FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[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 NUMBER 1-7910
TOSCO CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 95-1865716
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
72 CUMMINGS POINT ROAD
STAMFORD, CONNECTICUT 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 977-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.75 par value New York Stock Exchange
Pacific Stock Exchange
9 5/8% Series B First Mortgage Bonds due March 15, 2002 New York Stock Exchange
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.
X Yes __ No
The aggregate market value of the voting stock held by non-affiliates of
the registrant on February 29, 2000 based on the closing price at which such
stock was sold on the New York Stock Exchange on such date was $3,858,786,422.
Registrant's Common Stock outstanding at February 29, 2000 was 144,253,698
shares.
Portions of registrant's definitive Proxy Statement relating to its 2000
Annual Meeting of Shareholders are incorporated by reference into Part III, as
set forth herein.
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]
<PAGE>
TOSCO CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
Items 1 and 2. Business and Properties 1
Introduction 1
Petroleum Refining, Supply, Distribution, and Marketing 1
Other Activities 9
Office Properties 9
Employees 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 8. Financial Statements and Supplementary Data 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 23
Item 10. Directors and Executive Officers of the Registrant 23
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners
and Management 23
Item 13. Certain Relationships and Related Transactions 23
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 23
Index to Consolidated Financial Statements
and Financial Statement Schedules F-1
<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
INTRODUCTION
Tosco Corporation ("Tosco") is one of the largest independent refiners
and marketers of petroleum products in the United States, operating principally
on the East and West Coasts of the United States. Tosco operates eight
refineries with the capacity to process approximately 950,000 barrels per day of
crude oil, feedstocks, and blendstocks into various petroleum products. Through
its retail distribution network, Tosco sells approximately 4.5 billion gallons
of fuel annually. Tosco has owned the "76" products terminal and pipeline
distribution system since 1997, expanding upon Tosco's 1996 purchase of The
Circle K Corporation ("Circle K"), by which Tosco became one of the nation's
largest operators of company-controlled convenience stores. On February 29,
2000, Tosco acquired and began operating an additional system of 1,740 gasoline
and convenience outlets from Exxon Corporation and Mobil Oil Corporation
(together, "ExxonMobil"), further expanding Tosco's retail distribution network.
These ExxonMobil marketing assets consist of Mobil-branded stations from
Virginia through New Jersey and Exxon-branded stations from New York through
Maine. Tosco also engages in related commercial activities throughout the United
States and internationally. Tosco's refining and marketing business is managed
and operated through two divisions, Tosco Refining Company, based in Linden, New
Jersey, and Tosco Marketing Company, based in Tempe, Arizona.
Tosco was incorporated under the laws of the State of Nevada in 1955.
Its principal executive offices are located at 72 Cummings Point Road, Stamford,
Connecticut 06902 and its telephone number is (203) 977-1000.
PETROLEUM REFINING, SUPPLY, DISTRIBUTION, AND MARKETING
REFINING
Tosco, through five major facilities consisting of eight refineries,
processed in 1999 approximately 850,000 barrels per day of crude oil,
feedstocks, and blendstocks into various petroleum products, chiefly light
transportation fuels (gasoline, diesel, and jet fuel) and heating oil. Tosco's
refining facilities are located on the East and West Coasts of the United
States.
Bayway Refinery ("Bayway"), located in Linden, New Jersey, on the New
York Harbor and Trainer Refinery ("Trainer"), located in Trainer, Pennsylvania,
near Philadelphia, are operated in coordination with each other. Bayway can
process in excess of 275,000 barrels per day of crude oil and other feedstocks.
Bayway's facilities include hydrodesulfurization units and the largest fluid
catalytic cracking unit in the world. Bayway produces transportation fuels and
is a principal supplier of heating oil to the U.S. East Coast. In addition,
Bayway currently produces approximately 4.7 million barrels per year of light
petroleum products, including propylene used in the manufacture of
polypropylene. In late 1999, Tosco began the two-year construction of a 775
million pound per year polypropylene plant at Bayway. Tosco will use Union
Carbide's UNIPOL(TM) PPProcess for the plant. When completed, Tosco's production
from the new plant, will comprise a full range of homopolymers and random and
impact copolymers. Polypropylene is used to make a wide range of film, fiber,
and molded consumer and industrial products.
Trainer, acquired in a shutdown mode in February 1996 and started up
by Tosco in May 1997 after an approximately $100 million modernization and
upgrading program, can process approximately 180,000 barrels per day of crude
oil. Trainer's fluid catalytic cracking unit, hydrocracking unit and
hydrodesulfurization units enable it to produce a high percentage of light
refined petroleum products. Bayway and Trainer, Tosco's two East Coast
refineries, have ready access to marine, rail, and truck transportation and
product distribution pipelines, giving them considerable flexibility to change
their raw material input and product output to respond to changing market
conditions.
Avon Refinery ("Avon"), Rodeo Refinery ("Rodeo"), both located in the
San Francisco Bay area, and Santa Maria Refinery ("Santa Maria"), located on the
mid-California coast (collectively, the San Francisco Area Refinery ("SFAR")
System), are operated on an integrated basis. Avon, shutdown for a portion of
1999, has approximately 140,000 barrels per day of crude oil processing
capacity. Rodeo and Santa Maria, both acquired in 1997 from Union Oil Company of
California ("Unocal"), together have approximately 120,000 barrels per day of
crude oil distillation capacity. SFAR is technologically complex with coking,
catalytic cracking, hydrocracking, and hydrodesulfurizing units to accommodate
comparatively lower gravity crude oils. Coke calcining plants, acquired from
Unocal in 1997, are located near Rodeo and Santa Maria and are operated as part
of SFAR. The calcining facilities process green petroleum coke, a by-product of
refining operations, for use in the production of aluminum and other industrial
applications.
The Los Angeles Refinery ("LAR") System, consisting of two linked
refineries located in Carson and Wilmington, California, acquired from Unocal in
1997, has approximately 140,000 barrels per day of crude oil and other feedstock
processing capacity. LAR is a technologically complex facility with coking,
catalytic cracking, hydrocracking, and hydrodesulfurizing units to accommodate
comparatively lower gravity crude oils. It is capable of processing a broad
range of crude oils and other feedstocks into a high percentage of light refined
petroleum products, consisting chiefly of transportation fuels. Pipelines and
marine facilities link LAR to various crude supply and product distribution
systems in the large southern California market area.
In the Northwest, Ferndale Refinery ("Ferndale") is located on Puget
Sound, 100 miles north of Seattle. It is connected by the Olympic pipeline to
its major retail markets, has crude oil distillation capacity of approximately
95,000 barrels per day, and is equipped with thermal catalytic cracking and
hydrodesulfurization units, as well as modern marine facilities.
The following table sets forth certain significant refining operating
data for the years ended December 31, 1999, 1998, and 1997. A barrel is equal to
42 gallons.
REFINING DATA SUMMARY (A):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
------------- -------------- ---------
Average charge barrels input per day:
<S> <C> <C> <C>
Crude oil 762,600 837,200 703,400
Other feed and blending stocks 88,300 107,600 90,000
------------- -------------- -------------
850,900 944,800 793,400
============= ============== =============
Average barrels of petroleum products produced per day:
Gasoline 456,800 507,200 415,800
Distillates 186,900 217,100 196,400
Jet fuel 68,500 62,600 49,800
Residuals 82,800 93,200 77,700
Propane 17,800 20,800 15,800
Petroleum coke 24,900 29,800 21,300
Other finished products 7,900 11,600 11,000
------------- -------------- -------------
845,600 942,300 787,800
============= ============== =============
(a) The Refining Data Summary presents the operating results of the following refineries:
- Bayway Refinery, located on the New York Harbor.
- Ferndale Refinery, located on Washington's Puget Sound.
- Los Angeles Refinery System, comprised of two refineries in Los Angeles
(for the period beginning April 1, 1997).
- San Francisco Area Refinery System, comprised of the Rodeo-Santa Maria
complex (for the period beginning April 1, 1997) and the Avon Refinery
(shut down in March 1999 for a safety review and safety training for
employees following a fire at a crude unit on February 23, 1999, was
restarted by the end of July 1999).
- Trainer Refinery, located near Philadelphia (for the period beginning
May 8, 1997).
</TABLE>
<PAGE>
RAW MATERIAL SUPPLY
During 1999, Tosco's crude oil, feedstock, and blendstock requirements
of approximately 850,000 barrels per day were supplied by third parties. Tosco's
East Coast requirements of approximately 435,000 barrels per day were met from
foreign imports. Approximately 17% of Tosco's East Coast supply requirements
were met by a long-term contract with Statoil (Norway). Tosco's West Coast
requirements of approximately 415,000 barrels per day were supplied primarily
through domestic production, mainly Californian and Alaskan crudes, and to a
lesser extent foreign imports. Approximately 70% of Tosco's West Coast
requirements were met by long-term contracts, with suppliers such as BP Oil
Supply Company ("BP Oil"), Chevron U.S.A. ("Chevron"), Exxon Corporation
("Exxon"), Equiva Trading Company ("Equiva"), and Occidental Petroleum Company
("Occidental"). These barrels are delivered to Tosco's West Coast refineries
primarily through the major crude oil pipelines in California. To the extent
these pipelines are not available, Tosco's future operating results may be
adversely affected. The balance of Tosco's 1999 West and East Coast crude oil
and feedstock requirements were purchased on the spot market. During 1999, Tosco
resold less than 5% of its raw material purchases.
In connection with the two East Coast refineries' reliance on
European, as well as Middle East and West African sources, as their primary
suppliers of crude oil, Tosco's U.K. subsidiary (established in 1994 for the
purpose of obtaining better information and access to the European markets)
continues to act as a resource. Tosco's long-term lease agreement with Statia
Terminals for 3,600,000 barrels of crude oil storage in Nova Scotia, Canada,
entered into in 1994, remains in place. Similarly, Tosco's twelve-year
agreement, through a subsidiary, also entered into in 1994 with Neptune Orient
Lines, Ltd. of Singapore for the charter of four 100,000 deadweight ton ("DWT")
crude oil tankers, remains in place. The double hulled tankers were built to
maximize the use of Bayway's dock receiving facilities as well as to meet the
requirements of the U.S. Oil Pollution Act of 1990. The tankers are being
utilized to move crude oil to Bayway and Trainer, or other locations, from the
Nova Scotia storage location and for direct shipments from suppliers.
In February 1998, Tosco entered into a fifteen year contract with
Occidental to buy a substantial portion of Occidental's crude oil production
from the Elk Hills oil field in California. In 1999, Tosco completed the
building of a 15-mile pipeline from the Elk Hills field to existing lines that
serve Tosco's SFAR System, reducing Tosco's delivered raw material cost and
better utilizing Tosco's existing pipeline assets. This domestic supply of light
crude oil significantly reduces the need for Tosco to purchase waterborne crude
oil for Tosco's West Coast operations. Tosco anticipates it will purchase
additional Elk Hills production as it becomes available.
Tosco believes its average crude oil inventory is presently sufficient
for normal refinery operations at its refineries. Tosco's crude oil inventory
level is managed in light of market risk, carrying costs, and delivery method.
The cost to Tosco of crude oil and other feedstocks depends on many
factors, including the terms of purchase, credit, and delivery. In general,
heavy crude oils are less expensive than lighter crude oils. Thus, if Tosco's
West Coast refineries' supply of San Joaquin Valley heavy crude oil is reduced
or curtailed, or if its price relative to lighter crude oils increases, Tosco's
operations could be adversely affected. Similarly, since Congress and the
President deregulated the Alaska North Slope ("ANS") crude oil market by
permitting ANS to be exported in 1995, the deregulation may result in increases
in ANS crude prices from time to time. With respect to Tosco's East Coast
refineries, Bayway and Trainer, if their foreign sources of crude oil or the
marine system for delivering crude oil (including required marine insurance for
possible marine environmental liabilities) were curtailed, Tosco's operations
could be adversely affected. In addition, the loss, or an adverse change in the
terms, of the crude oil supply contracts or the loss of other sources or means
of delivery of crude oil could have a material adverse effect on Tosco's
operating results. The volatility of prices and quantities of crude oil that may
be purchased on the spot market or pursuant to long- and short-term contracts
could materially adversely affect Tosco's operating results.
WHOLESALE MARKETING AND DISTRIBUTION
Tosco sells unbranded refined petroleum products to wholesale
purchasers. Tosco's wholesale sales of gasoline and distillates are made to
large end users, retailers, independent marketers, and jobbers who serve
unbranded markets, including the retail, industrial, commercial, agricultural,
and governmental classes of trade. Sales are also made to other refiners and
resellers, both major and independent. Tosco generally sells its other
industrial petroleum products directly to the end users and resellers of such
industrial products. Tosco's costs associated with meeting the federal and state
environmental requirements, particularly the CARB Phase II requirements in
California, were significant. Tosco cannot be certain that its costs will be
fully recovered. Tosco's ability to sell its products on economical terms is
dependent, in part, on the competitive position of its customers in changing and
often turbulent markets. During 1999 and 1998, wholesale gasoline products
(including product transfers to retail marketing) accounted for approximately
55% and 53%, respectively, of Tosco's wholesale petroleum revenues, while
distillates (including product transfers to retail marketing) accounted for
approximately 25% of Tosco's wholesale petroleum revenues in both 1999 and 1998.
