146 meter FI-
- --------------------
451.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by flash.
Product Purchase Agreement Page 11 August 3, 1999
<PAGE>
EXHIBIT A-7
Product: Light Vacuum Gas Oil from AVU 146
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
Flash Point 165 Degrees F Minimum ASTM D-93
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U.S. Gulf Coast VGO (High Sulfur) Cargo for each
publication day less 2.0 cents/gallon multiplied by the quantity of the Product
delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be taken at AVU 146 meter FI-
- --------------------
697.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by flash.
Product Purchase Agreement Page 12 August 3, 1999
<PAGE>
EXHIBIT A-8
Product: Heavy Vacuum Gas Oil from AVU 146
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
Flash Point 165 Degrees F Minimum ASTM D-93
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the output of this Product which is not processed by HCU 942. The
Coker Company Share is defined as the total output of this product less the
volume processed by HCU 942 multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U.S. Gulf Coast VGO (High Sulfur) Cargo for each
publication day less 2.0 cents/gallon multiplied by the quantity of the Product
delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: The total quantity measurement of Heavy Vacuum Gas Oil
- --------------------
from AVU 146 shall be taken at AVU 146 meter FI-785. The quantity measurement
of Heavy Vacuum Gas Oil from AVU 146 processed by HCU 942 shall be taken as HCU
942 meter FQ-1020 less FCCU 1241 Light Cycle Oil meter XX-XXXX.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by flash.
Product Purchase Agreement Page 13 August 3, 1999
<PAGE>
EXHIBIT A-9
Product: Vacuum Tower Bottoms from AVU 146 to Clark Storage
- -------
Target Specification:
- -----------------------
Property Specification Test Method
-------- ------------- -----------
Flash Point 250 Degrees F Minimum ASTM D-93
API Gravity 0.0 Minimum ASTM D-1298, ASTM D-287,
or ASTM D-4052
Viscosity @ 210 Degrees F 230,000 cSt Maximum ASTM D-445
Viscosity @ 275 Degrees F 9,400 cSt Maximum ASTM D-445
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the total output of this product multiplied by the Coker Company Crude Oil
Volume divided by the Total Crude Oil Volume.
Price: The price is calculated by the following formula:
- -----
VTB = ( #6 Fuel - 0.75 - 0.363 * Jet ) / ( 1 - 0.363 ) - 0.042 marketing
fee
Where:
VTB - the price of Vacuum Tower Bottoms from AVU 146 to Clark Storage for
each publication day multiplied by the quantity of the
Product delivered on that day in dollars/barrel.
#6 Fuel - the arithmetic average of the high/low Platt's Oilgram Price
Report U.S. Gulf Coast Waterborne posting for spot
purchases of No.6, 3.5%S for each publication day in
dollars/barrel.
Jet - the arithmetic average of the high/low Platt's Oilgram Price Report
U.S. Gulf Coast Pipeline posting for spot purchases of
Jet/Kero 54 for each publication day in dollars/barrel.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of AVU 146.
Quantity Measurement: Quantity measurements shall be taken at AVU 146 meter FI-
- --------------------
844.
Quality Measurement: Grab samples shall be taken (3) times per week and
- -------------------
analyzed by flash, API gravity, and viscosity.
Product Purchase Agreement Page 14 August 3, 1999
<PAGE>
EXHIBIT A-10
Product: Absorber Gas to Refinery Fuel from DCU 843
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
H2S 50 ppmw Maximum Draeger
Higher Heating Value 1050 BTU/SCF Typical UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the total output of this Product multiplied by the Coker Company Crude Oil
Volume divided by the Total Crude Oil Volume.
Price: The weighted average cost of natural gas purchased by Clark converted
- -----
into dollars per FOEB where 6.0 MMBTU is equivalent to 1.0 FOEB.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of DCU 843.
Quantity Measurement: Quantity measurements shall be taken at DCU 843 meter FE-
- --------------------
3619.
Quality Measurement: Samples shall be taken at least (1) time per day and
- -------------------
analyzed by draeger and heating value.
Product Purchase Agreement Page 15 August 3, 1999
<PAGE>
EXHIBIT A-11
Product: Propane/Propylene Mix from DCU 843
- -------
Target Specification:
- --------------------
Component Specification Test Method
--------- ------------- -----------
H2S 100 ppmw Maximum Draeger
Ethane 5.0% LV Maximum ASTM D-2163
Butane and Heavier 5.0% LV Maximum ASTM D-2163
Propane 72.0% LV Typical ASTM D-2163
Propylene 28.0% LV Typical ASTM D-2163
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: For contained Propane: The arithmetic average of the high/low Oil Price
- -----
Information Service Mont Belvieu, Texas Eastern Pipeline posting for spot
purchases of propane for each publication day less 0.10 cents/gallon marketing
fee multiplied by the quantity of the Product delivered on that day weighted by
the respective volume of propane in the delivered Product.
For contained Propylene: The arithmetic average of the high/low prices paid by
Chevron Chemical Company (CCC) for propylene content in Propane/Propylene mix
(of equivalent volumes, specifications, freight costs, delivery periods and
other terms and conditions, but excluding purchases from CCC Affiliates or
distress purchases) during the calendar month of delivery, but only including
one-half of the actual pipeline tariff for comparable material from Mont Belvieu
to the Refinery less 0.10 cents/gallon marketing fee.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of DCU 843.
Quantity Measurement: Quantity measurements shall be taken at DCU 843 meter
- --------------------
FE-3271.
Quality Measurement: Grab samples shall be taken at least (1) time per day and
- -------------------
analyzed by draeger and at least (3) times per week and analyzed by gas
chromatography.
Product Purchase Agreement Page 16 August 3, 1999
<PAGE>
EXHIBIT A-12
Product: Butane/Butylene Mix from DCU 843
- -------
Component Specification Test Method
--------- ------------- -----------
H2S 5 ppmw Maximum Draeger
Sulfur 50 ppmw Maximum ASTM D-4045
Total Nitrogen 1 ppmw Maximum ASTM D-4629
Propane and Lighter 6.0% LV Maximum ASTM D-2163
Pentane and Heavier 5.0% LV Maximum ASTM D-2163
Hexane and Heavier 0.05% LV Maximum ASTM D-2163
Butadiene 0.35% LV Maximum ASTM D-2163
Isobutane 13.0% LV Typical ASTM D-2163
Normal Butane 47.0% LV Typical ASTM D-2163
Butylenes 40.0% LV Typical ASTM D-2163
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: For contained Propane and Lighter: The monthly quoted price for Texas
- -----
Eastern Natural Gas Spot Market Price as published by "Dynegy", in dollars/MMBTU
plus 0.15 dollars/MMBTU multiplied by 6.25 divided by 70.517 multiplied by 100
less 0.10 cents/gallon marketing fee multiplied by the quantity of the Product
delivered weighted by the respective volume of propane and lighter in the
delivered Product.
For contained Pentane and Heavier: The low Oil Price Information Service Mont
Belvieu, posting for spot purchases of Non-Dynegy Natural Gasoline for each
publication day less 4.0 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the quantity of the Product delivered on that day weighted by the
respective volume of pentane and heavier in the delivered Product.
For contained Isobutane: The low Oil Price Information Service Mont Belvieu,
posting for spot purchases of Isobutane for each publication day less 0.10
cents/gallon marketing fee multiplied by the quantity of the Product delivered
on that day weighted by the respective volume of isobutane in the delivered
Product.
For contained Normal Butane: The low Oil Price Information Service Mont Belvieu,
posting for spot purchases of Normal Butane for each publication day less 0.10
cents/gallon marketing fee multiplied by the quantity of the Product delivered
on that day weighted by the respective volume of Normal Butane in the delivered
Product.
For contained Butylenes: The price is calculated by the following formula:
Butylene = 1.75 * Premium - 1.15 * Isobutane - 10 cents/gallon - 0.10
cents/gallon marketing fee
Where:
Butylene - the price of contained butylenes for each publication day
multiplied by the quantity of the Product delivered on that
day weighted by the respective volume of Butylene in the
delivered Product.
Premium - the low Platt's Oilgram Price Report U. S. Gulf Coast
Pipeline posting for spot purchases of Premium Unleaded (93
Octane, prevailing (non-supplemental) RVP, non-Oxygenated,
non Reformulated) for each publication day.
Isobutane - the low Oil Price Information Service Mont Belvieu, posting
for spot purchases of Isobutane for each publication day.
Product Purchase Agreement Page 17 August 3, 1999
<PAGE>
EXHIBIT A-12
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of DCU 843.
Quantity Measurement: Quantity measurements shall be taken at DCU 843 meter
- --------------------
FE-3210.
Quality Measurement: Grab samples shall be taken at least (1) time per day and
- -------------------
analyzed by draeger and at least (3) times per week and analyzed by gas
chromatography, MDA Sulfur, and Antek Nitrogen.
Product Purchase Agreement Page 18 August 3, 1999
<PAGE>
EXHIBIT A-13
Product: Untreated Naphtha from DCU 843
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
FBP 390 degrees F Maximum ASTM D-86
N+A 25.5% LV Typical ASTM D-5134 - Modified to C-15
Existent Washed
Gums 1 mg/100 ml Maximum ASTM D-381
Oxygen Stability 360+ Minimum ASTM D-525
Silica 1.5 ppmw Maximum UOP-484
Quantity: For days that Naphtha from DCU 843 is not treated in the Naphtha
- --------
Hydrotreater 1344, Coker Company shall sell and Clark shall purchase the "Coker
Company Share" of the Untreated Naphtha from DCU 843 as defined below. The Coker
Company Share is defined as the Untreated Naphtha from DCU 843 multiplied by the
Coker Company Crude Oil Volume divided by the Total Crude Oil Volume.
Untreated Naphtha from DCU 843 = Total Naphtha from DCU 843 - Coker
Naphtha to Naphtha Hydrotreater 1344
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U. S. Gulf Coast Naphtha (Domestic 40 N+A) for
each publication day less 0.15 cents/gallon/N+A number below 40 N+A plus 0.15
cents/gallon/N+A number above 40 N+A less 4.0 cents/gallon.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of DCU 843.
Quantity Measurement: The Total Naphtha from DCU 843 shall be taken at DCU 843
- --------------------
meter FE-3755. The quantity measurement of Coker Naphtha to Naphtha Hydrotreater
1344 shall be taken as CCR 1344 meter FRC-601.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- -------------------
for each specification.
Product Purchase Agreement Page 19 August 3, 1999
<PAGE>
EXHIBIT A-14
Product: Hydrogen to DCU 843 Naphtha Hydrotreater
- -------
Target Specification:
- --------------------
Component Specification Test Method
--------- ------------- -----------
H2S 10 ppmw Maximum Draeger
Hydrogen 84.36% Mole Typical UOP-539
Hydrogen 80.00% Mole Minimum UOP-539
Higher Heating Value 500 BTU/SCF Typical UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the total Hydrogen
- --------
requirement necessary to process Clark feedstocks in DCU 843 Naphtha
Hydrotreater. Clark's Hydrogen requirement shall be calculated as a portion of
the Total Make-up Hydrogen to DCU 843 as follows:
Hydrogen
--------
Clark Hydrogen Portion = Total Make-up Hydrogen to DCU 843 Naphtha
Hydrotreater * (1 - Coker Company Crude Oil Volume
/ Total Crude Oil Volume )
Where:
Total Make-up Hydrogen
to DCU 843 Naphtha
Hydrotreater (FOEB/D) = Total Make-up Hydrogen to DCU 843 Naphtha
Hydrotreater (MSCF/D) * Mole Fraction Hydrogen *
0.0053 (LB/SCF) * 60,950 (BTU/LB) / 1000 / 6.0
(MMBTU/FOEB)
Non-Hydrogen
------------
Clark Non-Hydrogen Portion = Total Make-up Hydrogen to DCU 843 Naphtha
Hydrotreater * (1 - Coker Company Crude Oil
Volume / Total Crude Oil Volume ) - Clark
Hydrogen Portion
Where:
Total Make-up Hydrogen
to DCU 843 Naphtha
Hydrotreater (FOEB/D) = Total Make-up Hydrogen to DCU 843 Naphtha
Hydrotreater (MSCF/D) * Higher Heating Value
(BTU/SCF) / 1000 / 6.0 (MMBTU/FOEB)
Price: For Hydrogen: The weighted average delivered cost of hydrogen purchased
- -----
by Coker Company from Air Products converted into dollars per FOEB where 6.0
MMBTU is equivalent to 1.0 FOEB.