Tosco's average inventory of gasoline and distillates is approximately 10 to 15
days of wholesale sales.
There were no long-term sales contracts (i.e., in excess of one year)
that accounted for more than 10% of Tosco's consolidated revenues.
During 1999 and 1998, Tosco purchased for resale an average of
approximately 340,000 and 268,000 barrels per day, respectively, of petroleum
products from third parties.
In 1999, Tosco distributed refined petroleum products, principally in
the Eastern and Western United States, through an extensive distribution network
comprised of 173 proprietary and third-party terminal locations in 27 states and
by means of pipelines, rail tank cars, trucks, ocean-going tankers, and barges.
See Note 18 to the Consolidated Financial Statements. Tosco's proprietary
petroleum trucking operations, located primarily on the West Coast, deliver
approximately 4,000,000 gallons per day of products.
Tosco also engages in commercial activities related to its petroleum
refining, distribution, and marketing businesses throughout the United States
and internationally. These commercial operations are based in Tempe, Arizona.
LUBRICANTS
Tosco's 76 Lubricants Company markets lubricating oils, gear
lubricants, and greases domestically and internationally. Tosco entered the
lubricants market with its acquisition of a lubricants manufacturing,
distribution, and marketing business from Unocal in 1997. Tosco's four lubricant
blending and packaging facilities are located in Los Angeles, California,
Richmond, California, Portland, Oregon, and Savannah, Georgia. In 1999, almost
65 million gallons of automotive and commercial motor oils, industrial oils,
gear oils, and greases were sold from these plants directly to large end users,
retail discount chains, and to over 200 petroleum jobbers in the United States
and in 70 countries internationally. In 1999, jobbers accounted for
approximately 80% of all sales.
Tosco entered into long-term supply agreements with base stock
refiners to ensure a supply of the high quality base stocks needed for its
lubricants operations. Tosco does not anticipate difficulty obtaining necessary
supplies in the event these suppliers could not meet their commitments.
RETAIL MARKETING
At December 31, 1999, Tosco's retail system included approximately
4,790 retail marketing locations operating under the BP, Exxon, 76, and Circle K
tradenames. Of these, approximately 2,070 are company-controlled and operated,
approximately 1,240 are company-controlled and dealer-operated, approximately
1,190 are owned and operated by third parties, and approximately 290 are
franchise locations. Approximately 350 of the company-controlled and operated
sites do not sell gasoline. On February 29, 2000, Tosco acquired and began
operating an additional 1,740 retail marketing locations from ExxonMobil in the
Eastern United States of which approximately 685 are company-controlled and
1,055 are owned and operated by third parties. This system of former ExxonMobil
marketing assets consists of Mobil-branded stations from Virginia through New
Jersey and Exxon-branded stations from New York through Maine. In addition to
associated supply arrangements and undeveloped properties, Tosco also acquired
the exclusive right to use the Exxon and Mobil brands in each of the respective
states for at least 10 years.
Tosco's U.S. retail marketing business grew significantly during the
last five years. Prior to 1996, Tosco's retail system consisted of approximately
1,000 independently owned retail gasoline stations and approximately 115
company-operated convenience outlets. With the acquisition of Circle K in May
1996, Tosco's total retail marketing system grew to nearly 4,000 convenience and
gasoline outlets in 36 states and its company-operated sites grew to nearly
2,400. Tosco's marketing system was further expanded with the March 1997
acquisition of Unocal's West Coast retail gasoline system which added
approximately 1,800 gasoline and convenience locations. During 1999, Tosco
acquired approximately 230 gasoline service station and convenience stores in
major Southeastern urban areas and Pittsburgh, Pennsylvania, from BPAmoco p.l.c.
and Boardman Petroleum, Inc. In connection with the asset acquisition from
BPAmoco, Tosco entered into an agreement with BPAmoco to return Tosco's license
to use the BP trade name at the end of an approximate two year period. Tosco
also completed the divestiture of approximately 370 convenience stores in
non-core markets during 1999.
As of December 31, 1999, approximately 2,540 of Tosco's gasoline
stations were 76-branded. As a result of Tosco's agreement to return the BP
trade name to BPAmoco, Tosco is in the process of rebranding its Northwest BP
stations, Southeast BP and Amoco stations, and Southeast Smile stations to the
76 brand. The land, buildings, and/or equipment at approximately 1,850 of
Tosco's company-controlled (company-operated and dealer-operated) gasoline
station and convenience locations are being leased from third parties pursuant
to long-term leases. Additionally, approximately 1,480 of Tosco's gasoline
stations are operated by third parties pursuant to contracts which expire at
varying terms over the next 14 years. Since 1999, Tosco has been the largest
operator of company-controlled convenience stores.
The following table sets forth certain significant retail operating
data for the years ended December 31, 1999, 1998, and 1997.
RETAIL DATA SUMMARY:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997 (A)
------------- -------------- -----------
<S> <C> <C> <C>
Volume of fuel sold (millions of gallons) 4,451.6 4,490.4 4,159.4
Blended fuel margin (cents per gallon) (b) 11.4 12.1 12.8
Number of gasoline stations at year end 4,143 4,476 4,652
Merchandise sales (millions of dollars) $ 2,039.7 $ 2,097.8 $ 2,003.4
Merchandise margin (percentage of sales) 28.7% 29.6% 29.4%
Number of merchandise stores at year end 2,070 2,313 2,395
Other retail gross profit (millions of dollars) $ 115.9 $ 112.9 $ 116.2
(a) The Retail Data Summary includes the operations of gasoline service
stations acquired subsequent to the March 31, 1997 acquisition from Unocal.
(b) Blended fuel margin is calculated as fuel sales minus fuel cost of sales
divided by fuel gallons sold.
</TABLE>
GASOLINE DISTRIBUTION AND SUPPLY
In 1999, the retail operations of Tosco sold over 4.4 billion gallons
of gasoline including the operations of the convenience store system. The
convenience stores provide an important advantage in the sale of gasoline in the
competitive retail gasoline markets, as do the presence of such amenities as car
washes. All Tosco gasoline stations accept major credit cards.
MERCHANDISING
In 1999, the retail operations of Tosco, including Circle K and 76
products, had over $2 billion of merchandise sales. Offering gasoline is an
important competitive advantage in the convenience store retailing industry. The
convenience stores benefit not only from the sale of gasoline but also from
increased customer traffic in the stores occasioned by gasoline purchases.
COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS
Tosco is subject to extensive federal, state, and local laws and
regulations governing releases into the environment and the storage,
transportation, disposal, and clean-up of hazardous materials, including, but
not limited to, the federal Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, laws relating to underground storage tanks
("USTs"), and analogous state and local laws and regulations. See "Legal
Proceedings."
Environmental compliance for Tosco's refining and marketing business
has required, and will continue to require, capital expenditures. Tosco spent
approximately $54 million in 1999 and $88 million in 1998 for all such capital
expenditures by the two operating systems, of which $27 million and $30 million
related to the refining division for 1999 and 1998, respectively. Tosco
currently estimates that capital expenditures for environmental compliance for
the refining division may approximate $48 million and $53 million for 2000 and
2001, respectively. Such amounts do not include amounts that may be necessary to
produce gasoline to meet changing "clean fuels" specifications.
Environmental capital expenditures for Tosco's retail division,
including those relating to upgrading or replacing existing USTs, were
approximately $27 million in 1999 and $58 million in 1998. Tosco's current
estimates for 2000 and 2001 retail division capital expenditures are
approximately $10 million and $13 million, respectively.
Because anticipated remedial actions are subject to negotiation with
governmental agencies, the amount and timing of actual cash expenditures are
uncertain. In addition, further investigative work and negotiations with
governmental agencies may result in different or additional remedial actions
that Tosco cannot presently predict.
The U.S. Environmental Protection Agency (the "EPA") has established
standards for UST owners and operators relating to, among other things: (i)
maintaining leak detection systems; (ii) upgrading UST systems; (iii)
implementing corrective action in response to releases; (iv) closing out-of-use
USTs to prevent future releases; (v) maintaining appropriate records; and (vi)
maintaining evidence of financial responsibility for corrective action and
compensating third parties for bodily injury and property damage resulting from
UST releases. All states in which Tosco operates also have adopted UST
regulatory programs.
Under applicable federal and certain state regulatory programs, Tosco
was obligated to upgrade or replace by December 22, 1998, those USTs it owned or
operated which did not meet new corrosion protection and overfill/spill
containment standards. In some states, this upgrading or replacement was
required to be accomplished by earlier dates. Tosco evaluated each of its sites
selling gasoline to determine the type of expenditures required to comply with
these and other requirements under the federal and state UST regulatory
programs. In certain instances where Tosco believed it would be unable to meet
the December 22, 1998 or other applicable deadline, Tosco took sites out of
service until they could be brought up to the applicable standards or took them
out of service permanently.
Tosco is also advocating two important initiatives for clean fuels,
which are also believed to be beneficial to the environment. First, Tosco
believes that MTBE, which poses a potential water pollution threat, should be
reduced or eliminated as an additive in gasoline. Secondly, Tosco vigorously
supports a dramatic reduction in the amount of sulfur allowed in gasoline - from
the current national average of approximately 350 ppm down to 80 ppm or less.
Automobile manufacturers have indicated that a nationwide low-sulfur, clean fuel
specification is important for the design of new cars to achieve the low
tailpipe emission levels mandated in 2004.
Governmental regulations are complex and subject to different
interpretations. Therefore, future action and regulatory initiatives could
result in changes to expected operating permits, additional remedial actions, or
increased capital expenditures and operating costs that Tosco cannot presently
assess with certainty. See Note 11 to the Consolidated Financial Statements.
COMPETITION
Many of Tosco's competitors in the petroleum industry are fully
integrated companies engaged, on a national or international basis or both, in
many segments of the petroleum business, including exploration, production,
transportation, refining, and marketing, on scales much larger than Tosco. Such
competitors may have greater flexibility than Tosco in responding to or
absorbing market changes occurring in one or more of such segments. Tosco's
petroleum refining and marketing business is not seasonal.
Tosco faces strong competition in its market for the sale of refined
petroleum products, including gasoline. Such competitors, especially major
integrated oil companies, have in the past and may in the future engage in
marketing practices that result in profit margin deterioration for Tosco for
periods of time, causing an adverse effect on Tosco. Tosco does not believe that
there is any one or a small number of dominant competitors in the petroleum
refining and marketing business. Tosco does not know its precise competitive
position therein. Tosco's principal methods of competing are low unit cost of
production, price, or service. Tosco believes it is able to compete with these
methods because of its facilities, their locations, and direction of management.
Tosco must purchase all of its crude oil and substantially all of its
feedstock supplies from others, while some of its competitors have proprietary
sources of crude oil available for their own refineries. Tosco has agreements
with British Petroleum, Statoil, Equiva, Shell, and others to provide Tosco
certain amounts of crude oil. Under present market conditions, Tosco does not
anticipate difficulty in obtaining necessary crude oil supplies. See "Petroleum
Refining, Supply, Distribution, and Marketing - Raw Material Supply."
Tosco faces similarly strong competition in the sale of petroleum
lubricants. Recent large consolidations through mergers and acquisitions in the
previously fragmented lubricants market are making this market even more
competitive. Major integrated oil company brands are the main competitors in the
engine oil segment. These same companies as well as specialty oil marketers are
active in the industrial oil market. Tosco must purchase all of its lubricants
base stock from its competitors. See "Petroleum Refining Supply, Distribution,
and Marketing - LUBRICANTS."
Tosco also faces strong competition in the market for the sale of
retail gasoline and merchandise. The competitors include service stations of
large integrated gasoline companies, independent gasoline service stations,
other convenience stores owners and operators, fast food stores, supermarkets,
warehouse retailers, neighborhood grocery stores, and other similar retail
outlets, some of which are well-recognized national or regional retail systems.
Tosco believes that among the key competitive factors in the retail gasoline
markets are site location, name recognition, customer loyalty, ease of access,
store management, product selection, pricing, hours of operation, store safety,
cleanliness, product promotions, and marketing. Retail gasoline similar or
identical to that sold by Tosco is generally available to its competitors. Tosco
competes by pricing gasoline competitively, combining its retail gasoline
business with convenience stores which provide a wide variety of branded
products at reasonable prices, and using effective advertising and promotional
campaigns.
OPERATING PROPERTIES
Tosco, itself or through its wholly owned subsidiaries, owns the sites
at which its refineries are located (2,300-acre site at Avon, 1,300-acre site at
Bayway, 850-acre site at Ferndale, 650-acre site at LAR, 1,210-acre site at
Rodeo, 1,790-acre site at Santa Maria and a 500-acre site at Trainer) and the
buildings, tanks, pipelines, and related facilities.
Tosco had available at December 31, 1999, through ownership, lease
agreement, exchange, or other appropriate arrangement, the use of storage tanks,
loading racks, wharves, and other related assets at approximately 173 terminal
distribution locations in 27 states. Tosco believes its refinery-related
properties are well-maintained and are suitable and adequate for their present
purposes.
At December 31, 1999, Tosco or its wholly owned subsidiaries owned or
controlled by lease over 3,300 retail service stations located in 19 states.
After Tosco's February 29, 2000 ExxonMobil Asset Acquisition, Tosco owns or
controls by lease over 3,900 such stations in 26 states. In addition to
marketing transportation fuels (gasoline and diesel), many of the stations have
convenience store, car wash, and/or automotive repair facilities.
PATENTS AND TRADEMARKS
Tosco's patents relating to petroleum and lubricants operations are
not material to Tosco as a whole. The ownership of the 76, Union 76, and Circle
K tradenames and other trademarks employed in the marketing of petroleum
products are important to Tosco's operations.
<PAGE>
OTHER ACTIVITIES
OIL SHALE
Tosco and its wholly owned subsidiary, The Oil Shale Corporation ("Oil
Shale"), have interests in oil shale properties aggregating approximately 23,100
net mineral acres in Colorado and 20,525 net mineral acres in Utah. Tracts vary
in size from l60 to l7,570 mineral acres. Tosco is also the owner of water
rights and certain oil shale processes and technologies. In addition, Oil Shale
controls approximately l,900 acres of oil shale properties through unpatented
mining claims. (Unpatented properties are those in which the United States
Government has not conveyed to others all of its right, title, and interest.)
OFFICE PROPERTIES
At December 31, 1999, Tosco occupied a total of approximately 800,000
square feet of office space principally in Linden, New Jersey, Tempe, Arizona,
and Stamford, Connecticut, and at various office locations for the refining and
retail systems. The office space occupied by Tosco is generally suitable and
adequate for its purposes.
EMPLOYEES
At December 3l, 1999, Tosco had approximately 24,600 employees at
various locations, including approximately 18,200 store personnel, of which
approximately 4,900 are part-time. Approximately 11% of Tosco's employees,
primarily those employed at the refining facilities, are represented by labor
organizations. Tosco believes that its labor relations with its employees are
good.
ITEM 3. LEGAL PROCEEDINGS
A refinery in Duncan, Oklahoma, formerly owned by Tosco, is subject to
investigation by the Oklahoma Department of Environmental Quality ("ODEQ"). The
ODEQ requested that Tosco participate with the former owner, Sun Company, Inc.
(R&M) ("Sun"), from whom Tosco purchased the site, and the subsequent owners,
including those to whom Tosco sold the site, in the investigation and potential
remediation of alleged environmental contamination. On September 29, 1995, Tosco
entered into a Consent Agreement and Final Order with ODEQ to investigate the
extent of contamination at the refinery, conduct certain interim remedial
actions, and prepare a remedial action plan. On April 10, 1995, Tosco filed a
complaint for declaratory relief against Sun (TOSCO CORPORATION V. SUN COMPANY,
INC. (R&M)), U.S. District Court, Western District of Oklahoma, Case No. Civ. 95
556M) to recover the costs of complying with the ODEQ order, and seeking an
order determining Tosco's and Sun's rights and legal relations under various
environmental laws, including the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), the Resource Conservation and
Recovery Act ("RCRA") and the Oil Pollution Act ("OPA"), and under the Purchase
Agreement through which Tosco purchased the Duncan Refinery, relating to the
costs of environmental investigation and potential remediation at the site. The
complaint was subsequently amended to name Koch Industries, Inc. ("Koch"),
another former owner, as another defendant. On February 14, 1996, Tosco obtained
default judgments against some of the current owners of the refinery. In January
1998, Tosco entered into a Settlement Agreement with Sun, pursuant to which Sun
agreed to pay $7 million in exchange for a release from liability with respect
to the site. In early 1998, a trial was held on Tosco's claim against Koch. The
court ruled in Tosco's favor that Koch was responsible for effectively 15% of
past and future investigation and remediation costs at the site. In November
1999, Koch's May 4, 1998 appeal to the 10th Circuit Court of Appeals, seeking
review of the trial court decision, was argued.
In a case filed in 1996 by private litigants against all major
petroleum refiners, distributors, and retailers in California, including Tosco,
alleging that the defendants restrained trade and restricted the supply of a
certain type of cleaner burning gasoline sold in California, AGUILAR, ET AL. V.
ATLANTIC RICHFIELD CORPORATION, ET AL. (Superior Court of California, County of
San Diego, Case No. 00700810), the court granted the Defendants' Motions for
Summary Judgment in October 1997. In late January 2000, the California Court of
Appeals affirmed the lower court's summary judgment in favor of the defendants,
including Tosco (reversing the lower court's January 29, 1998, ruling in which
the lower court had reversed itself and ordered a new trial.) On January 28,
1998, a plaintiff allegedly representing a class of all wholesale purchasers of
gasoline in the State of California sued nine petroleum refineries, including
Tosco, making essentially the same allegations as those made in the Aguilar
case, GILLEY V. ATLANTIC RICHFIELD CORP., ET AL., (U.S. District Court, Southern
District of California, Case No. 93-CVU132BTM). The court has stayed all
proceedings in this matter pending the decision of the Court of Appeals in the
AGUILAR case.
On October 22, 1998, a complaint was filed by a private litigant,
purportedly on behalf of a class of all direct or indirect purchasers of
California diesel fuel between March 19, 1996 and December 31, 1997, against all
California refiners of California diesel fuel (CAL-TEX CITRUS JUICE, ET AL. V.
ATLANTIC RICHFIELD COMPANY, ET AL. Superior Court of California, County of
Sacramento, Case No. 98AS05227). The complaint alleges violations of various
state statutes by the defendants' alleged conspiracy to fix prices of California
diesel fuel. Tosco has filed an Answer.
In October 1998, a complaint was filed against gasoline refiners and
wholesalers in Hawaii, including Tosco, by the State of Hawaii alleging that
defendants fixed the price of gasoline and allocated market share and seeking
damages and injunctive relief (BRONSTER V. CHEVRON CORPORATION, ET AL., U.S.
District Court, District of Hawaii, Case No. CV9800792SPK). Tosco filed a Motion
to Dismiss. In 1999, in response to Tosco's Motion to Dismiss, which was granted
in part and denied in part, the State amended its complaint to make essentially
the same allegations.
In four cases, complaints were filed by private litigants, a water
company, and a municipality against numerous defendants, including Tosco,
alleging violation of state law in the production and sale of gasoline which
included an additive, methyl tertiary butyl ether, (KUBAS, ET AL. V. UNOCAL
CORPORATION, ET AL., Superior Court of California, County of Los Angeles, Case
No. BC191876, COMMUNITIES FOR A BETTER ENVIRONMENT V. UNOCAL CORPORATION, ET
AL., Superior Court of California, County of San Francisco, Case No. 997013,
SOUTH TAHOE PUBLIC UTILITY DISTRICT V. ATLANTIC RICHFIELD COMPANY, ET AL., U.S.
District Court, District of Delaware, Civil Action No. 98-336; THE CITY OF
DINUBA V. UNOCAL CORPORATION, ET AL., Superior Court of California, County of
San Francisco, Case No. 305450). It is alleged that the additive contaminated
water supplies. Tosco has filed Answers in all cases.
The costs of remedial actions in environmental cases are highly
uncertain due to, among other items, the complexity and evolving nature of
governmental laws and regulations and their interpretations as well as the
varying costs and effectiveness of alternative cleanup technologies. However,
Tosco presently believes that any cost in excess of the amounts already provided
for in the financial statements should not have a materially adverse effect upon
Tosco's operations or financial condition. Tosco further believes that a portion
of future environmental costs, as well as environmental expenditures previously
made, will be recovered from other responsible parties under contractual
agreements and existing laws and regulations. See Notes 11 and 20 to the
Consolidated Financial Statements.
There are various other suits and claims pending against Tosco, and
its subsidiaries, which in the opinion of Tosco are not material or meritorious
or are substantially covered by insurance. While it is impossible to estimate
with certainty the ultimate legal and financial liability with respect to these
suits and claims, Tosco believes the aggregate amount of such liabilities will
not result in monetary damages that in the aggregate would be material to the
business or operations of Tosco.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Served as an Principal Occupation
Name Age Officer Since and Positions Held
---- --- ------------- --------------------
Thomas D. O'Malley 58 1989 Chairman of the Board and Chief
Executive Officer of Tosco since
January 1990; President of Tosco
from May 1993 to May 1997 and
from October 1989 to May 1, 1990.
Jefferson F. Allen 54 1990 President of Tosco since May 1997
and Chief Financial Officer since
June 1990; Executive Vice
President from June 1990 to May
1997; Treasurer of Tosco from
June 1990 to October 1995;
various positions, including
Chairman and CEO, with Comfed
Bancorp, Inc., and related
entities from November 1988 to
June 1990.
Robert J. Lavinia 53 1993 Executive Vice President of Tosco
and President of Tosco Marketing
Company (a division of Tosco)
since February 1996; Senior Vice
President of Tosco from May 1994
to February 1996; Vice President
of Tosco from 1993 to May 1994;
President, Tosco Energy
Corporation during 1992; prior to
1992, various positions with
Phibro Energy for a period in
excess of five years.
Dwight L. Wiggins 59 1993 Executive Vice President of Tosco
and President of Tosco Refining
Company (a division of Tosco)
since February 1996; Senior Vice
President of Tosco from May 1994
to February 1996; Vice President
of Tosco from January 1993 to May
1994; President of Bayway
Refining Company since January
1993; New Jersey Area Manager for
Exxon Company U.S.A. 1990 to
1993.
Wilkes McClave III 52 1989 Senior Vice President of Tosco
since May 1996 and General
Counsel of Tosco since May 1990;
Vice President of Tosco from May
1990 to May 1996; Secretary of
Tosco since August 1989;
Assistant General Counsel of
Tosco from January 1986 to May
1990.
Peter A. Sutton 54 1992 Senior Vice President of Tosco
since August 1998; Vice President
of Tosco from January 1992 to
August 1998; Senior Vice
President of Tosco Refining
Company since May 1990; various
other positions with Tosco for a
period in excess of five years.
Duane B. Bordvick 54 1997 Senior Vice President of Tosco
for safety, health, and the
environment since February 2000;
Vice President of Tosco for
environmental and external
affairs from February 1997 to
February 2000; Vice President of
Tosco Refining Company for a
period in excess of five years.
Craig R. Deasy 55 1986 Vice President and Treasurer of
Tosco since October 1995; Vice
President and Treasurer of Bayway
Refining Company since April
1993; various other positions
with Tosco for a period in excess
of five years.
William E. Hantke 52 1999 Vice President of Tosco for
development since May 1999;
various other positions with
Tosco since 1990; various finance
and accounting positions in oil
and other commodity industries
since 1975.
Ann Farner Miller 48 1996 Vice President of Tosco for
governmental relations since May
1996; director of governmental
relations of Tosco Refining
Company for a period in excess of
five years.
Richard W. Reinken 43 1994 Vice President and Chief
Information Officer of Tosco
since November 1994; Senior Vice
President of Tosco Marketing
Company since June 1996;
Consultant, Andersen Consulting
from 1985 to 1994.
Robert I. Santo 56 1992 Vice President of Tosco since
January 1998; Chief Accounting
Officer of Tosco since January
1992; various other positions
with Tosco for a period in excess
of five years.
Wanda Williams 53 1996 Vice President of Tosco for human
resources since May 1996; Vice
President of Tosco Marketing
Company since May 1996; Vice
President of Circle K for human
resources from June 1993 to May
1996; various other positions
with Circle K from July 1992 to
May 1996; various human resources
positions in the oil industry and
convenience store industry from
1971 to 1992.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Tosco's Common Stock is traded on the New York Stock Exchange ("NYSE")
and the Pacific Stock Exchange. Set forth below are the high and low sales
prices as reported on the NYSE Composite Tape.
PRICE RANGE OF COMMON STOCK
<TABLE>
<CAPTION>
1999 High Low Dividend 1998 High Low Dividend
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $26 5/16 $19 5/16 $0.06 1st Quarter $37 7/8 $31 5/8 $0.06
2nd Quarter 28 23 $0.07 2nd Quarter 36 5/8 26 3/8 $0.06
3rd Quarter 28 13/16 24 5/8 $0.07 3rd Quarter 30 7/8 20 7/8 $0.06
4th Quarter 30 5/16 23 15/16 $0.07 4th Quarter 29 19 3/4 $0.06
The number of Tosco shareholders of record on February 29, 2000 was 8,595.