For Non-Hydrogen: The weighted average delivered cost of natural gas purchased
by Clark converted into dollars per FOEB where 6.0 MMBTU is equivalent to 1.0
FOEB.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of DCU 843.
Quantity Measurement: Product quantity measurements shall be taken at DCU 843
- --------------------
FE-3675.
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- -------------------
least (3)
Product Purchase Agreement Page 20 August 3, 1999
<PAGE>
EXHIBIT A-14
times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 21 August 3, 1999
<PAGE>
EXHIBIT A-15
Product: High Pressure Hydrogen Purge Gas from DCU 843 Naphtha Hydrotreater
- -------
Target Specification:
- --------------------
Component Specification Test Method
--------- ------------- -----------
H2S 80 ppmw Maximum Draeger
Hydrogen 77.70% Mole Typical UOP-539
Hydrogen 75.00% Mole Minimum UOP-539
Higher Heating Value 600 BTU/SCF Typical UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the portion of the
- --------
components of this Product produced by Coker Company feedstocks in DCU 843.
That portion of each component is calculated as follows:
Hydrogen
--------
Coker Company Hydrogen Portion = Total Contained Hydrogen in High Pressure
Hydrogen Purge Gas * Coker Company Crude Oil Volume
/ Total Crude Oil Volume
Where:
Total Contained Hydrogen in
High Pressure Hydrogen
Purge Gas (FOEB/D) = Total High Pressure Hydrogen Purge Gas from DCU 843
(MSCF/D) * Mole Fraction Hydrogen * 0.0053 (LB/SCF)
* 60,950 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Non-Hydrogen
------------
Coker Company Non-Hydrogen Portion = Total High Pressure Hydrogen Purge
Gas * Coker Company Crude Oil Volume / Total
Crude Oil Volume - Coker Company Hydrogen
Portion
Where:
Total High Pressure
Hydrogen
Purge Gas (FOEB/D) = Total High Pressure Hydrogen Purge Gas from DCU 843
(MSCF/D) * Higher Heating Value (BTU/SCF) / 1000 / 6.0
(MMBTU/FOEB)
Price: For Hydrogen: The weighted average delivered cost of hydrogen purchased
- -----
by Coker Company from Air Products converted into dollars per FOEB where 6.0
MMBTU is equivalent to 1.0 FOEB.
For Non-Hydrogen: The weighted average delivered cost of natural gas purchased
- ----------------
by Clark converted into dollars per FOEB where 6.0 MMBTU is equivalent to 1.0
FOEB.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of DCU 843.
Quantity Measurement: Product quantity measurements shall be taken at DCU 843
- --------------------
FQ-3735.
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- -------------------
least (3) times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 22 August 3, 1999
<PAGE>
EXHIBIT A-16
Product: Heavy Gas Oil from DCU 843
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
Flash Point 165 degrees F Minimum ASTM D-93
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the output of this Product which is not processed by HCU 942. The
Coker Company Share is defined as the total output of this product less the
volume processed by HCU 942 multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U. S. Gulf Coast VGO (High Sulfur) Cargo for each
publication day less 6.0 cents/gallon multiplied by the quantity of the Product
delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of DCU 843.
Quantity Measurement: The total quantity measurement of Heavy Gas Oil from DCU
- --------------------
843 shall be taken at DCU 843 meter FE-1690. The quantity measurement of Heavy
Gas Oil from DCU 843 processed by HCU 942 shall be taken as DCU 843 meter FE-
1000.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- -------------------
by flash.
<PAGE>
EXHIBIT A-17
Product: Petroleum Coke
- -------
Target Specification: None
- --------------------
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: Actual 3rd party sales price adjusted back to the custody transfer point
- -----
for transportation and storage cost less $0.05 per wet metric ton marketing fee.
Delivery Point/Risk of Loss: This product shall be delivered into railcar or
- ---------------------------
storage facility and risk of loss shall pass at the point of delivery.
Quantity Measurement / Metering Facilities: Based on invoiced quantity.
- ------------------------------------------
Quality Measurement: Based on invoiced quality.
- -------------------
Product Purchase Agreement Page 24 August 3, 1999
<PAGE>
EXHIBIT A-18
Product: Hydrogen to HCU 942
- -------
Target Specification:
- --------------------
Component Specification Test Method
--------- ------------- -----------
Hydrogen 99.9% Mole Minimum UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the total Hydrogen
- --------
requirement necessary to process Clark feedstocks in HCU 942. Clark's Hydrogen
requirement shall be calculated as a portion of the Total Make-up Hydrogen to
HCU 942 as follows:
Clark Hydrogen Requirement = Total Make-up Hydrogen to HCU 942 * Clark
Deemed Hydrogen / Total Deemed Hydrogen
Where:
Clark Deemed Hydrogen = Light Cycle Oil to HCU 942 * 2074 + Heavy
Gas Oil from DCU 843 to HCU 942 * ( 1 -
Coker Company Crude Oil Volume / Total
Crude Oil Volume ) * 2169 + ( Heavy Gas Oil
from AVU 146 to HCU 942 ) * ( 1 - Coker
Company Crude Oil Volume / Total Crude Oil
Volume ) * 2015
Total Deemed Hydrogen = Light Cycle Oil to HCU 942 * 2074 + Heavy
Gas Oil from DCU 843 to HCU 942 * 2169 +
( Heavy Gas Oil from AVU 146 to HCU 942 ) *
2015
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -
Light Cycle Oil to HCU 942
The above equations are based on the following deemed quantities. Deemed
quantities for other feedstock types will be developed as needed to accommodate
optimization opportunities.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Heavy Gas Oil Heavy Gas Oil
Deemed Quantities Light Cycle Oil from DCU 843 from AVU 146
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Hydrogen
Consumption (SCF/B) 2074 2169 2015
-------------------------------------------------------------------------------------
</TABLE>
Price: The actual cost Coker Company pays for hydrogen under contract with Air
- -----
Products.
Delivery Point/Risk of Loss: This product shall be delivered by pipeline to the
- ---------------------------
battery limit of HCU 942 and risk of loss shall pass at the point of delivery.
Quantity Measurement: The following meters shall be used as input to the above
- --------------------
calculations:
<TABLE>
<S> <C>
Total Make-up Hydrogen to HCU 942: HCU 942 FQ-1700
Light Cycle Oil to HCU 942: XX-XXXX
Heavy Gas Oil from DCU 843 to HCU 942: DCU 843 FE-1000
Heavy Gas Oil from AVU 146 & Light Cycle Oil to HCU 942: HCU 942 FQ-1020
</TABLE>
Quality Measurement: Grab samples shall be taken at least (3) times per week and
- -------------------
analyzed by gas chromatography.
Product Purchase Agreement Page 25 August 3, 1999
<PAGE>
EXHIBIT A-19
Product: Stripper Off-Gas from HCU 942
Target Specification:
- ---------------------
Component Specification Test Method
--------- ------------- -----------
H2S 50 ppmw Maximum Draeger
Water 2.66% Mole Typical UOP-539
Hydrogen 45.76% Mole Typical UOP-539
Methane 4.00% Mole Typical UOP-539
Ethane 4.90% Mole Typical UOP-539
Propane 13.67% Mole Typical UOP-539
Isobutane 11.26% Mole Typical UOP-539
Normal Butane 7.83% Mole Typical UOP-539
Pentane and Heavier 9.92% Mole Typical UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the portion of each
- --------
component of this Product produced by Coker Company feedstocks in HCU 942. That
portion for each component is calculated as follows:
Hydrogen
--------
Coker Company Hydrogen = Total Contained Hydrogen in Stripper Off-Gas *
( Heavy Gas Oil from AVU 146 to HCU 942 + Heavy Gas Oil from
DCU 843 to HCU 942 ) * Coker Company Crude Oil Volume /
Total Crude Oil Volume / ( Heavy Gas Oil from AVU 146 to HCU
942 + Heavy Gas Oil from DCU 843 to HCU 942 + Light Cycle
Oil to HCU 942 )
Where:
Total Contained Hydrogen in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from HCU 942 (MSCF/D)
* Mole Fraction Hydrogen * 0.0053 (LB/SCF) *
60,950 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -
Light Cycle Oil to HCU 942
Methane
-------
Coker Company Methane = Total Contained Methane in Stripper Off-Gas
* ( Heavy Gas Oil from AVU 146 to HCU 942 * 0.34 + Heavy Gas
Oil from DCU 843 to HCU 942 * 0.36 ) * Coker Company Crude
Oil Volume / Total Crude Oil Volume / ( Heavy Gas Oil from
AVU 146 to HCU 942 * 0.34 + Heavy Gas Oil from DCU 843 to
HCU 942 * 0.36 + Light Cycle Oil to HCU 942 * 0.18 )
Where:
Total Contained Methane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from HCU 942 (MSCF/D)
* Mole Fraction Methane * 0.0425 (LB/SCF) *
23,840 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -
Light Cycle Oil to HCU 942
Product Purchase Agreement Page 26 August 3, 1999
<PAGE>
EXHIBIT A-19
Ethane
------
Coker Company Ethane = Total Contained Ethane in Stripper Off-Gas
* ( Heavy Gas Oil from AVU 146 to HCU 942 * 0.28 + Heavy Gas
Oil from DCU 843 to HCU 942 * 0.31 ) * Coker Company Crude
Oil Volume / Total Crude Oil Volume / ( Heavy Gas Oil from
AVU 146 to HCU 942 * 0.28 + Heavy Gas Oil from DCU 843 to
HCU 942 * 0.31 + Light Cycle Oil to HCU 942 * 0.24 )
Where:
Total Contained Ethane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from HCU 942 (MSCF/D) *
Mole Fraction Ethane * 0.0800 (LB/SCF) * 22,169 (BTU/LB) /
1000 / 6.0 (MMBTU/FOEB)
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 & Light
Cycle Oil to HCU 942 - Light Cycle
Oil to HCU 942
Propane
-------
Coker Company Propane = Total Contained Propane in Stripper Off-Gas *
( Heavy Gas Oil from AVU 146 to HCU 942 * 1.30 + Heavy Gas
Oil from DCU 843 to HCU 942 * 1.37 ) * Coker Company Crude
Oil Volume / Total Crude Oil Volume / ( Heavy Gas Oil from
AVU 146 to HCU 942 * 1.30 + Heavy Gas Oil from DCU 843 to
HCU 942 * 1.37 + Light Cycle Oil to HCU 942 * 0.87 )
Where:
Total Contained Propane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from HCU 942 (MSCF/D) *
Mole Fraction Propane * 0.1187 (LB/SCF) /
177.7 (LB/BBL) * 1000
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 & Light
Cycle Oil to HCU 942 - Light Cycle
Oil to HCU 942
Isobutane
---------
Coker Company Propane = Total Contained Isobutane in Stripper Off-Gas
* ( Heavy Gas Oil from AVU 146 to HCU 942 * 1.93 + Heavy Gas
Oil from DCU 843 to HCU 942 * 2.03 ) * Coker Company Crude
Oil Volume / Total Crude Oil Volume / ( Heavy Gas Oil from
AVU 146 to HCU 942 * 1.93 + Heavy Gas Oil from DCU 843 to
HCU 942 * 2.03 + Light Cycle Oil to HCU 942 * 0.38 )
Where:
Total Contained Isobutane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from HCU 942 (MSCF/D) *
Mole Fraction Isobutane * 0.1582 (LB/SCF) /
197.2 (LB/BBL) * 1000
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 & Light
Cycle Oil to HCU 942 - Light Cycle
Oil to HCU 942
Product Purchase Agreement Page 27 August 3, 1999
<PAGE>
EXHIBIT A-19
Normal Butane
-------------
Coker Company Normal Butane = Total Contained Normal Butane in Stripper
Off-Gas * ( Heavy Gas Oil from AVU 146 to HCU 942
* 0.93 + Heavy Gas Oil from DCU 843 to HCU 942 *
0.98 ) * Coker Company Crude Oil Volume / Total
Crude Oil Volume / ( Heavy Gas Oil from AVU 146 to
HCU 942 * 0.93 + Heavy Gas Oil from DCU 843 to HCU
942 * 0.98 + Light Cycle Oil to HCU 942 * 0.18 )
Where:
Total Contained Normal Butane
In Stripper Off-Gas (B/D) = Total Stripper Off-Gas from HCU 942 (MSCF/D) *
Mole Fraction Normal Butane * 0.1585 (LB/SCF) /
204.6 (LB/BBL) * 1000
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -Light
Cycle Oil to HCU 942
Pentane and Heavier
-------------------
Coker Company Pentane
and Heavier = Total Contained Pentane and Heavier in Stripper Off-Gas *
( Heavy Gas Oil from AVU 146 to HCU 942 * 7.23 +
Heavy Gas Oil from DCU 843 to HCU 942 * 7.21 ) *
Coker Company Crude Oil Volume / Total Crude Oil
Volume / ( Heavy Gas Oil from AVU 146 to HCU 942 *
7.23 + Heavy Gas Oil from DCU 843 to HCU 942 *
7.21 + Light Cycle Oil to HCU 942 * 1.66 )
Where:
Total Contained Pentane
and Heavier In
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from HCU 942 (MSCF/D) *
Mole Fraction Pentane and Heavier * 0.1980
(LB/SCF) / 221.0 (LB/BBL) * 1000
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -
Light Cycle Oil to HCU 942
The above equations are based on the following deemed quantities. Deemed
quantities for other feedstock types will be developed as needed to accommodate
optimization opportunities.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Deemed Quantities Heavy Gas Oil Heavy Gas Oil
(Volume % of Feed Type) Light Cycle Oil from DCU 843 from AVU 146
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Methane 0.18 0.36 0.34
---------------------------------------------------------------------------------------
Ethane 0.24 0.31 0.28
---------------------------------------------------------------------------------------
Propane 0.87 1.37 1.30
---------------------------------------------------------------------------------------
Isobutane 0.38 2.03 1.93
---------------------------------------------------------------------------------------
Normal Butane 0.18 0.98 0.93
---------------------------------------------------------------------------------------
Pentane & Heavier 1.66 7.21 7.23
---------------------------------------------------------------------------------------
</TABLE>
Price: For Hydrogen, Methane, and Ethane: The weighted average delivered cost of
- -----
natural gas purchased by Clark converted into dollars per FOEB where 6.0 MMBTU
is equivalent to 1.0 FOEB less Fractionation Fee.