</TABLE>
DIVIDEND POLICY
Tosco has paid a regular quarterly cash dividend on its Common Stock
since the third quarter of 1989. Pursuant to the terms of Tosco's Revolving
Credit Facility and its bond indentures, dividends on Tosco's Common Stock are
permitted to the extent Tosco satisfies certain defined criteria. Continued
payment of such quarterly dividend is also subject to profitable results of
operations, which are primarily dependent on the continued favorable performance
of Tosco's operating facilities and favorable operating margins. There can be no
assurance that Tosco will be able to continue payment of such quarterly
dividend.
ITEM 6. SELECTED FINANCIAL DATA
The following Selected Financial Data are qualified in their entirety
by the more detailed Consolidated Financial Statements and related Notes at the
end of this report. The Selected Financial Data for each of the five years ended
December 31, 1999, are derived from the Consolidated Financial Statements of
Tosco audited by PricewaterhouseCoopers LLP, independent accountants.
<PAGE>
TOSCO CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Millions of Dollars, Except Per Share and Ratio Data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
STATEMENT OF INCOME INFORMATION 1999 1998 1997 (A) 1996 (B) 1995
---- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C>
Sales $14,362.1 $12,021.5 $13,281.6 $9,922.6 $7,284.1
Operating contribution (c) $1,258.8 $1,215.7 $1,168.1 $725.6 $389.4
Depreciation and amortization (308.4) (313.9) (303.5) (184.5) (111.4)
Special items:
Inventory (writedown) recovery 240.0 (240.0) (53.0)
Restructuring (charge) recovery 2.1 (40.0) (13.5) (5.2)
Avon Refinery start-up costs (43.1)
Gain on sale of retail assets in non-core markets 40.5
Interest expense, net (118.8) (122.7) (134.5) (83.4) (52.8)
Net income $441.7 $106.2 $212.7 $146.3 $77.1
Diluted earnings per share $2.83 $0.67 $1.37 $1.16 $0.69
Cash dividends per common share 0.27 0.24 0.24 0.22 0.21
December 31,
BALANCE SHEET INFORMATION 1999 1998 1997 1996 1995
----- ---- ---- ---- ------
Total assets $6,212.4 $5,842.8 $5,974.9 $3,554.8 $2,003.2
Revolving credit facility $106.0 $196.0 $166.0 $- $45.0
Long-term debt 1,352.9 1,358.6 1,415.3 826.8 579.0
--------- --------- -------- --------- --------
Debt 1,458.9 1,554.6 1,581.3 826.8 624.0
Trust Preferred Securities (d) 300.0 300.0 300.0 300.0
Shareholders' equity 2,108.3 1,913.0 1,944.1 1,070.3 627.1
--------- --------- -------- --------- --------
Total capitalization $3,867.2 $3,767.6 $3,825.4 $2,197.1 $1,251.1
========= ========= ======== ========= ========
Debt to total capitalization ratio 0.38 0.41 0.41 0.38 0.50
Book value per common share $14.65 $12.57 $12.44 $8.17 $5.64
(a) Includes the operations of 76 Products for the period commencing March 31, 1997 (date acquired).
(b) Includes the operations of The Circle K Corporation for the period commencing May 30, 1996 (date acquired).
(c) Operating contribution is calculated as sales minus cost of sales.
(d) Trust Preferred Securities consist of company-obligated, mandatorily redeemable, convertible preferred securities of
Tosco Financing Trust, holding solely 5.75% convertible junior subordinated debentures of Tosco.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Tosco's mix of refining and marketing businesses allowed it to post
good results for 1999 in a weak market. Income from operations (before special
items) for 1999 increased over 1998, despite the volatility in product prices
throughout 1999. Special items for 1999 include a $240 million inventory
write-up, a $40 million gain on the sale of retail sites, an $8 million LIFO
inventory liquidation gain, and non-recurring costs of $43 million related to
the restart of the Avon Refinery. Tosco upgraded its marketing division during
1999 through the acquisition of over 200 quality sites from BP/Amoco and
Boardman Petroleum in the Southeast. In addition, Tosco sold 372 convenience
stores in non-core markets during 1999. On February 29, 2000, Tosco acquired and
began operating retail systems consisting of 1,740 gasoline and convenience
outlets from Exxon Corporation and Mobil Oil Corporation (collectively
"ExxonMobil"). These outlets comprise Exxon's Northeast and Mobil's Middle
Atlantic systems. During 1999, Tosco was added to the S&P 500 Index and its
credit rating was further upgraded within the investment grade category by S&P
Rating Service. The S&P 500 Index is one of the most widely used benchmarks for
U.S. equity performance.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA) 1999 1998 1997 (A)
------------- -------------- ------------
<S> <C> <C> <C>
Sales $ 14,362.1 $ 12,021.5 $ 13,281.6
Cost of sales (13,103.3) (10,805.8) (12,113.5)
------------- -------------- -------------
Operating contribution 1,258.8 1,215.7 1,168.1
Depreciation and amortization (308.4) (313.9) (303.5)
Special items:
Inventory (writedown) recovery 240.0 (240.0) (53.0)
Restructuring (charge) recovery 2.1 (40.0)
Avon Refinery start-up costs (43.1)
Gain on sale of retail assets in non-core markets 40.5
Selling, general, and administrative expenses (305.2) (300.3) (296.3)
Interest expense, net (118.8) (122.7) (134.5)
------------- ------------- -------------
Income before income taxes and distributions on Trust Preferred
Securities 765.9 198.8 380.8
Income taxes (314.0) (82.5) (158.0)
------------- ------------- -------------
Income before distributions on Trust Preferred Securities 451.9 116.3 222.8
Distributions on Trust Preferred Securities, net of income tax benefit (10.2) (10.1) (10.1)
------------- ------------- -------------
Net income $ 441.7 $ 106.2 $ 212.7
============= ============= =============
Earnings per share (b) $ 2.83 $ 0.67 $ 1.37
============= ============== =============
(a) Results of operations include the West Coast petroleum refining, marketing,
and related supply and transportation operations acquired from Union Oil
Company of California ("Unocal") on March 31, 1997 (the "76 Products
Acquisition").
(b) Earnings per share throughout Management's Discussion and Analysis of
Financial Condition and Results of Operations are expressed on a diluted
basis.
</TABLE>
<PAGE>
REFINING DATA SUMMARY (A):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
------------- -------------- ---------
Average charge barrels input per day (b):
<S> <C> <C> <C>
Crude oil 762,600 837,200 703,400
Other feed and blending stocks 88,300 107,600 90,000
------------- -------------- -------------
850,900 944,800 793,400
============= ============== =============
Average barrels of petroleum products produced per day (b):
Clean products (c) 712,200 786,900 662,000
Other finished products 133,400 155,400 125,800
------------- -------------- -------------
845,600 942,300 787,800
============= ============== =============
Operating margin per charge barrel (d) $ 5.11 $ 4.61 $ 4.89
============= ============== =============
(a) The Refining Data Summary presents the operating results of the following refining facilities:
- Bayway Refinery, located on the New York Harbor.
- Ferndale Refinery, located on Washington's Puget Sound.
- Los Angeles Refinery System, comprised of two refineries in Los Angeles
(for the period beginning April 1, 1997)
- San Francisco Area Refinery System, comprised of the Rodeo-Santa Maria
complex (for the period beginning April 1, 1997) and the Avon Refinery.
(The Avon Refinery was shutdown in March 1999 for a safety review
following a fire at a crude unit on February 23, 1999. All major
processing units had been restarted by the end of July 1999.)
- Trainer Refinery, located near Philadelphia (for the period beginning
May 8, 1997).
(b) A barrel is equal to 42 gallons.
(c) Clean products are defined as clean transportation fuels (gasoline, diesel,
and jet fuel) and heating oil.
(d) Operating margin per charge barrel is calculated as operating contribution,
excluding refinery operating costs, divided by total refinery charge
barrels. Operating contribution includes insurance recoveries.
</TABLE>
RETAIL DATA SUMMARY:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997 (A)
------------- -------------- -----------
<S> <C> <C> <C>
Volume of fuel sold (millions of gallons) 4,451.6 4,490.4 4,159.4
Blended fuel margin (cents per gallon) (b) 11.4 12.1 12.8
Number of gasoline stations at year end 4,143 4,476 4,652
Merchandise sales (millions of dollars) $ 2,039.7 $ 2,097.8 $ 2,003.4
Merchandise margin (percentage of sales) 28.7% 29.6% 29.4%
Number of merchandise stores at year end 2,070 2,313 2,395
Other retail gross profit (millions of dollars) $ 115.9 $ 112.9 $ 116.2
(a) The Retail Data Summary includes the operations of gasoline service stations
acquired in the 76 Products Acquisition.
(b) Blended fuel margin is calculated as fuel sales minus fuel cost of sales
divided by fuel gallons sold.
</TABLE>
<PAGE>
1999 COMPARED TO 1998
Tosco earned net income before special items of $297 million ($1.92
per share) during 1999. These results, which include insurance recoveries
related to the Avon Refinery incident which replaced otherwise lost operational
profit, represent a 10% increase in net income before special items of $270
million ($1.66 per share) for 1998. Special items for 1999 include a $240
million ($142 million after-tax and $0.89 per share) write-up of LIFO
inventories previously written-down to their net realizable value, a $40 million
($24 million after-tax and $0.15 per share) gain on the sale of 372 retail sites
in non-core markets, an $8 million ($5 million after-tax and $0.03 per share)
LIFO inventory liquidation gain, and non-recurring costs of $43 million ($25
million after-tax and $0.16 per share) related to the restart of the Avon
Refinery following its stand-down for a safety review. After special items,
Tosco earned net income of $442 million ($2.83 per share) in 1999 compared to
$106 million ($0.67 per share) in 1998. Results of operations for 1998 included
a $240 million ($140 million after tax, $0.88 per share) non-cash inventory
writedown and a $40 million ($23 million after tax, $0.15 per share)
restructuring charge. Sales in 1999 were $14.4 billion compared to $12.0 billion
in 1998. This increase of $2.4 billion was attributable to increased product
prices partially offset by lower refinery production and retail merchandise
sales. Production declines were primarily due to the stand-down of the Avon
Refinery and the turnaround of the Bayway Refinery cat cracker in March and
April 1999.
On February 23, 1999, a fire occurred at a crude unit at the San
Francisco Area Refinery, Avon facility. The fire was quickly isolated and
extinguished with no offsite effects or health risks to the community. In March,
the Avon Refinery was shutdown while a thorough safety review and extensive
employee safety training were conducted. In May, Tosco began the process of
restarting the refinery and all major processing units were restarted by the end
of July. See Note 16 to the Consolidated Financial Statements.
Operating contribution of $1.3 billion for 1999 increased by $43
million compared to 1998. The increase was from refining ($45 million) partially
offset by a decrease from marketing ($2 million).
The increase in refining operating contribution of $45 million for the
1999 year compared to 1998 was primarily due to increased operating margins per
charge barrel ($5.11 in 1999 compared to $4.61 in 1998). This was partially
offset by lower production rates in 1999 (850,900 barrels per day ("B/D") in
1999 compared to 944,800 B/D in 1998). The improvement in consolidated operating
margins during 1999 were the result of improved West Coast margins, due to
increased demand coupled with reduced production, partially offset by lower East
Coast margins. West Coast throughputs were reduced at several California
refineries, including Tosco's Avon Refinery, during 1999 due to unscheduled
outages of major processing units. East Coast operating margins were among the
lowest levels in recent history. Cost of sales for 1999 was reduced by $42
million ($25 million after-tax and $0.16 per diluted share) for insurance
recoveries related to the Avon Refinery incident and an $8 million LIFO
inventory liquidation gain.
Marketing operating contribution for 1999 was $531 million compared to
$533 million in 1998. The decrease of $2 million was primarily due to lower
blended fuel margins for 1999. As a result of reduced store counts, fuel volumes
and merchandise sales for 1999 were lower than 1998, but both amounts increased
in 1999 compared to 1998 on a per store basis.
Depreciation and amortization for 1999 was $308 million compared to
$314 million in 1998. The decrease of $6 million was due to a $24 million
reduction in depreciation attributable to Tosco's January 1, 1999 extension of
its refinery and distribution assets' useful lives. This was partially offset by
1999 depreciation on assets placed in service throughout 1999. See Note 6 to the
Consolidated Financial Statements.
In December 1999, Tosco reversed (based on December 31, 1999 price
levels) $240 million of net realizable value write-downs of its raw material and
product inventories. These inventories had been written-down to their net
realizable value at December 31, 1998. The 1998 writedown was the result of the
steep market decline in crude oil and product prices in 1998 lowering the value
of inventories acquired in connection with Tosco's acquisitions since 1993.