Product Purchase Agreement Page 28 August 3, 1999
<PAGE>
EXHIBIT A-19
For contained Propane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu, Texas Eastern Pipeline posting for spot
purchases of propane for each publication day less 0.10 cents/gallon marketing
fee multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of propane in the delivered Product.
For contained Isobutane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu posting for spot purchases of isobutane for
each publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of isobutane in the delivered Product.
For contained Normal Butane delivered from October through February: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Normal Butane delivered from March through September: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day less 3.0 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Pentanes and Heavier: The arithmetic average of the high/low Oil
Price Information Service Mont Belvieu posting for spot purchases of natural
gasoline Non-Dynegy for each publication day less 1.5 cents/gallon less 0.10
cents/gallon marketing fee multiplied by the Inflation Factor less Fractionation
Fee multiplied by the quantity of the Product delivered on that day weighted by
the respective volume of pentanes and heavier in the delivered Product.
For all other contained components: All other components are transferred to
Clark at no cost.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of HCU 942.
Quantity Measurement: Quantity measurements shall be taken at HCU 942 meter
- --------------------
FQ-2251. The following meters shall be used as input to the above calculations:
Light Cycle Oil to HCU 942: XX-XXXX
Page purchase Agreement Page 29 August 3, 1999
<PAGE>
EXHIBIT A-19
Heavy Gas Oil from DCU 843 to HCU 942: DCU 843 FE-1000
Heavy Gas Oil from AVU 146 & Light Cycle Oil to HCU 942: HCU 942 FQ-1020
Quality Measurement: Grab samples shall be taken at least (1) time per day and
- -------------------
analyzed by draeger and at least (3) times per week and analyzed by gas
chromatography.
Product Purchase Agreement Page 30 August 3, 1999
<PAGE>
EXHIBIT A-20
Product: Light Naphtha from HCU 942
- -------
Target Specification:
- ---------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C>
Propane 0.17% LV Typical UOP-539
Isobutane 1.59% LV Typical UOP-539
Normal Butane 1.56% LV Typical UOP-539
Butane and Lighter 5.00% LV Maximum UOP-539
Reid Vapor Pressure @ 100 degrees F 13.5 PSIG Maximum ASTM D-5191 (Grabner)
</TABLE>
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in HCU 942. That portion is
calculated as follows:
Coker Company Light Naphtha = Total Light Naphtha * ( Heavy Gas Oil
from AVU 146 to HCU 942 * 7.23 + Heavy Gas Oil from
DCU 843 to HCU 942 * 7.21 ) * Coker Company Crude
Oil Volume / Total Crude Oil Volume / ( Heavy Gas
Oil from AVU 146 to HCU 942 * 7.23 + Heavy Gas Oil
from DCU 843 to HCU 942 * 7.21 + Light Cycle Oil to
HCU 942 * 1.66 )
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -
Light Cycle Oil to HCU 942
The above equations are based on the following deemed quantities. Deemed
quantities for other feedstock types will be developed as needed to accommodate
optimization opportunities.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Deemed Quantities Heavy Gas Oil Heavy Gas Oil
(Volume % of Feed Type) Light Cycle Oil from DCU 843 from AVU 146
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Light Naphtha 1.66 7.21 7.23
-------------------------------------------------------------------------------
</TABLE>
Price: The arithmetic average of the high/low Oil Price Information Service Mont
- -----
Belvieu posting for spot purchases of natural gasoline Non-Dynegy for each
publication day less 1.5 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per
MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of HCU 942.
Product Purchase Agreement Page 31 August 3, 1999
<PAGE>
EXHIBIT A-20
Quantity Measurement: Quantity measurements shall be taken at HCU 942 meter
- --------------------
FQ-2700. The following meters shall be used as input to the above calculations:
Light Cycle Oil to HCU 942: XX-XXXX
Heavy Gas Oil from DCU 843 to HCU 942: DCU 843 FE-1000
Heavy Gas Oil from AVU 146 & Light Cycle Oil to HCU 942: HCU 942 FQ-1020
Quality Measurement: Grab samples shall be taken at least (1) time per day and
- -------------------
analyzed by draeger and at least (3) times per week and analyzed by gas
chromatography, and Grabner vapor pressure.
Product Purchase Agreement Page 32 August 3, 1999
<PAGE>
EXHIBIT A-21
Product: Heavy Naphtha from HCU 942
- -------
Target Specification:
- ---------------------
Property Specification Test Method
-------- ------------- -----------
FBP 390 degrees F Maximum ASTM D-86
N+A 73.0% LV Typical ASTM D-5134 - Modified to C-15
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in HCU 942. That portion is
calculated as follows:
Coker Company Heavy Naphtha = Total Heavy Naphtha * ( Heavy Gas Oil
from AVU 146 to HCU 942 * 19.96 + Heavy Gas Oil from
DCU 843 to HCU 942 * 20.02 ) * Coker Company Crude Oil
Volume / Total Crude Oil Volume / ( Heavy Gas Oil from
AVU 146 to HCU 942 * 19.96 + Heavy Gas Oil from DCU 843
to HCU 942 * 20.02 + Light Cycle Oil to HCU 942 *
14.66 )
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -
Light Cycle Oil to HCU 942
The above equations are based on the following deemed quantities. Deemed
quantities for other feedstock types will be developed as needed to accommodate
optimization opportunities.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Deemed Quantities Heavy Gas Oil Heavy Gas Oil
(Volume % of Feed Type) Light Cycle Oil from DCU 843 from AVU 146
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Heavy Naphtha 14.66 20.02 19.96
----------------------------------------------------------------------------------------
</TABLE>
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U. S. Gulf Coast Naphtha (Domestic 40 N+A) for
each publication day less 0.15 cents/gallon/N+A number below 40 N+A plus 0.15
cents/gallon/N+A number above 40 N+A less 1.0 cents/gallon.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of HCU 942.
Quantity Measurement: Quantity measurements shall be taken at HCU 942 meter
- --------------------
FQ-2600. The following meters shall be used as input to the above calculations:
Light Cycle Oil to HCU 942: XX-XXXX
Heavy Gas Oil from DCU 843 to HCU 942: DCU 843 FE-1000
Heavy Gas Oil from AVU 146 & Light Cycle Oil to HCU 942: HCU 942 FQ-1020
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- -------------------
by gas chromatography and distillation.
Product Purchase Agreement Page 33 August 3, 1999
<PAGE>
EXHIBIT A-22
Product: Kerosene from HCU 942
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
API Gravity 37.0 Minimum ASTM D-1298,
ASTM D-287, or
ASTM D-4052
API Gravity 51.0 Maximum ASTM D-1298,
ASTM D-287, or
ASTM D-4052
Corrosion 2 hrs. @212 degrees F 1 Maximum ASTM D-130
MSEP 85 Minimum ASTM D-3948
Water Reaction Interface Rating 1b Maximum ASTM D-1094
Freezing Point -40 degrees C Maximum ASTM D-2386
or
ASTM D-5972
Viscosity @ -4 degrees F 8.0 cSt Maximum ASTM D-445
Flash Point 108 degrees F Minimum ASTM D-56
10% 400 degrees F Maximum ASTM D-86
FBP 572 degrees F Maximum ASTM D-86
Residue, % 1.5 Maximum ASTM D-86
Loss, % 1.5 Maximum ASTM D-86
Existent Gum 7 mg/100 ml Maximum ASTM D-381
Thermal Stability Pressure Drop 25 mm/Hg Maximum ASTM D-3241
Thermal Stability Tube Deposit 3 Code Maximum ASTM D-3241
Sulfur 0.30 wt% Maximum ASTM D-2622
Doctor Negative ASTM D-4952
Aromatics 25 vol% Maximum ASTM D-1319
Neutralization Number 0.1 mg KOH/g Maximum ASTM D-974
Smoke / Naphthalenes
Smoke Point 25 Minimum ASTM D-1322
OR
Smoke Point 18 Minimum ASTM D-1322
AND
Naphthalenes 3.0 Maximum ASTM D-1840
Target specifications are based on current fungible aviation fuel namely
Colonial 54 Grade Jet Fuel. To the extent the specifications change for
Colonial 54 Grade Jet Fuel the target specifications will be changed
accordingly.
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in HCU 942. That portion is
calculated as follows:
Coker Company Kerosene = Total Kerosene * ( Heavy Gas Oil from AVU 146
to HCU 942 * 21.64 + Heavy Gas Oil from DCU 843 to
HCU 942 * 22.16 ) * Coker Company Crude Oil Volume /
Total Crude Oil Volume / ( Heavy Gas Oil from AVU 146
to HCU 942 * 21.64 + Heavy Gas Oil from DCU 843 to
HCU 942 * 22.16 + Light Cycle Oil to HCU 942 *
65.67 )
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -
Light Cycle Oil to HCU 942
Product Purchase Agreement Page 34 August 3, 1999
<PAGE>
EXHIBIT A-22
The above equations are based on the following deemed quantities. Deemed
quantities for other feedstock types will be developed as needed to accommodate
optimization opportunities.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Deemed Quantities Heavy Gas Oil Heavy Gas Oil
(Volume % of Feed Type) Light Cycle Oil from DCU 843 from AVU 146
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kerosene 65.67 22.16 21.64
------------------------------------------------------------------------------------
</TABLE>
Price: The arithmetic average of the high/low Platt's Oilgram Price Report U. S.
- -----
Gulf Coast Pipeline posting for spot purchases of Jet/Kero 54 for each
publication day less 1.0 cents/gallon less 0.05 cents/gallon marketing fee
multiplied by the quantity of the Product delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of HCU 942.
Quantity Measurement: Quantity measurements shall be taken at HCU 942 meter
- --------------------
FQ-2575. The following meters shall be used as input to the above calculations:
Light Cycle Oil to HCU 942: XX-XXXX
Heavy Gas Oil from DCU 843 to HCU 942: DCU 843 FE-1000
Heavy Gas Oil from AVU 146 & Light Cycle Oil to HCU 942: HCU 942 FQ-1020
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- -------------------
for each specification.
Product Purchase Agreement Page 35 August 3, 1999
<PAGE>
EXHIBIT A-23
Product: Diesel from HCU 942
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C> <C>
API Gravity 30.0 Minimum ASTM D-1298,
ASTM D-287, or
ASTM D-4052
Corrosion 3 hrs. @ 212 degrees F 1 Maximum ASTM D-130
Viscosity @ 100 degrees F 2.0 cSt Minimum ASTM D-445
Viscosity @ 100 degrees F 3.6 cSt Maximum ASTM D-445
Flash Point 130 degrees F Minimum ASTM D-56
90% 540 degrees F Minimum ASTM D-86
90% 640 degrees F Maximum ASTM D-86
FBP 690 degrees F Maximum ASTM D-86
Color 2.5 Maximum ASTM D-1500
Cloud (September-March) 15 degrees F Maximum ASTM D-2500,
ASTM D-5771,
or
ASTM D-5773
Cloud (April-August) 20 degrees F Maximum ASTM D-2500,
ASTM D-5771,
or
ASTM D-5773
Pour (September-March) 0 degrees F Maximum ASTM D-97,
ASTM D-5949,
or
ASTM D-5950
Pour (April-August) 10 degrees F Maximum ASTM D-97,
ASTM D-5949,
or
ASTM D-5950
Sulfur 0.047 wt% Maximum ASTM D-2622
Cetane Index 42 Minimum ASTM D-976
Ash 0.01 wt% Maximum ASTM D-482
Carbon Residue
(Ramsbottom on 10% Bottom) 0.35 Maximum ASTM D-524
BS&W 0.05 Maximum ASTM D-1796
Haze Rating @ 77 degrees F (Procedure 2) 2 Maximum ASTM D-4176
Thermal Stability
90 Minutes 150 degrees C Pad Rating 7 Maximum Dupont Scale
OR
Oxidation Stability 2.5 mg/100 ml Maximum ASTM D-2274
</TABLE>
* Denotes less than
Target specifications are based on current fungible transportation
diesel fuel namely Colonial 74 Grade Low Sulfur Diesel Fuel. To the
extent the specifications change for Colonial 74 Grade Low Sulfur Diesel
Fuel the target specifications will be changed accordingly.
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in HCU 942. That portion is
calculated as follows:
Coker Company Diesel = Total Diesel * ( Heavy Gas Oil from AVU 146 to
HCU
Product Purchase Agreement Page 36 August 3, 1999
<PAGE>
EXHIBIT A-23
942 * 12.58 + Heavy Gas Oil from DCU 843 to HCU 942 * 13.11 )
* Coker Company Crude Oil Volume / Total Crude Oil Volume /
( Heavy Gas Oil from AVU 146 to HCU 942 * 12.58 + Heavy Gas
Oil from DCU 843 to HCU 942 * 13.11 + Light Cycle Oil to HCU
942 * 28.84 )
Heavy Gas Oil from AVU 146 to HCU 942 = Heavy Gas Oil from AVU 146 &
Light Cycle Oil to HCU 942 -
Light Cycle Oil to HCU 942
The above equations are based on the following deemed quantities. Deemed
quantities for other feedstock types will be developed as needed to accommodate
optimization opportunities.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Deemed Quantities Heavy Gas Oil Heavy Gas Oil
(Volume % of Feed Type) Light Cycle Oil from DCU 843 from AVU 146
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Diesel 28.84 13.11 12.58
--------------------------------------------------------------------------------------
</TABLE>
Price: The arithmetic average of the high/low Platt's Oilgram Price Report U. S.
- -----
Gulf Coast Pipeline posting for spot purchases of LS No. 2 for each publication
day less 0.05 cents/gallon marketing fee multiplied by the quantity of the
Product delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of HCU 942.
Quantity Measurement: Quantity measurements shall be taken at HCU 942 meter
- --------------------
FQ-2500. The following meters shall be used as input to the above calculations:
Light Cycle Oil to HCU 942: XX-XXXX
Heavy Gas Oil from DCU 843 to HCU 942: DCU 843 FE-1000
Heavy Gas Oil from AVU 146 & Light Cycle Oil to HCU 942: HCU 942 FQ-1020
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- -------------------
for each specification.
Product Purchase Agreement Page 37 August 3, 1999
<PAGE>
EXHIBIT A-24
Product: Ultra Low Sulfur Gas Oil from HCU 942
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
Flash Point 165 degrees F Minimum ASTM D-56
Sulfur 0.05 wt% Maximum ASTM D-2622
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in HCU 942. That portion is
calculated as follows:
Coker Company Gas Oil = Total Gas Oil * Coker Company Crude Oil Volume /
Total Crude Oil Volume
Deemed quantities for Clark feedstock types that produce this Product will be
developed as needed to accommodate optimization opportunities.
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U. S. Gulf Coast VGO (Low Sulfur) Cargo for each
publication day multiplied by the quantity of the Product delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of HCU 942.
Quantity Measurement: Quantity measurements shall be taken at HCU 942 meter
- --------------------
FQ-2426.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- -------------------
for flash and sulfur specification.
Product Purchase Agreement Page 38 August 3, 1999
<PAGE>
EXHIBIT A-25
Product: Stripper Off Gas from Naphtha Hydrotreater 1344
- -------
Target Specification:
- --------------------
Component Specification Test Method
--------- ------------- -----------
H2S 3.7% Mole Typical UOP-539
Hydrogen 45.2% Mole Typical UOP-539
Nitrogen 0.9% Mole Typical UOP-539
Methane 5.1% Mole Typical UOP-539
Ethane 8.0% Mole Typical UOP-539
Propane 13.7% Mole Typical UOP-539
Isobutane 6.0% Mole Typical UOP-539
Normal Butane 13.8% Mole Typical UOP-539
Pentane and Heavier 3.6% Mole Typical UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the portion of each
- --------
component of this Product produced by Coker Company feedstocks in Naphtha
Hydrotreater 1344. That portion for each component is calculated as follows:
H2S
---
Coker Company H2S = Total Contained H2S in Stripper Off-Gas * ( Coker
Naphtha to Naphtha Hydrotreater 1344 * 0.31 + ( Total Unfinished
Naphtha - Excessed Unfinished Naphtha ) * 0.11 ) * Coker Company
Crude Oil Volume / Total Crude Oil Volume / (( Coker Naphtha to
Naphtha Hydrotreater 1344 * 0.31 + ( Total Naphtha Hydrotreater
Feed - Coker Naphtha to Naphtha Hydrotreater 1344 ) * 0.11 )
Where:
Total Contained H2S in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from Naphtha
Hydrotreater 1344 (MSCF/D) * Mole Fraction H2S
* 0.0907 (LB/SCF) * 7,105 (BTU/LB) / 1000 / 6.0
(MMBTU/FOEB)
Total Unfinished Naphtha = The Total Unfinished Naphtha from AVU 146 as
defined in Exhibit A-3.
Excessed Unfinished Naphtha = The excessed Unfinished Naphtha from AVU 146
as defined in Exhibit A-3.
Hydrogen
--------
Coker Company Hydrogen = Total Contained Hydrogen in Stripper Off-Gas
* ( Coker Naphtha to Naphtha Hydrotreater 1344 * 0.17 + ( Total
Unfinished Naphtha - Excessed Unfinished Naphtha ) * 1.01 ) *
Coker Company Crude Oil Volume / Total Crude Oil Volume /
(( Coker Naphtha to Naphtha Hydrotreater 1344 * 0.17 + ( Total
Naphtha Hydrotreater Feed - Coker Naphtha to Naphtha
Hydrotreater 1344 ) * 1.01 )
Where:
Total Contained Hydrogen in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from Naphtha
Hydrotreater 1344 (MSCF/D) * Mole Fraction
Hydrogen * 0.0053 (LB/SCF) * 60,950 (BTU/LB) /
1000 / 6.0 (MMBTU/FOEB)
Product Purchase Agreement Page 39 August 3, 1999
<PAGE>
EXHIBIT A-25
Total Unfinished Naphtha = The Total Unfinished Naphtha from AVU 146 as
defined in Exhibit A-3.
Excessed Unfinished Naphtha = The excessed Unfinished Naphtha from AVU 146
as defined in Exhibit A-3.
Methane
-------
Coker Company Methane = Total Contained Methane in Stripper Off-Gas
* ( Coker Naphtha to Naphtha Hydrotreater 1344 * 0.17 +
( Total Unfinished Naphtha - Excessed Unfinished Naphtha ) *
1.01 ) * Coker Company Crude Oil Volume / Total Crude Oil
Volume / (( Coker Naphtha to Naphtha Hydrotreater 1344 *
0.17 + ( Total Naphtha Hydrotreater Feed - Coker Naphtha to
Naphtha Hydrotreater 1344 ) * 1.01 )
Where:
Total Contained Methane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from Naphtha
Hydrotreater 1344 (MSCF/D) * Mole Fraction
Methane * 0.0425 (LB/SCF) * 23,840 (BTU/LB) /
1000 / 6.0 (MMBTU/FOEB)
Total Unfinished Naphtha = The Total Unfinished Naphtha from AVU 146 as
defined in Exhibit A-3.
Excessed Unfinished Naphtha = The excessed Unfinished Naphtha from AVU 146
as defined in Exhibit A-3.
Ethane
------
Coker Company Ethane = Total Contained Ethane in Stripper Off-Gas *
( Coker Naphtha to Naphtha Hydrotreater 1344 * 0.17 +
( Total Unfinished Naphtha - Excessed Unfinished Naphtha ) *
1.01 ) * Coker Company Crude Oil Volume / Total Crude Oil
Volume / (( Coker Naphtha to Naphtha Hydrotreater 1344 *
0.17 + ( Total Naphtha Hydrotreater Feed - Coker Naphtha to
Naphtha Hydrotreater 1344 ) * 1.01 )
Where:
Total Contained Ethane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from Naphtha
Hydrotreater 1344 (MSCF/D) * Mole Fraction
Ethane * 0.0800 (LB/SCF) * 22,169 (BTU/LB) /
1000 / 6.0 (MMBTU/FOEB)
Total Unfinished Naphtha = The Total Unfinished Naphtha from AVU 146 as
defined in Exhibit A-3.
Excessed Unfinished Naphtha = The excessed Unfinished Naphtha from AVU 146
as defined in Exhibit A-3.
Propane
-------
Coker Company Propane = Total Contained Propane in Stripper Off-Gas
* ( Coker Naphtha to Naphtha Hydrotreater 1344 * 0.14 +
( Total Unfinished Naphtha - Excessed Unfinished Naphtha ) *
0.00 ) * Coker Company Crude Oil Volume / Total Crude Oil
Volume / (( Coker Naphtha to Naphtha Hydrotreater 1344 *
0.14 + ( Total Naphtha Hydrotreater Feed - Coker Naphtha to
Naphtha Hydrotreater 1344 ) * 0.00 )
Product Purchase Agreement Page 40 August 3, 1999
<PAGE>
EXHIBIT A-25
Where:
Total Contained Propane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from Naphtha Hydrotreater
1344 (MSCF/D) * Mole Fraction Propane *
0.1187 (LB/SCF) / 177.7 (LB/BBL) * 1000
Total Unfinished Naphtha = The Total Unfinished Naphtha from AVU 146
as defined in Exhibit A-3.
Excessed Unfinished Naphtha = The excessed Unfinished Naphtha from AVU
146 as defined in Exhibit A-3.
Isobutane
---------
Coker Company Isobutane = Total Contained Isobutane in Stripper
Off-Gas * ( Coker Naphtha to Naphtha Hydrotreater 1344 *
0.06 + ( Total Unfinished Naphtha - Excessed Unfinished
Naphtha ) * 0.00 ) * Coker Company Crude Oil Volume / Total
Crude Oil Volume / (( Coker Naphtha to Naphtha Hydrotreater
1344 * 0.06 + ( Total Naphtha Hydrotreater Feed - Coker
Naphtha to Naphtha Hydrotreater 1344 ) * 0.00 )
Where:
Total Contained Isobutane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from Naphtha Hydrotreater
1344 (MSCF/D) * Mole Fraction Isobutane *
0.1582 (LB/SCF) / 197.2 (LB/BBL) * 1000
Total Unfinished Naphtha = The Total Unfinished Naphtha from AVU 146
as defined in Exhibit A-3.
Excessed Unfinished Naphtha = The excessed Unfinished Naphtha from AVU
146 as defined in Exhibit A-3.