During 1999, Tosco incurred non-recurring expenses of $43 million
related primarily to the restart of the Avon Refinery. These start-up costs did
not include any normal recurring expenses for maintaining the refinery or
training employees during the stand-down period. See Note 16 to the Consolidated
Financial Statements.
During 1998, Tosco recorded a $40 million charge primarily related to
the restructuring of its San Francisco Area Refinery System. In April 1999,
management announced that layoffs and consolidation of functions planned for
1999 would not occur as originally contemplated. Accordingly, remaining employee
termination cost accruals totaling $2 million were reversed in 1999. See Note 8
to the Consolidated Financial Statements.
Tosco has completed its present program of divestiture of convenience
stores in non-core markets. In 1999, Tosco realized a gain of $40 million from
the sale of 372 convenience stores. Operations from these convenience stores did
not significantly impact operating contribution during 1999.
Net interest expense during 1999 was $4 million less than 1998 due
primarily to lower levels of borrowings partially offset by increases in
interest rates under the Revolving Credit Facility.
Income taxes, including the benefit associated with the distributions
on company-obligated, mandatorily redeemable, convertible preferred securities
("Trust Preferred Securities"), were $307 million for 1999 compared to $75
million in 1998. The increase was due to higher taxable income in 1999. During
1999, Tosco reduced its effective income tax rate to 41.0% from 41.5% used in
1998 based on an evaluation of state income taxes given Tosco's current mix of
profits.
1998 COMPARED TO 1997
Tosco earned net income of $106 million ($0.67 per share) in 1998
compared to $213 million ($1.37 per share) in 1997. Results of operations for
1998 include a $240 million ($140 million after tax, $0.88 per share) non-cash
inventory writedown and a $40 million ($23 million after tax, $0.15 per share)
restructuring charge. Results of operations for 1997 include a $53 million ($31
million after tax, $0.19 per share) non-cash inventory writedown. Sales in 1998
were $12.0 billion compared to $13.3 billion in 1997. This decrease of $1.3
billion was attributable to lower product prices partially offset by higher
refinery throughput and retail fuel sales volumes. The higher throughput and
sales volumes resulted from the 76 Products Acquisition (twelve months in 1998
versus nine months in 1997) and the full year operation of the previously
shutdown Trainer Refinery, which was reopened on May 8, 1997.
Operating contribution of $1.2 billion for 1998 increased by $47
million over 1997. The increase was from refining ($54 million) partially offset
by a decrease from marketing ($7 million).
Refining operating contribution for 1998 increased by $54 million to
$682 million due primarily to increased throughput (944,800 barrels per day
("B/D") in 1998 compared to 793,400 B/D in 1997) partially offset by lower
operating margin per charge barrel ($4.61 in 1998 compared to $4.89 in 1997).
The increase in throughput volumes was primarily due to the acquisition of
refineries from Unocal, the start-up of the Trainer Refinery, and to a lesser
degree to increases at the Avon and Bayway refineries, both of which experienced
no unscheduled shutdowns in 1998. The decrease in operating margin per charge
barrel was primarily due to lower product prices experienced throughout 1998.
Refining operating contribution includes insurance recoveries related to the
unscheduled shutdowns in 1997 of the Bayway Refinery cat cracker and Avon
Refinery hydrocracker.
Marketing operating contribution for 1998 was $533 million compared to
$540 million in 1997. The decrease of $7 million was due to lower blended fuel
margins (12.1 cents per gallon in 1998 versus 12.8 in 1997) partially offset by
higher fuel sales volumes from the 76 Products Acquisition and higher
merchandise sales volumes and profit margins.
Tosco recorded a $240 million charge for the write-down of raw
material and product inventories to their fair value at December 31, 1998. The
inventory writedown was the result of the steep market decline in crude oil and
product prices in 1998 lowering the value of inventories acquired in connection
with Tosco's acquisitions since 1993. During 1997, Tosco recorded a $53 million
inventory write-down also as a result of declining prices.
During 1998, Tosco recorded a $40 million charge primarily related to
the restructuring of its San Francisco Area Refinery System. The key component
of the restructuring plan revolves around the continued integration of the Avon
Refinery and the Rodeo-Santa Maria complex acquired in 1997.
Selling, general, and administrative ("SG&A") expenses for 1998
include the recognition of a $10 million gain on the sale of the Revere
distribution terminal in Massachusetts, and approximately $3 million of
non-recurring costs related to the consolidation of Tosco's offices. SG&A
expenses for 1997 include non-recurring transition expenses of $18 million
related to the integration of the 76 Products assets into Tosco's operations.
Excluding these 1998 and 1997 non-recurring items, SG&A expenses increased by
$29 million in 1998, due primarily to the 76 Products Acquisition.
Net interest expense, as restated, for 1998 was $12 million less than
1997 due to lower levels of borrowings and interest rates under the Revolving
Credit Facility.
Income taxes, including the benefit associated with the Trust
Preferred Securities, were $75 million for 1998 compared to $151 million in
1997. The decrease was due to lower taxable income in 1998.
OUTLOOK
On February 29, 2000, Tosco acquired and began operating retail
systems consisting of approximately 1,740 retail gasoline and convenience
outlets from ExxonMobil for $860 million (the "ExxonMobil Acquisition"). Tosco
is also acquiring certain undeveloped sites and distribution terminals, all of
which ExxonMobil is divesting under a Federal Trade Commission consent decree.
The acquired outlets comprise the Exxon system from New York through Maine (the
"Northeast Territory") and the Mobil system from New Jersey through Virginia
(the "Middle Atlantic Territory"). The outlets include approximately 685 owned
or leased sites and 1,055 open dealer and branded distributor sites. Tosco has
exclusive rights to the "Exxon" brand in the Northeast Territory and the "Mobil"
brand in the Middle Atlantic Territory for ten years. The acquisition is
expected to be accretive to earnings. See Note 23 to the Consolidated Financial
Statements. Tosco continues to review acquisition opportunities. However, Tosco
plans to continue its disciplined approach to acquisitions, which requires an
acquisition to be accretive to earnings.
Results of operations are primarily determined by the operating
efficiency of the refineries and by refining and retail fuel margins. Tosco
expects, given reasonable margins, to operate its refineries at high levels
through the balance of 2000. Tosco is not able to predict the level or timing of
operating margins for 2000 because of the uncertainties associated with oil
markets. In view of uncertain operating margins and highly competitive markets,
Tosco is committed to improving its results by becoming more efficient in all
areas of operation without compromising safety, reliability, or environmental
compliance.
Tosco estimates that its effective income tax rate for 2000 will
decrease to 40.5% based on an evaluation of Tosco's projected state income taxes
after factoring in the ExxonMobil Acquisition.
CASH FLOWS
As summarized in the Consolidated Statement of Cash Flows, cash and
cash equivalents decreased by $3 million during 1999. Cash used in investing
activities of $473 million and financing activities of $346 million exceeded
cash provided by operating activities of $816 million.
Net cash provided by operating activities of $816 million was from
cash earnings (net income plus depreciation and amortization, and other non-cash
operating gains and losses) of $632 million, a net decrease in operating assets
and liabilities (primarily working capital) of $176 million, and other items of
$8 million. The change in working capital reflects the increase in crude and
product prices that occurred in 1999 and Tosco's liquidation of LIFO
inventories.
Net cash used in investing activities totaled $473 million due to
capital additions of $451 million, spending for turnarounds of $85 million, and
acquisitions of retail systems of $118 million less proceeds on asset sales of
$156 million and a net decrease in deferred charges and other assets of $25
million.
Net cash used in financing activities totaled $346 million due to net
repayments under the Revolving Credit Facility totaling $90 million, Common
Stock repurchases of $216 million, and dividend payments of $40 million.
Tosco completed its previously announced Common Stock repurchase
program in August 1999. In September 1999, Tosco's Board of Directors approved
an additional $300 million for the repurchase of Tosco Common Stock as
opportunities arise and financial ability permits. Through February 29, 2000, no
repurchases had been made pursuant to this program. See Note 13 to the
Consolidated Financial Statements.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity (as measured by cash, cash equivalents, marketable
securities, deposits, and availability under the Revolving Credit Facility)
totaled $813 million at December 31, 1999, a $42 million decrease from the
December 31, 1998 balance of $855 million. Cash and cash equivalents, marketable
securities, and deposits increased by $1 million, and availability under the
Revolving Credit Facility decreased by $43 million. The decrease in availability
under the Revolving Credit Facility reflects Tosco's election not to renew its
$100 million Facility B under the Revolving Credit Facility when it expired on
January 12, 1999.
At December 31, 1999, total shareholders' equity was $2.1 billion; a
$195 million increase compared to the December 31, 1998 balance. This increase
was due to net income of $442 million and other items of $10 million exceeding
Common Stock repurchases of $217 million and dividends of $40 million. Debt
(current and long-term debt and the Revolving Credit Facility) decreased by $96
million to approximately $1.5 billion at December 31, 1999 due primarily to net
Revolving Credit Facility repayments. The ratio of debt (Revolving Credit
Facility and non-current portion of long-term debt) to total capitalization
(Revolving Credit Facility, non-current portion of long-term debt, Trust
Preferred Securities, and Shareholders' Equity) was 38% at December 31, 1999,
compared to the December 31, 1998 ratio of 41%.
In January 1997, Tosco filed a shelf registration statement providing
for the issuance of up to $1.5 billion aggregate principal amount of debt and
equity securities. Such securities may be offered, separately or together, in
amounts and at prices and terms to be set forth in one or more supplements to
the shelf registration statement. On February 8, 2000, Tosco issued $400 million
of 8.125% Notes due in 2030 in a public offering pursuant to the shelf
registration statement. At February 29, 2000, Tosco has $379 million remaining
and available pursuant to this shelf registration statement.
In February 2000, Tosco amended and restated its Revolving Credit
Facility (the "Amended Revolving Credit Facility"). See Note 9 to the
Consolidated Financial Statements.
The Amended Revolving Credit Facility, as well as funds potentially
available from the issuance of securities, provides Tosco with adequate
resources to meet its expected liquidity demands for at least the next twelve
months, including repayment of the $125 million notes payable on July 15, 2000.
CAPITAL EXPENDITURES
During 1999, Tosco spent $451 million on property, plant, and
equipment additions and $85 million for turnarounds. With the exception of
certain turnarounds at the Avon Refinery during the stand-down period, these
additions were budgeted for 1999. Refining additions of $309 million were
primarily for turnarounds at the Avon and Bayway Refineries and projects related
to compliance with environmental regulations and permits, personnel/process
safety programs, and operating flexibility and reliability projects.
Marketing capital additions of $227 million were primarily for
improvements at existing sites. Tosco's marketing division also acquired 174
retail gasoline and convenience store sites and 20 raw land parcels in the
Southeast and 27 gasoline service stations in Pittsburgh, Pennsylvania during
1999. Tosco divested 372 non-core convenience store properties during 1999. See
Notes 3, 6, and 18 to the Consolidated Financial Statements.
Construction of a 775 million pounds per year polypropylene plant at
the Bayway Refinery, currently in progress, is expected to be completed in two
years.
Tosco intends to finance its 2000 capital additions, including
construction of the polypropylene plant, through cash flows from operations and,
if needed, by borrowings under the Amended Revolving Credit Facility. Tosco
financed the ExxonMobil Acquisition, including working capital, through a
combination of available cash, borrowings under the Amended Revolving Credit
Facility, operating lease financing, and the sale of debt securities.
RISK MANAGEMENT
Tosco uses a variety of strategies to reduce commodity price,
interest, and operational risks. Tosco, at times and when able, uses futures and
forward contracts to lock in what it believes to be favorable margins on a
varying portion of refinery production by taking offsetting long (obligation to
buy at a certain price) positions in crude oil and short (obligation to deliver
at a certain price) positions in gasoline and heating oil. This strategy is
intended to hedge Tosco's exposure to fluctuations in refining margins and
therefore should tend to reduce the volatility of operating results. In
addition, Tosco enters into swap contracts with counterparties to hedge sales
prices of residual fuels production. To a lesser extent, future and forward
contracts may also be used to hedge inventories stored for future sale and to
hedge against adverse price movements between the cost of domestic and foreign
crude oil.
Tosco uses a value-at-risk ("VAR") model to assess the market risk of
its derivative instruments. VAR represents the potential losses for an
instrument or portfolio from adverse changes in market factors, for a specified
time period and confidence level. Tosco estimates VAR across its derivative
instruments using a model with historical volatilities and correlations
calculated using a one-day interval. Tosco's measured VAR, using a VAR model
with a 95% confidence level and assuming normal market conditions at December
31, 1999 and 1998, was not material.
Tosco's calculated VAR exposure represents an estimate of reasonably
possible net losses assuming hypothetical movements in future market rates and
is not necessarily indicative of actual results that may occur. The calculated
VAR does not represent the maximum possible loss nor any expected loss that may
occur, since actual future gains and losses will differ from those estimated,
based upon actual fluctuations in market rates, operating exposures, and the
timing thereof, and changes in Tosco's holdings of derivative instruments during
the year.
Tosco manages its interest rate risk by maintaining a mix of fixed
rate and floating rate debt. Floating rate debt, primarily borrowings under the
Amended Revolving Credit Facility that currently provides up to $750 million of
uncollateralized revolving credit availability, is used to finance Tosco's
working capital requirements. The balance of Tosco's debt is at acceptable fixed
rates. See Notes 9 and 10 to the Consolidated Financial Statements.
Tosco carries insurance policies on insurable risks, which it believes
to be appropriate at commercially reasonable rates. While Tosco believes that it
is adequately insured, future losses could exceed insurance policy limits or,
under adverse interpretations, be excluded from coverage. Future costs, if any,
incurred under such circumstances would have to be paid out of general corporate
funds, if available. See Note 19 to the Consolidated Financial Statements for a
discussion of Tosco's strategy to reduce credit risk.
IMPACT OF INFLATION
The impact of inflation has been less significant during recent years
because of the relatively low rates experienced in the United States. Raw
material, energy, and labor are important components of Tosco's costs. Any or
all of these components could be increased by inflation, with a possible adverse
effect on profitability, especially in high inflation periods when raw material
and energy cost increases generally lead finished product prices.
IMPACT OF THE YEAR 2000 ISSUE
Historically, certain computer programs used two rather than four
digits to define a given calendar year. Computer programs that used two digits
to define the year could recognize a date using "00" as the year 1900 rather
than 2000. This practice could have resulted in business and field system
failures or miscalculations that could have caused serious disruptions of
operations. This was generally referred to as the "Year 2000 Issue." For several
years, Tosco has been proactively upgrading and replacing its information
systems. In early 1998, Tosco formed a Year 2000 Program Office to coordinate
the efforts of Tosco's operating units and administrative departments. During
1998 and 1999, Tosco committed significant resources to address its Year 2000
Issues. Tosco has not experienced any meaningful disruptions related to the Year
2000 Issue.
Tosco's Year 2000 compliance costs included external consultants and
contractors, compensation costs of internal employees working directly on Year
2000 Issues, purchases of software and hardware, and system upgrades and
modifications which were accelerated to address the Year 2000 Issue. Tosco's
Year 2000 compliance costs did not have a material effect on its 1999 or 1998
operating results or financial position.
NEW ACCOUNTING STANDARD
During June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. The Company plans to adopt SFAS No. 133 on January 1, 2001. Tosco is
currently evaluating the effect SFAS No. 133 will have on its financial position
and results of operations.
FORWARD LOOKING STATEMENTS
TOSCO HAS MADE, AND MAY CONTINUE TO MAKE, VARIOUS FORWARD-LOOKING
STATEMENTS WITH RESPECT TO ITS FINANCIAL POSITION, BUSINESS STRATEGY, PROJECTED
COSTS, PROJECTED SAVINGS, AND PLANS AND OBJECTIVES OF MANAGEMENT. SUCH
FORWARD-LOOKING STATEMENTS ARE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS OR
PHRASES SUCH AS "ANTICIPATES," "INTENDS," "EXPECTS," "PLANS," "BELIEVES,"
"ESTIMATES," OR WORDS OR PHRASES OF SIMILAR IMPORT. THESE FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO NUMEROUS ASSUMPTIONS, RISKS, AND UNCERTAINTIES, AND
THE STATEMENTS LOOKING FORWARD BEYOND 2000 ARE SUBJECT TO GREATER UNCERTAINTY
BECAUSE OF THE INCREASED LIKELIHOOD OF CHANGES IN UNDERLYING FACTORS AND
ASSUMPTIONS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED BY
THE FORWARD-LOOKING STATEMENTS.
IN ADDITION TO FACTORS PREVIOUSLY DISCLOSED BY TOSCO AND FACTORS
IDENTIFIED ELSEWHERE HEREIN, CERTAIN OTHER FACTORS COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS. ALL SUBSEQUENT WRITTEN
AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO TOSCO, OR PERSONS ACTING ON
BEHALF OF TOSCO, ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH
FACTORS.
TOSCO'S FORWARD-LOOKING STATEMENTS REPRESENT ITS JUDGMENT ONLY ON THE
DATES SUCH STATEMENTS ARE MADE. BY MAKING ANY FORWARD-LOOKING STATEMENTS, TOSCO
ASSUMES NO DUTY TO UPDATE THEM TO REFLECT NEW, CHANGED, OR UNANTICIPATED EVENTS
OR CIRCUMSTANCES.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Part II,
Item 8, are included in Part IV, as indexed at Item 14(a) and (a)(2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information appearing
under the caption "Nominees for Election" in Tosco's definitive Proxy Statement
relating to its 2000 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission. See also the information appearing under the
caption "Executive Officers of the Registrant" in Part I.
Tosco is not aware of any family relationship between any Director or
executive officer. Each officer is generally elected to hold office until the
next Annual Meeting of the Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information appearing
under the caption "Executive Compensation" in Tosco's definitive Proxy Statement
relating to its 2000 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information appearing
under the caption "Stock Ownership of Officers and Directors" and "Other Matters
- - Certain Security Holdings" in Tosco's definitive Proxy Statement relating to
its 2000 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information appearing
under the caption "Executive Compensation" in Tosco's definitive Proxy Statement
relating to its 2000 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)(1) AND (A)(2). FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES. The consolidated financial statements and financial statement
schedules of Tosco Corporation and subsidiaries, required by Part II, Item 8,
are included in Part IV of this report. See Index to Consolidated Financial
Statements and Financial Statement Schedules on page F-1.
(A)(3). EXHIBITS
3(a) Amended and Restated Articles of Incorporation of
Registrant. Incorporated by reference to Exhibit 3(a) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
3(b) By-laws of Registrant as currently in effect. Incorporated
by reference to Exhibit 3(b) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
4(a) Form of Indenture between Registrant and IBJ Schroder and
Trust Company, as Trustee, relating to 9% Series A First
Mortgage Bonds due March 15, 1997, and 9 5/8% Series B First
Mortgage Bonds due March 15, 2002. Incorporated by reference
to Exhibit 4.1 to Registration Statement filed by Registrant
on Form S-3 dated March 4, 1992.
4(b) Form of Indenture among Registrant, Bayway Refining Company,
and the First National Bank of Boston, as Trustee, relating
to 8 1/4% First Mortgage Bonds due 2003. Incorporated by
reference to Exhibit 4.1 to Registration Statement filed by
Registrant on Form S-4 dated April 29, 1993.
4(c) Form of Indenture dated as of July 7, 1995, between
Registrant and The First National Bank of Boston, as
Trustee, relating to 7% Notes due 2000. Incorporated by
reference to Exhibit 4.1 to Registration Statement filed by
Registrant on Form S-3 dated May 18, 1995 (No. 33-59423).
4(d) Form of Indenture dated as of May 1, 1996, between
Registrant and State Street Bank and Trust Company.
Incorporated by reference to Exhibit 4.1 to Registration
Statement filed by Registrant on Form S-3 dated April 15,
1996 (No. 333-521).
4(e) Rights agreement dated as of November 19, 1998, between
Registrant and Bank of Boston, N.A., as Rights Agent.
Incorporated by reference to Exhibit 4 to Registrant's
current report on Form 8-K dated November 30, 1998.
10(a) Fifth Amended and Restated Credit Agreement dated as of
February 8, 2000, among Tosco Corporation, as Borrower, and
the Banks named therein, as Banks, and BankBoston, N.A.,
Administrative Agent, Royal Bank of Canada, as Syndication
Agent, and PNC Bank, National Association, as Documentation
Agent.
10(b) Severance Agreement dated January 26, 2000, between
Registrant and Thomas D. O'Malley, including schedule
identifying similar agreements between Registrant and two of
its employees.
10(c) Indemnification Agreement dated September 30, 1987, between
Registrant and Thomas D. O'Malley, including schedule
identifying similar agreements between Registrant and its
Directors and/or officers, together with related Trust
Agreement. Incorporated by reference to Exhibit 10(b) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987.
10(d) 1996 Long-term Incentive Plan, as amended. Incorporated by
reference to Exhibit 10(h) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
10(e) Tosco Corporation Senior Executive Retirement Plan of 1990,
as amended and restated as of May 15, 1996. Incorporated by
reference to Exhibit 10(i) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997.
10(f) Tosco Corporation Senior Executive Retirement Plan of 1990,
as amended and restated as of September 23, 1993.
Incorporated by reference to Exhibit 10(j) to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1997.
10(g) Severance Agreements dated January 1, 1993, as amended,
between Registrant and Robert J. Lavinia and Dwight L.
Wiggins. Incorporated by reference to Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.
10(h) Agreement of Purchase, Sale and Assignment of Marketing
Assets between Exxon Corporation and Tosco Corporation,
dated as of December 1, 1999.
10(i) Agreement of Purchase, Sale and Assignment of Marketing
Assets between Mobil Oil Corporation and Tosco Corporation,
dated as of December 1, 1999.
21. A list of all subsidiaries of the Registrant.
23. Consent of PricewaterhouseCoopers LLP.
27. Financial Data Schedule.
99. Condensed Consolidating Financial Information and Report of
Independent Accountants.
(B). REPORTS ON FORM 8-K
None
(C). Financial Statement schedules required by Regulation S-X are
excluded from the Annual Report to Shareholders by Rule 14a-3(b)(1). See
Schedule II to the Financial Statements, as required by Item 8, and appearing
under Item 14 hereof.
<PAGE>
TOSCO CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULE AND FINANCIAL EXHIBITS FILED WITH THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999
PAGE(S)
Report of Independent Accountants F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Income for the years ended December
31, 1999, 1998, and 1997 F-4
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1999, 1998, and 1997 F-5
Consolidated Statements of Cash Flows for the years ended December
31, 1999, 1998, and 1997 F-6
Notes to Consolidated Financial Statements F-7 - F-26
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the years ended
December 31, 1999, 1998, and 1997 (a) F-27
Financial Exhibits:
Exhibit 23 - Consent of Independent Accountants F-28
Exhibit 99 - Condensed Consolidating Financial Information (b):
Report of Independent Accountants on Exhibit 99 F-29
Condensed Consolidating Financial Information as of December
31, 1999 and for the year then ended F-30
Condensed Consolidating Financial Information as of December
31, 1998 and for the year then ended F-31
Condensed Consolidating Financial Information for the year
ended December 31, 1997 F-32
(a) Financial statement schedules, other than Schedule II, have been omitted
since they are either not required or applicable, or the required
information is presented in the consolidated financial statements and
related notes.
(b) The condensed consolidating financial information presents the financial
position, operating results, and cash flows of Tosco Corporation ("Tosco"),
Bayway Refining Company ("Bayway"), and Tosco's Nonguaranteeing
Subsidiaries. This information is provided to meet the reporting and
informational requirements of Bayway as guarantor of the 8.25% Bayway
Bonds. See Note 10 to the Consolidated Financial Statements.
<PAGE>
Report of Independent Accountants
To the Board of Directors and
Shareholders of Tosco Corporation:
In our opinion, the consolidated financial statements listed in the
accompanying index on page F-1 of this Form 10-K present fairly, in all material
respects, the financial position of Tosco Corporation and its subsidiaries at
December 31, 1999 and 1998, 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.