Normal Butane
-------------
Coker Company Normal Butane = Total Contained Normal Butane in
Stripper Off-Gas * ( Coker Naphtha to Naphtha
Hydrotreater 1344 * 0.12 + ( Total Unfinished
Naphtha -Excessed Unfinished Naphtha ) * 0.00 ) *
Coker Company Crude Oil Volume / Total Crude Oil
Volume / (( Coker Naphtha to Naphtha Hydrotreater 1344
* 0.12 + ( Total Naphtha Hydrotreater Feed - Coker
Naphtha to Naphtha Hydrotreater 1344 ) * 0.00 )
Where:
Total Contained Normal Butane
In Stripper Off-Gas (B/D) = Total Stripper Off-Gas from Naphtha
Hydrotreater 1344 (MSCF/D) * Mole Fraction
Normal Butane * 0.1585 (LB/SCF) / 204.6
(LB/BBL) * 1000
Total Unfinished Naphtha = The Total Unfinished Naphtha from AVU 146 as
defined in Exhibit A-3.
Excessed Unfinished Naphtha = The excessed Unfinished Naphtha from AVU 146
as defined in Exhibit A-3.
Product Purchase Agreement Page 41 August 3, 1999
<PAGE>
EXHIBIT A-25
Pentane and Heavier
-------------------
Coker Company Pentane
and Heavier = Total Contained Pentane and Heavier in Stripper Off-Gas *
( Coker Naphtha to Naphtha Hydrotreater 1344 *
100.03 + ( Total Unfinished Naphtha - Excessed
Unfinished Naphtha ) * 99.00 ) * Coker Company
Crude Oil Volume / Total Crude Oil Volume /
(( Coker Naphtha to Naphtha Hydrotreater 1344 *
100.03 + ( Total Naphtha Hydrotreater Feed -Coker
Naphtha to Naphtha Hydrotreater 1344 ) * 99.00 )
Where:
Total Contained Pentane
and Heavier In
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from Naphtha Hydrotreater
1344 (MSCF/D) * Mole Fraction Pentane and
Heavier * 0.1980 (LB/SCF) / 221.0 (LB/BBL) *
1000
The above equations are based on the following deemed quantities. Deemed
quantities for other feedstock types will be developed as needed to accommodate
optimization opportunities.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Deemed Quantities Unfinished
(Volume % of Feed Type) Coker Naphtha Naphtha
----------------------------------------------------------------------
<S> <C> <C>
H2S 0.31 0.11
----------------------------------------------------------------------
Hydrogen 0.17 1.01
----------------------------------------------------------------------
Methane 0.17 1.01
----------------------------------------------------------------------
Ethane 0.17 1.01
----------------------------------------------------------------------
Propane 0.14 0.00
----------------------------------------------------------------------
Isobutane 0.06 0.00
----------------------------------------------------------------------
Normal Butane 0.12 0.00
----------------------------------------------------------------------
Pentane & Heavier 100.03 99.00
----------------------------------------------------------------------
</TABLE>
Price: For Hydrogen, Methane, and Ethane: The weighted average delivered cost of
- -----
natural gas purchased by Clark converted into dollars per FOEB where 6.0 MMBTU
is equivalent to 1.0 FOEB less Fractionation Fee.
For contained Propane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu, Texas Eastern Pipeline posting for spot
purchases of propane for each publication day less 0.10 cents/gallon marketing
fee multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of propane in the delivered Product.
For contained Isobutane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu posting for spot purchases of isobutane for
each publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of isobutane in the delivered Product.
For contained Normal Butane delivered from October through February: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Normal Butane delivered from March through September: The
arithmetic average
Product Purchase Agreement Page 42 August 3, 1999
<PAGE>
EXHIBIT A-25
of the high/low Oil Price Information Service Mont Belvieu, Texas Eastern
Pipeline posting for spot purchases of normal butane for each publication day
less 3.0 cents/gallon less 0.10 cents/gallon marketing fee multiplied by the
Inflation Factor less Fractionation Fee multiplied by the quantity of the
Product delivered on that day weighted by the respective volume of normal butane
in the delivered Product.
For contained Pentanes and Heavier: The arithmetic average of the high/low Oil
Price Information Service Mont Belvieu posting for spot purchases of natural
gasoline Non-Dynegy for each publication day less 1.5 cents/gallon less 0.10
cents/gallon marketing fee multiplied by the Inflation Factor less Fractionation
Fee multiplied by the quantity of the Product delivered on that day weighted by
the respective volume of pentanes and heavier in the delivered Product.
For all other contained components: All other components are transferred to
Clark at no cost.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of Naphtha Hydrotreater
1344.
Quantity Measurement: Quantity measurements of the Stripper Off Gas from Naphtha
- --------------------
Hydrotreater 1344 shall be taken at CCR 1344 meter FR-864.
The following meters shall be used as input to the above calculations:
Coker Naphtha to Naphtha Hydrotreater 1344: CCR FRC-601
Total Naphtha Hydrotreater Feed: CCR FR-677
Quality Measurement: Grab samples shall be taken at least (3) times per week and
- -------------------
analyzed by gas chromatography.
Product Purchase Agreement Page 43 August 3, 1999
<PAGE>
EXHIBIT A-26
Product: Treated Naphtha from Naphtha Hydrotreater 1344
- -------
Target Specification:
- --------------------
Component Specification Test Method
--------- ------------- -----------
Sulfur 0.5 ppmw ASTM D-4045
Nitrogen 0.5 ppmw ASTM D-4629
Doctor Negative ASTM D-4952
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in Naphtha Hydrotreater 1344. That
portion is calculated as follows:
Platformer Charge * ( Coker Naphtha to Naphtha Hydrotreater 1344 * 100.03
+ ( Total Unfinished Naphtha - Excessed Unfinished Naphtha ) * 99.00 ) *
Coker Company Crude Oil Volume / Total Crude Oil Volume / (( Coker
Naphtha to Naphtha Hydrotreater 1344 * 100.03 + ( Total Naphtha
Hydrotreater Feed - Coker Naphtha to Naphtha Hydrotreater 1344 ) *
99.00 )
Where:
Total Unfinished Naphtha = The Total Unfinished Naphtha from AVU 146as
defined in Exhibit A-3.
Excessed Unfinished Naphtha = The excessed Unfinished Naphtha from AVU
146 as defined in Exhibit A-3.
The above equations are based on the following deemed quantities. Deemed
quantities for other feedstock types will be developed as needed to accommodate
optimization opportunities.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Deemed Quantities Unfinished
(Volume % of Feed Type) Coker Naphtha Naphtha
-------------------------------------------------------------------
<S> <C> <C>
Pentane & Heavier 100.03 99.00
-------------------------------------------------------------------
</TABLE>
Price: The price of Treated Naphtha from Naphtha Hydrotreater 1344 is calculated
- -----
as follows:
Treated Naphtha = ( Coker Naphtha to Naphtha Hydrotreater 1344 * 100.03
* ( Price of Untreated Naphtha from DCU 843 + 3.0 cents/
gallon ) + ( Total Unfinished Naphtha - Excessed Unfinished
Naphtha ) * 99.00 * ( Price of Unfinished Naphtha + 1.5
cents/gallon ) ) / ( Coker Naphtha to Naphtha Hydrotreater
1344 * 100.03 + ( Total Unfinished Naphtha - Excessed
Unfinished Naphtha ) * 99.00 )
Where:
Price of Untreated Naphtha from DCU 843 = The price as described in
Exhibit A-13.
Price of Unfinished Naphtha = The price as described in Exhibit A-3.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of Naphtha Hydrotreater
1344.
Quantity Measurement: The following meters shall be used as input to the above
- --------------------
calculations:
Coker Naphtha to Naphtha Hydrotreater 1344: CCR FRC-601
Product Purchase Agreement Page 44 August 3, 1999
<PAGE>
EXHIBIT A-26
Total Naphtha Hydrotreater Feed: CCR FR-677
Platformer Charge CCR FR-863
Quality Measurement: Grab samples shall be taken at least (3) times per week and
- -------------------
analyzed by sulfur, nitrogen, and doctor test.
Product Purchase Agreement Page 45 August 3, 1999
<PAGE>
EXHIBIT A-27
Product: Stripper Off Gas from GFU 241 in Kerosene or Diesel Service
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Component Specification Test Method
--------- ------------- -----------
<S> <C> <C>
H2S 13.58% Mole Typical UOP-539
Water 0.41% Mole Typical UOP-539
Hydrogen 28.81% Mole Typical UOP-539
Methane 13.99% Mole Typical UOP-539
Ethane 14.81% Mole Typical UOP-539
Propane 14.81% Mole Typical UOP-539
Isobutane 5.35% Mole Typical UOP-539
Normal Butane 3.70% Mole Typical UOP-539
Pentane and Heavier 4.12% Mole Typical UOP-539
</TABLE>
Quantity: Coker Company shall sell and Clark shall purchase the portion of each
- --------
component of this Product produced by Coker Company feedstocks in GFU 241. That
portion for each component is calculated as follows:
H2S
---
Coker Company H2S = Total Contained H2S in Stripper Off-Gas * Total Feed
to GFU 241 * Coker Company Crude Oil Volume / Total Crude Oil
Volume
Where:
Total Contained H2S in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 241
(MSCF/D) * Mole Fraction H2S * 0.0907 (LB/SCF)
* 7,105 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Hydrogen
--------
Coker Company Hydrogen = Total Contained Hydrogen in Stripper Off-Gas
* Total Feed to GFU 241 * Coker Company Crude Oil Volume / Total
Crude Oil Volume
Where:
Total Contained Hydrogen in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 241 (MSCF/D)
* Mole Fraction Hydrogen * 0.0053 (LB/SCF) *
60,950 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Methane
-------
Coker Company Methane = Total Contained Methane in Stripper Off-Gas
* Total Feed to GFU 241 * Coker Company Crude Oil Volume / Total
Crude Oil Volume
Where:
Total Contained Methane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 241 (MSCF/D)
* Mole Fraction Methane * 0.0425 (LB/SCF) *
23,840 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Ethane
------
Product Purchase Agreement Page 46 August 3, 1999
<PAGE>
EXHIBIT A-27
Coker Company Ethane = Total Contained Ethane in Stripper Off-Gas * Total
Feed to GFU 241 * Coker Company Crude Oil Volume / Total Crude
Oil Volume
Where:
Total Contained Ethane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 241 (MSCF/D)
* Mole Fraction Ethane * 0.0800 (LB/SCF) *
22,169 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Propane
-------
Coker Company Propane = Total Contained Propane in Stripper Off-Gas
* Total Feed to GFU 241 * Coker Company Crude Oil Volume / Total
Crude Oil Volume
Where:
Total Contained Propane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 241 (MSCF/D) *
Mole Fraction Propane * 0.1187 (LB/SCF) / 177.7 (LB/BBL) *
1000
Isobutane
---------
Coker Company Isobutane = Total Contained Isobutane in Stripper Off-
Gas * Total Feed to GFU 241 * Coker Company Crude Oil Volume /
Total Crude Oil Volume
Where:
Total Contained Isobutane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 241 (MSCF/D)
* Mole Fraction Isobutane * 0.1582 (LB/SCF) /
197.2 (LB/BBL) * 1000
Normal Butane
-------------
Coker Company Normal Butane = Total Contained Normal Butane in Stripper
Off-Gas * Total Feed to GFU 241 * Coker Company Crude Oil
Volume / Total Crude Oil Volume
Where:
Total Contained Normal Butane
In Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 241 (MSCF/D)
* Mole Fraction Normal Butane * 0.1585
(LB/SCF) / 204.6 (LB/BBL) * 1000
Pentane and Heavier
-------------------
Coker Company Pentane
and Heavier = Total Contained Pentane and Heavier in Stripper Off-Gas *
Total Feed to GFU 241 * Coker Company Crude Oil Volume /
Total Crude Oil Volume
Where:
Total Contained Pentane
and Heavier In
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 241 (MSCF/D) *
Mole Fraction Pentane and Heavier * 0.1980
(LB/SCF) / 221.0 (LB/BBL) * 1000
Product Purchase Agreement Page 47 August 3, 1999
<PAGE>
EXHIBIT A-27
Price: For Hydrogen, Methane, and Ethane: The weighted average delivered cost
- -----
of natural gas purchased by Clark converted into dollars per FOEB where 6.0
MMBTU is equivalent to 1.0 FOEB less 0.84 dollars/FOEB.
For contained Propane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu, Texas Eastern Pipeline posting for spot
purchases of propane for each publication day less 0.10 cents/gallon marketing
fee multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of propane in the delivered Product.
For contained Isobutane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu posting for spot purchases of isobutane for
each publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of isobutane in the delivered Product.
For contained Normal Butane delivered from October through February: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Normal Butane delivered from March through September: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day less 3.0 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Pentanes and Heavier: The arithmetic average of the high/low Oil
Price Information Service Mont Belvieu posting for spot purchases of natural
gasoline Non-Dynegy for each publication day less 1.5 cents/gallon less 0.10
cents/gallon marketing fee multiplied by the Inflation Factor less Fractionation
Fee multiplied by the quantity of the Product delivered on that day weighted by
the respective volume of pentanes and heavier in the delivered Product.
For all other contained components: All other components are transferred to
Clark at no cost.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss
Product Purchase Agreement Page 48 August 3, 1999
<PAGE>
EXHIBIT A-27
shall pass at the battery limits of GFU 241.
Quantity Measurement: Quantity measurements shall be taken at GFU 241 meter
- --------------------
FI-104.
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- --------------------
least (3) times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 49 August 3, 1999
<PAGE>
EXHIBIT A-28
Product: High Pressure Purge Gas from GFU 241
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C> <C>
H2S 80 ppmw Maximum Draeger
Higher Heating Value 650 BTU/SCF Typical UOP-539
</TABLE>
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Coker Company Share (FOEB/D) = Total High Pressure Purge Gas from GFU 241
(MSCF/D) * Higher Heating Value (BTU/SCF) / 1000 / 6.0
(MMBTU/FOEB)
Price: The weighted average delivered cost of natural gas purchased by Clark
- ------
converted into dollars per FOEB where 6.0 MMBTU is equivalent to 1.0 FOEB.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 241.
Quantity Measurement: Product quantity measurements shall be taken at GFU 241
- --------------------
XX-XXXX.
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- --------------------
least (3) times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 50 August 3, 1999
<PAGE>
EXHIBIT A-29
Product: Naphtha from GFU 241 in Kerosene or Diesel Service
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C> <C>
FBP 390 degrees F Maximum ASTM D-86
N+A 60.0% LV Typical ASTM D-5134 - Modified to C-15
</TABLE>
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U. S. Gulf Coast Naphtha (Domestic 40 N+A) for
each publication day less 0.15 cents/gallon/N+A number below 40 N+A plus 0.15
cents/gallon/N+A number above 40 N+A less 1.0 cents/gallon less Fractionation
Fee.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 241.
Quantity Measurement: Quantity measurements shall be taken at GFU 241 meter
- --------------------
FRCA-110.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- -------------------
by gas chromatography and distillation.
Product Purchase Agreement Page 51 August 3, 1999
<PAGE>
EXHIBIT A-30
Product: Kerosene from GFU 241 in Kerosene Service
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C> <C>
API Gravity 37.0 Minimum ASTM D-1298,
ASTM D-287, or
ASTM D-4052
API Gravity 51.0 Maximum ASTM D-1298,
ASTM D-287, or
ASTM D-4052
Corrosion 2 hrs. @212 F 1 Maximum ASTM D-130
MSEP 85 Minimum ASTM D-3948
Water Reaction Interface Rating 1b Maximum ASTM D-1094
Freezing Point -40 C Maximum ASTM D-2386
or
ASTM D-5972
Viscosity @ -4 F 8.0 cSt Maximum ASTM D-445
Flash Point 108 F Minimum ASTM D-56
10% 400 F Maximum ASTM D-86
FBP 572 F Maximum ASTM D-86
Residue, % 1.5 Maximum ASTM D-86
Loss, % 1.5 Maximum ASTM D-86
Existent Gum 7 mg/100 ml Maximum ASTM D-381
Thermal Stability Pressure Drop 25 mm/Hg Maximum ASTM D-3241
Thermal Stability Tube Deposit 3 Code Maximum ASTM D-3241
Sulfur 0.30 wt% Maximum ASTM D-2622
Doctor Negative ASTM D-4952
Aromatics 25 vol% Maximum ASTM D-1319
Neutralization Number 0.1 mg KOH/g Maximum ASTM D-974
Smoke / Naphthalenes
Smoke Point 25 Minimum ASTM D-1322
OR
Smoke Point 18 Minimum ASTM D-1322
AND
Naphthalenes 3.0 Maximum ASTM D-1840
</TABLE>
Target specifications are based on current fungible aviation fuel namely
Colonial 54 Grade Jet Fuel. To the extent the specifications change for
Colonial 54 Grade Jet Fuel the target specifications will be changed
accordingly.
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: The arithmetic average of the high/low Platt's Oilgram Price Report
- -----
U.S. Gulf Coast Pipeline posting for spot purchases of Jet/Kero 54 for each
publication less 0.05 cents/gallon marketing fee multiplied by the quantity of
the Product delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss
Product Purchase Agreement Page 52 August 3, 1999
<PAGE>
EXHIBIT A-30
shall pass at the battery limits of GFU 241.
Quantity Measurement: Quantity measurements shall be taken at GFU 241 meter
- --------------------
FRA-105.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- -------------------
for each specification.
Product Purchase Agreement Page 53 August 3, 1999
<PAGE>
EXHIBIT A-31
Product: Diesel from GFU 241 in Diesel Service
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C> <C>
Corrosion 3 hrs. @212 degrees F 1 Maximum ASTM D-130
Viscosity @ 100 degrees F 2.0 cSt Minimum
Viscosity @ 100 degrees F 3.6 cSt Maximum ASTM D-445
Flash Point 130 degrees F Minimum ASTM D-56
90% 540 degrees F Minimum ASTM D-86
90% 640 degrees F Maximum ASTM D-86
FBP 690 degrees F Maximum ASTM D-86
Color 2.5 Maximum ASTM D-1500
Sulfur 0.047 wt% Maximum ASTM D-2622
Ash 0.01 wt% Maximum ASTM D-482
Carbon Residue
(Ramsbottom on 10% Bottom) 0.35 Maximum ASTM D-524
BS&W Less than 0.5 Maximum ASTM D-1796
Haze Rating @77 degrees F (Procedure 2) 2 Maximum ASTM D-4176
Thermal Stability
90 Minutes 150 degrees C Pad Rating 7 Maximum Dupont Scale
OR
Oxidation Stability 2.5 mg/100 ml Maximum ASTM D-2274
</TABLE>
Target specifications are based on current fungible transportation diesel
fuel namely Colonial 74 Grade Low Sulfur Diesel Fuel. To the extent the
specifications change for Colonial 74 Grade Low Sulfur Diesel Fuel the
target specifications will be changed accordingly.
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product. The Coker Company Share is defined
as the output of this product multiplied by the Coker Company Crude Oil Volume
divided by the Total Crude Oil Volume.
Price: The arithmetic average of the high/low Platt's Oilgram Price Report
- -----
U.S. Gulf Coast Pipeline posting for spot purchases of LS No. 2 for each
publication day less 0.05 cents/gallon marketing fee multiplied by the quantity
of the Product delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 241.
Quantity Measurement: Quantity measurements shall be taken at GFU 241 meter
- --------------------
FRA-105.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- --------------------
for each specification.
Product Purchase Agreement Page 54 August 3, 1999
<PAGE>
EXHIBIT A-32
Product: Stripper Off Gas from GFU 242
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Component Specification Test Method
--------- ------------- -----------
<S> <C> <C>
H2S 9.52% Mole Typical UOP-539
Water 0.95% Mole Typical UOP-539
Hydrogen 44.76% Mole Typical UOP-539
Methane 16.67% Mole Typical UOP-539
Ethane 12.86% Mole Typical UOP-539
Propane 7.62% Mole Typical UOP-539
Isobutane 1.90% Mole Typical UOP-539
Normal Butane 1.43% Mole Typical UOP-539
Pentane and Heavier 4.29% Mole Typical UOP-539
</TABLE>
Quantity: Coker Company shall sell and Clark shall purchase the portion of each
- --------
component of this Product produced by Coker Company Feedstock in GFU 242. Coker
Company Feedstock in GFU 242 is defined as the Total Feed to GFU 242 less the
Unfinished Jet from AVU 146 drawn from inventory as defined in Exhibit A-4
multiplied by the Coker Company Crude Oil Volume divided by the Total Crude Oil
Volume. The portion of each component of this Product produced by Coker Company
feedstock in GFU 242 is calculated as follows:
H2S
---
Coker Company H2S = Total Contained H2S in Stripper Off-Gas * Coker
Company Feedstock in GFU 242
Where:
Total Contained H2S in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 242
(MSCF/D) * Mole Fraction H2S * 0.0907 (LB/SCF)
* 7,105 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Hydrogen
Coker Company Hydrogen = Total Contained Hydrogen in Stripper Off-Gas
* Coker Company Feedstock in GFU 242
Where:
Total Contained Hydrogen in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 242 (MSCF/D)
* Mole Fraction Hydrogen * 0.0053 (LB/SCF) *
60,950 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Methane
-------
Coker Company Methane = Total Contained Methane in Stripper Off-Gas
* Coker Company Feedstock in GFU 242
Where:
Total Contained Methane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 242 (MSCF/D)
* Mole Fraction Methane * 0.0425 (LB/SCF) *
23,840 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Product Purchase Agreement Page 55 August 3, 1999
<PAGE>
EXHIBIT A-32
Ethane
------
Coker Company Ethane = Total Contained Ethane in Stripper Off-Gas
* Coker Company Feedstock in GFU 242
Where:
Total Contained Ethane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 242 (MSCF/D)
* Mole Fraction Ethane * 0.0800 (LB/SCF) *
22,169 (BTU/LB) / 1000 / 6.0 (MMBTU/FOEB)
Propane
-------
Coker Company Propane = Total Contained Propane in Stripper Off-Gas
* Coker Company Feedstock in GFU 242
Where:
Total Contained Propane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 242 (MSCF/D)
* Mole Fraction Propane * 0.1187 (LB/SCF) /
177.7 (LB/BBL) * 1000
Isobutane
---------
Coker Company Isobutane = Total Contained Isobutane in Stripper
Off-Gas * Coker Company Feedstock in GFU 242
Where:
Total Contained Isobutane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 242 (MSCF/D)
* Mole Fraction Isobutane * 0.1582 (LB/SCF) /
197.2 (LB/BBL) * 1000
Normal Butane
-------------
Coker Company Normal Butane = Total Contained Normal Butane in Stripper
Off-Gas * Coker Company Feedstock in GFU 242
Where:
Total Contained Normal Butane
In Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 242 (MSCF/D)
* Mole Fraction Normal Butane * 0.1585
(LB/SCF) / 204.6 (LB/BBL) * 1000
Pentane and Heavier
-------------------
Coker Company Pentane
and Heavier = Total Contained Pentane and Heavier in Stripper
Off-Gas * Coker Company Feedstock in GFU 242
Where:
Total Contained Pentane
and Heavier In
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 242 (MSCF/D)
* Mole Fraction Pentane and Heavier * 0.1980
(LB/SCF) / 221.0 (LB/BBL) * 1000
Product Purchase Agreement Page 56 August 3, 1999
<PAGE>
EXHIBIT A-32
Price: For Hydrogen, Methane, and Ethane: The weighted average delivered cost
- -----
of natural gas purchased by Clark converted into dollars per FOEB where 6.0
MMBTU is equivalent to 1.0 FOEB less Fractionation Fee.
For contained Propane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu, Texas Eastern Pipeline posting for spot
purchases of propane for each publication day less 0.10 cents/gallon marketing
fee multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of propane in the delivered Product.
For contained Isobutane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu posting for spot purchases of isobutane for
each publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of isobutane in the delivered Product.
For contained Normal Butane delivered from October through February: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Normal Butane delivered from March through September: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day less 3.0 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Pentanes and Heavier: The arithmetic average of the high/low Oil
Price Information Service Mont Belvieu posting for spot purchases of natural
gasoline Non-Dynegy for each publication day less 1.5 cents/gallon less 0.10
cents/gallon marketing fee multiplied by the Inflation Factor less Fractionation
Fee multiplied by the quantity of the Product delivered on that day weighted by
the respective volume of pentanes and heavier in the delivered Product.
For all other contained components: All other components are transferred to
Clark at no cost.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 242.
Quantity Measurement: Quantity measurements shall be taken at GFU 242 meter
- --------------------
FI-204.