In addition, in our opinion, the financial statement schedule also listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule 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 of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Phoenix, Arizona
March 1, 2000
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Par Value)
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $28.3 $31.3
Marketable securities and deposits 53.8 49.6
Trade accounts receivable, less allowance for uncollectibles
of $17.9 (1999) and $16.8 (1998) 273.5 265.4
Inventories, net 1,173.4 1,077.3
Prepaid expenses and other current assets 115.5 95.4
--------- ---------
Total current assets 1,644.5 1,519.0
Property, plant, and equipment, net 3,675.2 3,379.4
Deferred turnarounds, net 176.7 156.3
Intangible assets (primarily tradenames), less accumulated amortization of
$56.9 (1999) and $51.9 (1998) 582.3 638.5
Other deferred charges and assets 133.7 149.6
---------- ---------
$6,212.4 $5,842.8
LIABILITIES AND SHAREHOLDERS' EQUITY ========== =========
Current liabilities:
Accounts payable $857.7 $651.4
Accrued expenses and other current liabilities 673.6 728.4
Current maturities of long-term debt 1.4 1.6
Deferred income taxes 74.4 23.3
-------- ---------
Total current liabilities 1,607.1 1,404.7
Revolving credit facility 106.0 196.0
Long-term debt 1,352.9 1,358.6
Accrued environmental costs 239.3 253.7
Deferred income taxes 283.6 179.4
Other liabilities 215.2 237.4
-------- ---------
Total liabilities 3,804.1 3,629.8
-------- ---------
Company-obligated, mandatorily redeemable, convertible preferred securities
of Tosco Financing Trust, holding solely 5.75% convertible junior
subordinated debentures of Tosco Corporation ("Trust Preferred Securities") 300.0 300.0
-------- ---------
Shareholders' equity:
Common stock, $.75 par value, 250.0 shares authorized,
177.8 shares issued 133.6 133.6
Additional paid-in capital 2,033.4 2,030.0
Retained earnings 725.2 323.5
Treasury stock, at cost (783.9) (574.1)
--------- ---------
Total shareholders' equity 2,108.3 1,913.0
--------- ---------
$6,212.4 $5,842.8
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Millions, Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Sales $14,362.1 $12,021.5 $13,281.6
Cost of sales (13,103.3) (10,805.8) (12,113.5)
Depreciation and amortization (308.4) (313.9) (303.5)
Special items:
Inventory (writedown) recovery 240.0 (240.0) (53.0)
Restructuring (charge) recovery 2.1 (40.0)
Avon Refinery start-up costs (43.1)
Gain on sale of retail assets in non-core markets 40.5
Selling, general, and administrative expenses (305.2) (300.3) (296.3)
Interest expense (123.8) (127.0) (139.6)
Interest income 5.0 4.3 5.1
----------- --------- ----------
Income before income taxes and distributions on Trust Preferred
Securities 765.9 198.8 380.8
Income taxes (314.0) (82.5) (158.0)
----------- ---------- ----------
Income before distributions on Trust Preferred Securities 451.9 116.3 222.8
Distributions on Trust Preferred Securities, net of income tax
benefit of $7.1 (1999) and $7.2 (1998 and 1997) (10.2) (10.1) (10.1)
----------- ---------- ----------
Net income $441.7 $106.2 $212.7
=========== ========== ==========
BASIC EARNINGS PER SHARE
Earnings used for computation of basic earnings per share $441.7 $106.2 $212.7
Weighted average common shares outstanding 148.9 155.0 149.0
----------- ---------- ----------
Basic earnings per share $2.97 $0.69 $1.43
=========== ========== ==========
DILUTED EARNINGS PER SHARE
Earnings used for computation of diluted earnings per share (a) $451.9 $106.2 $222.8
----------- ---------- ----------
Weighted average common shares outstanding 148.9 155.0 149.0
Assumed conversion of dilutive stock options 1.9 4.1 4.4
Assumed conversion of Trust Preferred Securities (a) 9.1 9.1
----------- ---------- ----------
Weighted average common and common equivalent shares used for
computation of diluted earnings per share 159.9 159.1 162.5
----------- ---------- ----------
Diluted earnings per share $2.83 $0.67 $1.37
=========== ========== ==========
(a) Conversion of the Trust Preferred Securities was not assumed in 1998 due to the anti-dilutive impact of the conversion.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In Millions)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
---------------------- Additional Retained --------------------
Shares Amount Paid-in Capital Earnings Shares Amount Total
------ ------ --------------- --------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 138.5 $103.8 $ 963.7 $ 77.6 7.5 $(74.8) $1,070.3
Net income 212.7 212.7
Dividends - common stock (35.9) (35.9)
Exercise of stock options 0.1 0.1 0.9 (0.5) 4.5 5.5
Acquisition of common stock 0.3 (8.8) (8.8)
Issuance of common stock 25.3 19.0 678.4 697.4
Issuance of Unocal shares 14.1 10.6 386.3 396.9
Repurchase of Unocal shares 14.1 (393.7) (393.7)
Other (0.3) (0.3) (0.3)
------- -------- -------- -------- ------- -------- ---------
Balance, December 31, 1997 177.7 133.5 2,029.0 254.4 21.4 (472.8) 1,944.1
Net income 106.2 106.2
Dividends - common stock (37.1) (37.1)
Exercise of stock options 0.1 0.1 1.0 0.4 1.5
Repurchase of common stock (Note 13) 4.3 (101.1) (101.1)
Other (0.6) (0.6)
------- -------- -------- -------- ------- -------- ---------
Balance, December 31, 1998 177.8 133.6 2,030.0 323.5 25.7 (574.1) 1,913.0
Net income 441.7 441.7
Dividends - common stock (40.0) (40.0)
Exercise of stock options (0.1) (0.7) 6.7 6.6
Repurchase of common stock (Note 13) 8.9 (216.5) (216.5)
Other 3.5 3.5
------- -------- --------- -------- ------- --------- ---------
Balance, December 31, 1999 177.8 $133.6 $2,033.4 $725.2 33.9 $(783.9) $2,108.3
======= ======== ========= ======== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $441.7 $106.2 $212.7
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property, plant, and equipment 217.2 228.5 224.9
Amortization of deferred turnarounds, intangible assets, and other
deferred charges 91.2 85.4 78.6
Provision for bad debts 9.3 10.4 8.2
Inventory writedown (recovery) (240.0) 240.0 53.0
Restructuring charge (recovery) (2.1) 40.0
Gain on sale of retail assets in non-core markets (40.5)
Deferred income taxes 155.3 125.4 39.4
Changes in operating assets and liabilities, net:
Trade accounts receivable (17.4) 40.3 (2.7)
Inventories 150.5 (63.0) (304.7)
Prepaid expenses and other current assets (15.6) 30.2 (25.9)
Accounts payable, accrued expenses, and other
current liabilities 106.8 (191.2) 411.9
Accrued environmental costs and other liabilities (48.8) 32.7 (6.5)
Other, net 8.1 (12.7) (2.9)
--------- --------- --------
Net cash provided by operating activities 815.7 672.2 686.0
--------- --------- ----------
Cash flows from investing activities:
Net increase in marketable securities and deposits (4.2) (5.9) (8.4)
Purchase of property, plant, and equipment (451.0) (458.5) (417.6)
Proceeds on sale of property, plant, and equipment 156.2 65.2 13.5
Deferred turnaround spending (85.1) (95.2) (104.5)
Decrease (increase) in deferred charges and other assets, net 34.3 9.0 (4.8)
Acquisition of retail systems, net of cash acquired (118.1)
Acquisition of 76 Products assets, net of cash acquired (1,189.1)
Proceeds on sale of 76 Products assets 72.7
Other, net (4.7) 0.2 6.0
--------- --------- ----------
Net cash used in investing activities (472.6) (485.2) (1,632.2)
--------- --------- ----------
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit facilities (90.0) 30.0 166.0
Proceeds from note and debenture offerings 600.0
Payments under long-term debt agreements (6.0) (79.0) (113.7)
Proceeds from common stock offering, net 697.4
Repurchase of Common Stock and Unocal Shares (1997) (216.5) (101.1) (393.7)
Dividends paid on common stock (40.0) (37.1) (35.9)
Other, net 6.4 (3.0) (33.8)
--------- --------- ----------
Net cash (used in) provided by financing activities (346.1) (190.2) 886.3
--------- --------- ----------
Net decrease in cash and cash equivalents (3.0) (3.2) (59.9)
Cash and cash equivalents at beginning of year 31.3 34.5 94.4
--------- --------- ----------
Cash and cash equivalents at end of year $28.3 $31.3 $34.5
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOSCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
1. Nature of Business
Tosco Corporation ("Tosco") is one of the nation's largest independent
refiners and marketers of petroleum products operating principally on the East
and West Coasts of the United States. Tosco is also one of the largest operators
of company-controlled convenience stores in the United States.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Tosco and its wholly-owned subsidiaries and affiliates (collectively
the "Company"). All significant intercompany accounts and transactions have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management estimates and assumptions
that affect the reported amounts of assets and liabilities, the reported results
of operations, and the disclosure of contingent assets and liabilities.
Cash, Cash Equivalents, Marketable Securities, and Deposits
Cash in excess of operating requirements is used to pay down cash
borrowings under the Company's Revolving Credit Facility or invested in highly
liquid cash equivalents. Margin deposits, based on a percentage of the value of
the futures contracts, are maintained with commodity brokers in accordance with
the requirements of commodity exchanges. Margin deposits are included in
marketable securities and deposits on the balance sheet.
At December 31, 1999 and 1998, the Company had approximately $17.5
million of director and officer liability insurance coverage with a subsidiary
(amounts approximately equal to the fair value of marketable securities held in
trust by the subsidiary). The subsidiary's trust assets are restricted to
payment of directors' and officers' liability defense costs and claims.
Marketable securities held by the subsidiary, classified as available for sale,
consist of highly liquid debt and equity securities. Their cost approximates
fair value. Accordingly, unrealized gains and losses are not significant. Debt
securities with original maturities of three months or less at the date of
purchase are classified as cash equivalents, while debt securities with
maturities of twelve months or less from the balance sheet date are included in
marketable securities and deposits on the balance sheet.
Inventories
Inventories are stated at the lower of cost or market. The cost of
refinery inventories is determined on the last-in, first-out ("LIFO") basis. The
cost of retail fuel inventories is determined on the first-in, first-out
("FIFO") basis. The cost of retail merchandise inventories is determined under
the retail method.
Property, Plant, and Equipment
Property, plant, and equipment, including capitalized interest, are
carried at cost less accumulated depreciation and amortization. Depreciation and
amortization are provided over the estimated useful lives of the respective
classes of assets utilizing the straight-line method. Expenditures that
materially increase values, change capacities, or extend useful lives are
capitalized. Routine maintenance and repairs are expensed. Gains and losses on
disposition of assets are reflected in results of operations.
Computer software costs are deferred and amortized over their useful
lives, generally not to exceed five years. Certain enterprise-wide information
systems are amortized over periods of up to ten years.
Deferred Turnarounds
Refinery processing units are periodically shut down for major
scheduled maintenance ("Turnarounds"). Turnaround costs are deferred and
amortized on a straight-line basis over the expected period of benefit, which
generally ranges from 24 to 48 months.
Intangible Assets (Primarily Tradenames)
The Company's "76" and "Circle K" tradenames are amortized on a
straight-line basis over 40 years. Other tradenames and intangible assets are
amortized on a straight-line basis over periods of up to 15 years.
Other Deferred Charges and Assets
Financing charges related to the acquisition or refinancing of debt
are deferred and amortized over the term of the related debt using the effective
interest method. Production costs of media advertising are deferred until the
advertising occurs. Advertising expense for 1999, 1998, and 1997 was $51.3
million, $48.3 million, and $43.9 million, respectively.
Self-Insurance
The Company is self-insured up to certain limits for workers'
compensation (in certain states), property damage, and general liability claims.
Accruals for loss incidences are made based on the Company's claims experience
and actuarial assumptions followed in the insurance industry. Actual losses
could differ from accrued amounts.
Environmental Costs
Liabilities for future remediation costs are recorded when
environmental assessments and/or remedial efforts are probable and the costs can
be reasonably estimated. Other than for assessments, the timing and magnitude of
these accruals are generally based on the completion of investigations or other
studies or a commitment to a formal plan of action. Environmental liabilities
are based on best estimates of probable undiscounted future costs using
currently available technology, and applying current regulations, as well as the
Company's own internal environmental policies. Estimated reimbursements of
remediation costs of petroleum releases from underground storage tanks are
recorded as assets when reimbursements from state trust fund programs are
probable.
Deferred Revenue
Advances received in connection with long-term supplier marketing or
display allowances are amortized to income over the terms of the respective
arrangements based on projected purchase levels.
Revenue Recognition
Revenue is recognized upon transfer of title to products sold, based
on the terms of delivery.
Excise Taxes
Excise taxes collected on behalf of governmental agencies are excluded
from sales, cost of sales, and other expenses. Excise taxes totaled $2.628
billion, $2.316 billion, and $1.768 billion for 1999, 1998, and 1997,
respectively.
Derivatives
In the normal course of business, the Company, to reduce its exposure
to fluctuations in the price of crude oil and other petroleum products, is party
to commodity-based derivative financial instruments with off-balance sheet risk
(Notes 19 and 24). Such contracts, which are designated as hedges, are recorded
using hedge accounting. Gains and losses on these financial instruments are
deferred until the underlying physical transaction occurs. The gains and losses
are then recognized and reported as a component of the related transaction. Any
cash flow recognition resulting from holding these financial instruments is
treated in the same manner as the underlying physical transaction.
3. Acquisitions
Boardman Petroleum Service Stations
On October 1, 1999, the Company completed the purchase of 43 "Smile"
retail gasoline service stations and convenience stores plus 20 vacant lots from
Boardman Petroleum, Inc for $69.5 million, including inventories and other
current assets (the "Boardman Acquisition"). An additional 24 service station
sites were purchased by a special purpose entity that leased the sites to the
Company (Note 18). These sites are located principally in five Southeastern
states and will be operated under the Company's "76" gasoline and "Circle K"
convenience store brands.