Product Purchase Agreement Page 57 August 3, 1999
<PAGE>
EXHIBIT A-32
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- -------------------
least (3) times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 58 August 3, 1999
<PAGE>
EXHIBIT A-33
Product: High Pressure Purge Gas from GFU 242
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- ----------
<S> <C> <C>
H2S 80 ppmw Maximum Draeger
Higher Heating Value 650 BTU/SCF Typical UOP-539
</TABLE>
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product produced by Coker Company Feedstock
in GFU 242. Coker Company Feedstock in GFU 242 is defined as the Total Feed to
GFU 242 less the Unfinished Jet from AVU 146 drawn from inventory as defined in
Exhibit A-4 multiplied by the Coker Company Crude Oil Volume divided by the
Total Crude Oil Volume.
Coker Company Share (FOEB/D) = Total High Pressure Purge Gas from GFU 242
(MSCF/D) * Higher Heating Value (BTU/SCF) / 1000 / 6.0
(MMBTU/FOEB)
Price: The weighted average delivered cost of natural gas purchased by Clark
- ------
converted into dollars per FOEB where 6.0 MMBTU is equivalent to 1.0 FOEB.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 242.
Quantity Measurement: Product quantity measurements shall be taken at GFU 242
- --------------------
XX-XXXX.
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- -------------------
least (3) times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 59 August 3, 1999
<PAGE>
EXHIBIT A-34
Product: Naphtha from GFU 242
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C> <C>
FBP 390 F Maximum ASTM D-86
N+A 60.0% LV Typical ASTM D-5134 - Modified to C-15
</TABLE>
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product produced by Coker Company Feedstock
in GFU 242. Coker Company Feedstock in GFU 242 is defined as the Total Feed to
GFU 242 less the Unfinished Jet from AVU 146 drawn from inventory as defined in
Exhibit A-4 multiplied by the Coker Company Crude Oil Volume divided by the
Total Crude Oil Volume.
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U. S. Gulf Coast Naphtha (Domestic 40 N+A) for
each publication day less 0.15 cents/gallon/N+A number below 40 N+A plus 0.15
cents/gallon/N+A number above 40 N+A less 1.0 cents/gallon less Fractionation
Fee.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 242.
Quantity Measurement: Quantity measurements shall be taken at GFU 242 meter
- --------------------
FRCA-210.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- --------------------
by gas chromatography and distillation.
Product Purchase Agreement Page 60 August 3, 1999
<PAGE>
EXHIBIT A-35
Product: Kerosene from GFU 242
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C> <C>
API Gravity 37.0 Minimum ASTM D-1298,
ASTM D-287, or
ASTM D-4052
API Gravity 51.0 Maximum ASTM D-1298,
ASTM D-287, or
ASTM D-4052
Corrosion 2 hrs. @212 F 1 Maximum ASTM D-130
MSEP 85 Minimum ASTM D-3948
Water Reaction Interface Rating 1b Maximum ASTM D-1094
Freezing Point -40 C Maximum ASTM D-2386
or
ASTM D-5972
Viscosity @ -4 degrees F 8.0 cSt Maximum ASTM D-445
Flash Point 108 F Minimum ASTM D-56
10% 400 F Maximum ASTM D-86
FBP 572 F Maximum ASTM D-86
Residue, % 1.5 Maximum ASTM D-86
Loss, % 1.5 Maximum ASTM D-86
Existent Gum 7 mg/100 ml Maximum ASTM D-381
Thermal Stability Pressure Drop 25 mm/Hg Maximum ASTM D-3241
Thermal Stability Tube Deposit 3 Code Maximum ASTM D-3241
Sulfur 0.30 wt% Maximum ASTM D-2622
Doctor Negative ASTM D-4952
Aromatics 25 vol% Maximum ASTM D-1319
Neutralization Number 0.1 mg KOH/g Maximum ASTM D-974
Smoke / Naphthalenes
Smoke Point 25 Minimum ASTM D-1322
OR
Smoke Point 18 Minimum ASTM D-1322
AND
Naphthalenes 3.0 Maximum ASTM D-1840
</TABLE>
Target specifications are based on current fungible aviation fuel namely
Colonial 54 Grade Jet Fuel. To the extent the specifications change for
Colonial 54 Grade Jet Fuel the target specifications will be changed
accordingly.
Quantity: Coker Company shall sell and Clark shall purchase the "Coker Company
- --------
Share" of the total output of this Product produced by Coker Company Feedstock
in GFU 242. Coker Company Feedstock in GFU 242 is defined as the Total Feed to
GFU 242 less the Unfinished Jet from AVU 146 drawn from inventory as defined in
Exhibit A-4 multiplied by the Coker Company Crude Oil Volume divided by the
Total Crude Oil Volume.
Price: The arithmetic average of the high/low Platt's Oilgram Price Report U.
- -----
S. Gulf Coast Pipeline posting for spot purchases of Jet/Kero 54 for each
publication less 0.05 cents/gallon marketing fee multiplied by the quantity of
the Product delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Product Purchase Agreement Page 61 August 3, 1999
<PAGE>
EXHIBIT A-35
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 242.
Quantity Measurement: Quantity measurements shall be taken at GFU 242 meter
- --------------------
FRA-205.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- --------------------
for each specification.
Product Purchase Agreement Page 62 August 3, 1999
<PAGE>
EXHIBIT A-36
Product: Stripper Off Gas from GFU 243
- -------
Target Specification:
- --------------------
Component Specification Test Method
--------- ------------- -----------
H2S 15.21% Mole Typical UOP-539
Water 5.16% Mole Typical UOP-539
Hydrogen 11.24% Mole Typical UOP-539
Methane 7.75% Mole Typical UOP-539
Ethane 18.13% Mole Typical UOP-539
Propane 23.05% Mole Typical UOP-539
Isobutane 7.99% Mole Typical UOP-539
Normal Butane 9.13% Mole Typical UOP-539
Pentane and Heavier 2.32% Mole Typical UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the portion of each
- --------
component of this Product produced by Coker Company feedstocks in GFU 243. That
portion for each component is calculated as follows:
H2S
---
Coker Company H2S = Total Contained H2S in Stripper Off-Gas *
((Total volume of Diesel from AVU 146 - Diesel charge volume
to GFU 241 + Total volume of Light Gas Oil from DCU 843) *
Coker Company Crude Oil Volume / Total Crude Oil Volume -
Coker Company Share of the Excessed Unfinished Diesel) /
Total charge volume to GFU 243
Where:
Total Contained H2S in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 243
(MSCF/D) * Mole Fraction H2S * 0.0907
(LB/SCF) * 7,105 (BTU/LB) / 1000 / 6.0
(MMBTU/FOEB)
Excessed Unfinished Diesel = The volume of Unfinished Diesel as
defined in Exhibit A-5
Hydrogen
--------
Coker Company Hydrogen = Total Contained Hydrogen in Stripper Off-Gas
* ((Total volume of Diesel from AVU 146 - Diesel
charge volume to GFU 241 + Total volume of Light Gas
Oil from DCU 843 ) * Coker Company Crude Oil Volume
/ Total Crude Oil Volume - Coker Company Share of
the Excessed Unfinished Diesel) / Total charge
volume to GFU 243
Where:
Total Contained Hydrogen in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 243
(MSCF/D) * Mole Fraction Hydrogen * 0.0053
(LB/SCF) * 60,950 (BTU/LB) / 1000 / 6.0
(MMBTU/FOEB)
Excessed Unfinished Diesel = The volume of Unfinished Diesel as
defined in Exhibit A-5
Methane
-------
Product Purchase Agreement Page 63 August 3, 1999
<PAGE>
EXHIBIT A-36
Coker Company Methane = Total Contained Methane in Stripper Off-
Gas * ((Total volume of Diesel from AVU 146 - Diesel
charge volume to GFU 241 + Total volume of Light Gas
Oil from DCU 843) * Coker Company Crude Oil Volume /
Total Crude Oil Volume - Coker Company Share of the
Excessed Unfinished Diesel) / Total charge volume to
GFU 243
Where:
Total Contained Methane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 243
(MSCF/D) * Mole Fraction Methane * 0.0425
(LB/SCF) * 23,840 (BTU/LB) / 1000 / 6.0
(MMBTU/FOEB)
Excessed Unfinished Diesel = The volume of Unfinished Diesel as
defined in Exhibit A-5
Ethane
------
Coker Company Ethane = Total Contained Ethane in Stripper Off-
Gas * ((Total volume of Diesel from AVU 146 - Diesel
charge volume to GFU 241 + Total volume of Light Gas
Oil from DCU 843 ) * Coker Company Crude Oil Volume /
Total Crude Oil Volume - Coker Company Share of the
Excessed Unfinished Diesel) / Total charge volume to
GFU 243
Where:
Total Contained Ethane in
Stripper Off-Gas (FOEB/D) = Total Stripper Off-Gas from GFU 243
(MSCF/D) * Mole Fraction Ethane * 0.0800
(LB/SCF) * 22,169 (BTU/LB) / 1000 / 6.0
(MMBTU/FOEB)
Excessed Unfinished Diesel = The volume of Unfinished Diesel as
defined in Exhibit A-5
Propane
-------
Coker Company Propane = Total Contained Propane in Stripper Off-
Gas * ((Total volume of Diesel from AVU 146 - Diesel
charge volume to GFU 241 + Total volume of Light Gas
Oil from DCU 843 ) * Coker Company Crude Oil Volume /
Total Crude Oil Volume - Coker Company Share of the
Excessed Unfinished Diesel) / Total charge volume to
GFU 243
Where:
Total Contained Propane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 243 (MSCF/D)
* Mole Fraction Propane * 0.1187 (LB/SCF) /
177.7 (LB/BBL) * 1000
Excessed Unfinished Diesel = The volume of Unfinished Diesel as
defined in Exhibit A-5
Isobutane
---------
Coker Company Isobutane = Total Contained Isobutane in Stripper
Off-Gas * ((Total volume of Diesel from AVU 146 -
Diesel charge volume to GFU 241 + Total volume of Light
Gas Oil from DCU 843 ) * Coker Company Crude Oil Volume
/ Total Crude Oil Volume - Coker Company Share of the
Excessed Unfinished Diesel) / Total charge volume to
GFU 243
Product Purchase Agreement Page 64 August 3, 1999
<PAGE>
EXHIBIT A-36
Where:
Total Contained Isobutane in
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 243 (MSCF/D) *
Mole Fraction Isobutane * 0.1582 (LB/SCF) / 197.2
(LB/BBL) * 1000
Excessed Unfinished Diesel = The volume of Unfinished Diesel as defined
in Exhibit A-5
Normal Butane
-------------
Coker Company Normal Butane = Total Contained Normal Butane in
Stripper Off-Gas * ((Total volume of Diesel from
AVU 146 - Diesel charge volume to GFU 241 + Total
volume of Light Gas Oil from DCU 843 ) * Coker
Company Crude Oil Volume / Total Crude Oil Volume -
Coker Company Share of the Excessed Unfinished
Diesel) / Total charge volume to GFU 243
Where:
Total Contained Normal Butane
In Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 243 (MSCF/D)
* Mole Fraction Normal Butane * 0.1585 (LB/SCF)
/ 204.6 (LB/BBL) * 1000
Excessed Unfinished Diesel = The volume of Unfinished Diesel as defined
in Exhibit A-5
Pentane and Heavier
-------------------
Coker Company Pentane
and Heavier = Total Contained Pentane and Heavier in Stripper Off-Gas *
((Total volume of Diesel from AVU 146 -Diesel charge
volume to GFU 241 + Total volume of Light Gas Oil from DCU
843 ) * Coker Company Crude Oil Volume / Total Crude Oil
Volume - Coker Company Share of the Excessed Unfinished
Diesel) / Total charge volume to GFU 243
Where:
Total Contained Pentane
and Heavier In
Stripper Off-Gas (B/D) = Total Stripper Off-Gas from GFU 243 (MSCF/D) *
Mole Fraction Pentane and Heavier * 0.1980
(LB/SCF) / 221.0 (LB/BBL) * 1000
Excessed Unfinished Diesel = The volume of Unfinished Diesel as defined in
Exhibit A-5
Price: For Hydrogen, Methane, and Ethane: The weighted average delivered cost
- -----
of natural gas purchased by Clark converted into dollars per FOEB where 6.0
MMBTU is equivalent to 1.0 FOEB less Fractionation Fee.
For contained Propane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu, Texas Eastern Pipeline posting for spot
purchases of propane for each publication day less 0.10 cents/gallon marketing
fee multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of propane in the delivered Product.
Product Purchase Agreement Page 65 August 3, 1999
<PAGE>
EXHIBIT A-36
For contained Isobutane: The arithmetic average of the high/low Oil Price
Information Service Mont Belvieu posting for spot purchases of isobutane for
each publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of isobutane in the delivered Product.
For contained Normal Butane delivered from October through February: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day plus 1.25 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Normal Butane delivered from March through September: The
arithmetic average of the high/low Oil Price Information Service Mont Belvieu,
Texas Eastern Pipeline posting for spot purchases of normal butane for each
publication day less 3.0 cents/gallon less 0.10 cents/gallon marketing fee
multiplied by the Inflation Factor less Fractionation Fee multiplied by the
quantity of the Product delivered on that day weighted by the respective volume
of normal butane in the delivered Product.
For contained Pentanes and Heavier: The arithmetic average of the high/low Oil
Price Information Service Mont Belvieu posting for spot purchases of natural
gasoline Non-Dynegy for each publication day less 1.5 cents/gallon less 0.10
cents/gallon marketing fee multiplied by the Inflation Factor less Fractionation
Fee multiplied by the quantity of the Product delivered on that day weighted by
the respective volume of pentanes and heavier in the delivered Product.
For all other contained components: All other components are transferred to
Clark at no cost.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 243.
Quantity Measurement: Product quantity measurements shall be taken at GFU 243
- --------------------
meter FI-160. Total charge volume to GFU 243 shall be taken at GFU 243 meter
FIC-102.
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- --------------------
least (3) times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 66 August 3, 1999
<PAGE>
EXHIBIT A-37
Product: Low Pressure Purge Gas from GFU 243
- -------
Target Specification:
- -----------------------
Property Specification Test Method
-------- ------------- -----------
H2S 80 ppmw Maximum Draeger
Higher Heating Value 750 BTU/SCF Typical UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in GFU 243. That portion is
calculated as follows:
Coker Company Portion = Total Low Pressure Purge Gas * ((Total volume of
Diesel from AVU 146 - Diesel charge volume to GFU 241 +
Total volume of Light Gas Oil from DCU 843 ) * Coker Company
Crude Oil Volume / Total Crude Oil Volume - Coker Company
Share of the Excessed Unfinished Diesel) / Total charge
volume to GFU 243
Where:
Total Low Pressure
Purge Gas (FOEB/D) = Total Low Pressure Purge Gas from GFU
243 (MSCF/D) * Higher Heating Value (BTU/SCF) / 1000 /
6.0 (MMBTU/FOEB)
Excessed Unfinished Diesel = The volume of Unfinished Diesel as defined in
Exhibit A-5
Price: The weighted average delivered cost of natural gas purchased by Clark
- ------
converted into dollars per FOEB where 6.0 MMBTU is equivalent to 1.0 FOEB.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 243.
Quantity Measurement: Product quantity measurements shall be taken at GFU 243
- --------------------
meter FIC-117. Total charge volume to GFU 243 shall be taken at GFU 243 meter
FIC-102.
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- --------------------
least (3) times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 67 August 3, 1999
<PAGE>
EXHIBIT A-38
Product: High Pressure Purge Gas from GFU 243
- -------
Target Specification:
- -----------------------
Property Specification Test Method
-------- ------------- -----------
H2S 80 ppmw Maximum Draeger
Higher Heating Value 650 BTU/SCF Typical UOP-539
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in GFU 243. That portion is
calculated as follows:
Coker Company Portion = Total High Pressure Purge Gas * ((Total
volume of Diesel from AVU 146 - Diesel charge volume to GFU
241 + Total volume of Light Gas Oil from DCU 843) * Coker
Company Crude Oil Volume / Total Crude Oil Volume - Coker
Company Share of the Excessed Unfinished Diesel) / Total
charge volume to GFU 243
Where:
Total High Pressure
Purge Gas (FOEB/D) = Total High Pressure Purge Gas from GFU
243 (MSCF/D) * Higher Heating Value (BTU/SCF) / 1000
/ 6.0 (MMBTU/FOEB)
Excessed Unfinished Diesel = The volume of Unfinished Diesel as defined
in Exhibit A-5
Price: The weighted average delivered cost of natural gas purchased by Clark
- ------
converted into dollars per FOEB where 6.0 MMBTU is equivalent to 1.0 FOEB.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 243.
Quantity Measurement: Product quantity measurements shall be taken at GFU 243
- --------------------
meter FIC-110. Total charge volume to GFU 243 shall be taken at GFU 243 meter
FIC-102.
Quality Measurement: Grab samples shall be taken and analyzed by draeger and at
- --------------------
least (3) times per week and analyzed by gas chromatography.
Product Purchase Agreement Page 68 August 3, 1999
<PAGE>
EXHIBIT A-39
Product: Naphtha from GFU 243
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
FBP 390 F Maximum ASTM D-86
N+A 60.0% LV Typical ASTM D-5134 - Modified to C-15
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in GFU 243. That portion is
calculated as follows:
Coker Company Portion = Total Naphtha from GFU 243 * ((Total volume
of Diesel from AVU 146 - Diesel charge volume to GFU 241 +
Total volume of Light Gas Oil from DCU 843) * Coker Company
Crude Oil Volume / Total Crude Oil Volume - Coker Company
Share of the Excessed Unfinished Diesel) / Total charge
volume to GFU 243
Where:
Excessed Unfinished Diesel = The volume of Unfinished Diesel as defined in
Exhibit A-5
Price: The arithmetic average of the high/low Oil Price Information Service
- -----
posting for spot purchases of U. S. Gulf Coast Naphtha (Domestic 40 N+A) for
each publication day less 0.15 cents/gallon/N+A number below 40 N+A plus 0.15
cents/gallon/N+A number above 40 N+A less 1.0 cents/gallon less Fractionation
Fee.
The Fractionation Fee is calculated as the sum of a variable and fixed fee
component as follows:
Fractionation Fee = Base Variable Fee * Current Natural Gas / 2.236 +
Fixed Variable Fee * (1.02) (N-1998)
Where:
Base Variable Fee = 0.627 dollars per barrel
Current Natural Gas = The weighted average delivered cost of natural gas
purchased by Clark converted into dollars per MMBTU.
Fixed Variable Fee = 0.344 dollars per barrel
N = Current 4 digit year (i.e. 2002)
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 243.
Quantity Measurement: Product quantity measurements shall be taken at GFU 243
- --------------------
meter FIC-115. Total charge volume to GFU 243 shall be taken at GFU 243 meter
FIC-102.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- --------------------
by gas chromatography and distillation.
Product Purchase Agreement Page 69 August 3, 1999
<PAGE>
EXHIBIT A-40
Product: Diesel from GFU 243
- -------
Target Specification:
- --------------------
<TABLE>
<CAPTION>
Property Specification Test Method
-------- ------------- -----------
<S> <C>
Corrosion 3 hrs. @212 degrees F 1 Maximum ASTM D-130
Viscosity @ 100 degrees F 2.0 cSt Minimum ASTM D-445
Viscosity @ 100 degrees F 3.6 cSt Maximum ASTM D-445
Flash Point 130 degrees F Minimum ASTM D-56
90% 540 degrees F Minimum ASTM D-86
90% 640 degrees F Maximum ASTM D-86
FBP 690 degrees F Maximum ASTM D-86
Color 2.5 Maximum ASTM D-1500
Sulfur 0.047 wt% Maximum ASTM D-2622
Ash 0.01 wt% Maximum ASTM D-482
Carbon Residue
(Ramsbottom on 10% Bottom) 0.35 Maximum ASTM D-524
BS&W (less than)0.05 Maximum ASTM D-1796
Haze Rating @77 degrees F (Procedure 2) 2 Maximum ASTM D-4176
Thermal Stability
90 Minutes 150 degrees C Pad Rating 7 Maximum Dupont Scale
OR
Oxidation Stability 2.5 mg/100 ml Maximum ASTM D-2274
</TABLE>
Target specifications are based on current fungible transportation diesel
fuel namely Colonial 74 Grade Low Sulfur Diesel Fuel. To the extent the
specifications change for Colonial 74 Grade Low Sulfur Diesel Fuel the target
specifications will be changed accordingly.
Quantity: Coker Company shall sell and Clark shall purchase the portion of this
- --------
Product produced by Coker Company feedstocks in GFU 243. That portion is
calculated as follows:
Coker Company Portion = Total Diesel from GFU 243 * (( Total volume of
Diesel from AVU 146 - Diesel charge volume to GFU 241 + Total
volume of Light Gas Oil from DCU 843 ) * Coker Company Crude
Oil Volume / Total Crude Oil Volume - Coker Company Share of
the Excessed Unfinished Diesel ) / Total charge volume to GFU
243
Where:
Excessed Unfinished Diesel = The volume of Unfinished Diesel as defined in
Exhibit A-5
Price: The arithmetic average of the high/low Platt's Oilgram Price Report U.
- -----
S. Gulf Coast Pipeline posting for spot purchases of LS No. 2 for each
publication day less 0.05 cents/gallon marketing fee multiplied by the quantity
of the Product delivered on that day.
The price for non-publication day deliveries shall be the arithmetic average of
the prices for the last proceeding publication day and the next following
publication day.
Delivery Point/Risk of Loss: This Product shall be delivered by pipeline to
- ---------------------------
Clark and risk of loss shall pass at the battery limits of GFU 243.
Quantity Measurement: Product quantity measurements shall be taken at GFU 243
- --------------------
meter FIC-
Product Purchase Agreement Page 70 August 3, 1999
<PAGE>
EXHIBIT A-40
112. Total charge volume to GFU 243 shall be taken at GFU 243 meter
FIC-102.
Quality Measurement: Grab samples shall be taken (3) times per week and analyzed
- --------------------
for each specification.
Product Purchase Agreement Page 71 August 3, 1999
<PAGE>
EXHIBIT A-41
Product: Liquid Sulfur
- -------
Target Specification:
- --------------------
Property Specification Test Method
-------- ------------- -----------
H2S 100 ppmw Maximum Draeger
Quantity: Coker Company shall sell and Clark shall purchase the total output of
- --------
this product from SRU 545.
Price: Actual 3rd party sales price adjusted back to the custody transfer point
- -----
for transportation and storage cost less $1.00 per long ton marketing fee.
Delivery Point/Risk of Loss: This product shall be delivered into railcar,
- ---------------------------
truck, or storage facility suitable to load marine vessels and risk of loss
shall pass at the point of delivery.
Quantity Measurement / Metering Facilities: Based on invoiced quantity.
- ------------------------------------------
Quality Measurement: Grab samples shall be taken as needed by 3rd party sales
- -------------------
agreements.
Product Purchase Agreement Page 72 August 3, 1999
<PAGE>
EXHIBIT A-42
Product: Hydrogen to Clark Hydrogen Gathering System
- -------
Target Specification:
- --------------------
Component Specification Test Method
--------- ------------- -----------
Hydrogen 99.9% Mole Minimum UOP-539
Pressure 585 psig Minimum
Quantity: Coker Company shall sell and Clark shall purchase Hydrogen necessary
- --------
to supplement Clark internally produced hydrogen.
Price: The actual cost Coker Company pays for hydrogen under contract with Air
- -----
Products.
Delivery Point/Risk of Loss: This product shall be delivered by pipeline to the
- ---------------------------
Clark Hydrogen Gathering System.
Quantity Measurement: Product quantity measurements shall be taken at HGS meter
- --------------------
XX-XXXX.
Quality Measurement: Grab samples shall be taken at least (3) times per week
- -------------------
and analyzed by gas chromatography.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 284,879
<SECURITIES> 1,450
<RECEIVABLES> 206,404
<ALLOWANCES> 1,868
<INVENTORY> 252,192
<CURRENT-ASSETS> 780,124
<PP&E> 799,504
<DEPRECIATION> 184,169
<TOTAL-ASSETS> 1,513,853
<CURRENT-LIABILITIES> 470,870
<BONDS> 794,913
0
0
<COMMON> 0
<OTHER-SE> 183,233
<TOTAL-LIABILITY-AND-EQUITY> 1,513,853
<SALES> 4,517,757
<TOTAL-REVENUES> 4,530,216
<CGS> 4,102,012
<TOTAL-COSTS> 4,398,196
<OTHER-EXPENSES> 60,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,595
<INCOME-PRETAX> (50,684)
<INCOME-TAX> 16,154
<INCOME-CONTINUING> (34,530)
<DISCONTINUED> 32,290
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,240)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