BP/Amoco Service Stations
During June and July 1999, the Company completed the purchase of 48
retail gasoline and convenience store sites (21 located principally in seven
major Southeastern urban areas and 27 located in Pittsburgh, Pennsylvania) from
BP Amoco for $48.9 million, including inventories and other current assets (the
"BP Amoco Acquisition"). An additional 89 service station sites were acquired by
a special purpose entity that leased the sites to the Company (Note 18). These
sites will also be rebranded and operated under the Company's "76" gasoline and
"Circle K" convenience store brands.
4. Accounts Receivable
In March 1998, the Company entered into a three-year agreement with a
financial institution to sell on a revolving basis up to $300.0 million of an
undivided percentage ownership interest in a designated pool of accounts
receivable (the "Receivable Transfer Agreement"). The Receivable Transfer
Agreement replaced a similar agreement with another financial institution. In
December 1999, the Receivable Transfer Agreement was amended to allow for
receivable sales of up to $400.0 million. In October 1997, the Company entered
into a three-year agreement with a financial institution to sell on a revolving
basis up to $100.0 million of an undivided percentage ownership interest in a
designated pool of credit card accounts receivable (the "Credit Card Receivable
Transfer Agreement"). Under the Receivable Transfer Agreement and Credit Card
Receivable Transfer Agreement, the Company retains substantially the same risk
of credit loss as if the receivables had not been sold. The Company also retains
collection and administrative responsibilities on the participating interest
sold as agent for the financial institution. At December 31, 1999 and 1998,
accounts receivable were reduced by $485.0 million and $375.0 million,
respectively, for receivables sold under these programs. Sales of accounts
receivables under these programs averaged $1.112 billion, $903.2 million, and
$984.2 million per month in 1999, 1998, and 1997, respectively.
5. Inventories
(Millions of Dollars) 1999 1998
Refinery (LIFO at December 31, 1999 and market value at
December 31, 1998):
Raw materials $ 419.7 $ 418.8
Intermediates 231.9 191.6
Finished products 348.8 302.2
Retail (FIFO):
Merchandise 125.3 129.2
Gasoline and diesel 47.3 35.4
Other 0.4 0.1
--------- --------
$1,173.4 $1,077.3
========= ========
Cost of sales for 1999 has been reduced by $8.0 million due to the
liquidation of LIFO inventories. At December 31, 1999, the excess of replacement
cost (FIFO) over the carrying value (LIFO) of refinery inventories was $304.7
million. At December 31, 1998, the excess of cost (LIFO) over market value for
these inventories was $293.0 million.
<PAGE>
6. Property, Plant, and Equipment
<TABLE>
<CAPTION>
Straight-Line
(Millions of Dollars) 1999 1998 Annual Rate
---- ---- --------------
<S> <C> <C> <C>
Land $ 910.6 $ 888.4
Refineries and related assets 2,114.9 2,009.0 4% to 15%
Retail marketing and related assets 954.2 852.8 5% to 20%
Furniture, fixtures, and improvements 155.1 96.3 3% to 33%
Transportation equipment 138.5 124.0 4% to 33%
Natural gas properties 5.6 5.4
---------- ----------
4,278.9 3,975.9
Less accumulated depreciation and amortization (a) 1,061.7 892.7
---------- ----------
3,217.2 3,083.2
Construction in progress 458.0 296.2
---------- ----------
$ 3,675.2 $ 3,379.4
========== ==========
(a) Includes accumulated amortization related to assets under capital
leases of $6.8 million and $6.6 million at December 31, 1999 and 1998,
respectively.
</TABLE>
During 1999, the Company realized a gain of $40.5 million from the
sale of 372 convenience stores in markets the Company is exiting. Operations
from these convenience stores did not significantly impact operating
contribution for 1999.
Effective January 1, 1999, the Company prospectively extended the
useful lives of its refinery and distribution assets. This change was made to
better represent the remaining useful lives of the assets, as determined by a
third party appraisal. The impact of this change in accounting estimate, which
was partially offset by additional depreciation of assets placed in service in
late 1998 and early 1999, was an increase in net income during 1999 of $14.2
million ($0.09 per diluted share).
Expenditures for maintenance and repairs (excluding the amortization
of Turnarounds) during 1999, 1998, and 1997 were $271.9 million, $257.8 million,
and $210.4 million, respectively.
7. Intangible Assets
In connection with the BP Amoco Acquisition (Note 3), the Company
entered into an agreement with BP Amoco for the return of the Company's license
to use the "BP" tradename at the end of an approximate two-year period. The
consideration received approximated the expected unamortized value of the "BP"
tradename at the end of the two-year period.
In conjunction with the sale of convenience stores (Note 6), the
Company wrote-off the unamortized balance of its "Stax" tradename, which was
used only in markets which the Company exited.
8. Accrued Expenses and Other Current Liabilities
(Millions of Dollars) 1999 1998
---- ----
Accrued taxes, other than income taxes $ 222.2 $ 192.0
Accrued compensation and related benefits 113.9 130.0
Restructuring accrual (a) 16.7 24.6
Dividends payable 10.8 9.9
Other 310.0 371.9
-------- -------
$ 673.6 $ 728.4
======== =======
(a) During 1998, Tosco recorded a $40.0 million charge primarily related to
the restructuring of its San Francisco Area Refinery System.
<PAGE>
Restructuring accrual activity for 1999 and 1998 is summarized below:
<TABLE>
<CAPTION>
Balance at
Original 1999 Cumulative December 31,
(Millions of Dollars) Charge Adjustment Spending 1999 (a)
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Impairment of assets $ 15.2 $ - $ (15.2) $ -
Exit costs 18.9 (2.2) 16.7
Employee termination costs (b) 5.9 (2.1) (3.8)
------- ------- --------- ------
$ 40.0 $ (2.1) $ (21.2) $ 16.7
======= ======= ========= ======
(a) As a result of the Avon Refinery Incident (Note 16), certain exit
activities have been delayed.
(b) During April 1999, management announced that layoffs and consolidation
of functions planned for 1999 would not occur as originally
contemplated. Accordingly, remaining employee termination cost accruals
totaling $2.1 million were reversed.
</TABLE>
9. Revolving Credit Facility
The Company's revolving credit agreement (the "Revolving Credit
Facility") provides a $900.0 million uncollateralized revolving credit facility
that is available for working capital and general corporate purposes, including
acquisitions. The Revolving Credit Facility bears interest at the option of the
Company at one of three alternative rates (a federal funds rate, a Eurodollar
rate, or a base rate related to prime) plus an incremental margin for each rate
option. A commitment fee on the unused portion of the facility is also due. The
incremental margin and commitment fee are dependent on the credit rating of the
Company's First Mortgage Bonds (Note 10). Prior to January 1999, the Revolving
Credit Facility was a $1.000 billion uncollateralized facility.
Utilization of the Revolving Credit Facility as of December 31, 1999
and 1998 was as follows:
(Millions of Dollars) 1999 1998
---- ----
Cash borrowings $ 106.0 $ 196.0
Letters of credit 63.3 30.2
--------- ---------
Total utilization 169.3 226.2
Availability 730.7 773.8
--------- ---------
$ 900.0 $ 1,000.0
========= =========
On February 8, 2000, the Company amended and restated the Revolving
Credit Facility (Note 23).
10. Long-Term Debt
(Millions of Dollars) 1999 1998
---- ----
Collateralized debt:
First Mortgage Bonds (a) $ 200.0 $ 200.0
Bayway Bonds (b) 150.0 150.0
Other 3.1 3.5
Uncollateralized debt:
7% Notes (c) 125.0 125.0
7.625% Notes (d) 240.0 240.0
Notes and Debentures (e) 600.0 600.0
Other 0.2
Capital leases (f) 36.2 41.5
--------- ----------
1,354.3 1,360.2
Less current installments 1.4 1.6
--------- ----------
$ 1,352.9 $ 1,358.6
========= =========
(a) 9.625% first mortgage bonds due March 15, 2002 (the "First Mortgage
Bonds"), issued in March 1992. Interest on the First Mortgage Bonds is
payable each March 15 and September 15. The First Mortgage Bonds are
noncallable and are collateralized by the Avon Refinery and certain
related assets.
(b) In connection with the April 1993 acquisition of the Bayway Refinery,
the Company issued $150.0 million of 8.25% mortgage bonds (the "Bayway
Bonds") due May 15, 2003. The Bayway Bonds are guaranteed by Bayway
Refining Company ("Bayway"), a wholly owned subsidiary of Tosco.
Interest is payable semi-annually on May 15 and November 15. The Bayway
guarantee is collateralized by the Bayway Refinery and related assets
and a guarantee of Tosco.
(c) On July 12, 1995, $125.0 million of registered debt securities were
issued as 7% uncollateralized, noncallable notes due July 15, 2000 (the
"7% Notes"). Semi-annual interest payments on the 7% Notes began
January 15, 1996. The net proceeds from the public offering were used
to repay debt.
(d) In May 1996, the Company issued $240.0 million of 7.625%
uncollateralized notes due May 15, 2006 (the "7.625% Notes") in
connection with the acquisition of Circle K. Semi-annual interest
payments on the 7.625% Notes began November 15, 1996.
(e) On January 14, 1997, the Company issued $200.0 million of 7.25% Notes
due on January 1, 2007, $300.0 million of 7.8% Debentures due on
January 1, 2027, and $100.0 million of 7.9% Debentures due on January
1, 2047 (collectively the "Notes and Debentures"). Interest on the
unregistered Notes and Debentures was payable each January 1 and July
1, commencing on July 1, 1997. The proceeds from the unregistered Notes
and Debentures were used to finance a portion of the 1997 purchase of
assets from Union Oil Company of California ("Unocal"). In August 1997,
the Company exchanged the unregistered Notes and Debentures for fully
registered and freely salable notes and debentures having identical
terms, including the same interest rates and maturity dates. The Notes
and Debentures are non-redeemable and uncollateralized.
(f) The Company's capital lease obligations are collateralized primarily by
retail marketing and related assets and mature at varying dates through
2019. The carrying value of the assets under capital lease arrangements
approximates the capital lease obligation.
At December 31, 1999 future maturities relating to long-term debt were
as follows:
Capital
(Millions of Dollars) Debt Leases Total
-------- ------- -------
2000 (a) $ 125.8 $ 4.2 $ 130.0
2001 0.8 4.2 5.0
2002 200.8 4.1 204.9
2003 150.8 4.1 154.9
2004 4.0 4.0
Thereafter 839.9 66.2 906.1
--------- ------ ---------
Total future maturities 1,318.1 86.8 1,404.9
Less imputed interest 50.6 50.6
--------- ------ ---------
Present value of future maturities $ 1,318.1 $ 36.2 $ 1,354.3
========= ====== =========
(a) The $125.0 million 7% Notes are expected to be repaid in July 2000 from
the Revolving Credit Facility. Accordingly, the 7% Notes are classified
as noncurrent at December 31, 1999. Current maturities of long-term
obligations, excluding imputed interest on capital leases, are $1.4
million at December 31, 1999.
The debt agreements, including the Revolving Credit Facility (Note 9),
contain covenants that limit the Company's ability to incur additional
indebtedness, pay dividends, acquire its own equity securities, make investments
in certain subsidiaries, and make discretionary capital expenditures. They also
require the maintenance of minimum financial ratios and net worth levels. At
December 31, 1999, the Company was in compliance with all debt covenants.
<PAGE>
11. Accrued Environmental Costs
The Company is subject to extensive federal, state, and local
environmental laws and regulations relating to its petroleum refining,
distribution, and marketing operations. These laws and regulations (which are
complex, change frequently, and are subject to differing interpretations)
regulate the discharge of materials into the environment. The Company is
currently involved in a number of environmental proceedings and discussions
regarding the removal and mitigation of the environmental effects of subsurface
liquid hydrocarbons and alleged levels of hazardous waste at certain of its
refineries and other locations, including a site on the Superfund National
Priorities List.
In July 1993, outstanding litigation concerning environmental issues
was settled with the predecessor owners of the Avon Refinery (the "Settlement
Agreement"). Under the Settlement Agreement, the former owners agreed to pay up
to $18.0 million for one-half of the costs that may be incurred for compliance
with certain environmental orders and to provide the Company with a $6.0 million
credit for past expenses (which the Company uses to reduce its one-half share of
costs). After the $36.0 million shared cost maximum is expended, the parties may
elect to continue the Settlement Agreement or to reinstate litigation. The
Company and the former owners have established a committee to review and approve
expenditures for environmental investigative and remediation actions at the Avon
Refinery. Through December 31, 1999, the committee has spent $6.4 million on
such matters.
By agreement, Exxon Corporation ("Exxon") is responsible for
environmental obligations related to or arising out of its ownership and
operation of the Bayway Refinery, purchased by the Company in April 1993. The
Company has also received similar environmental indemnifications for periods
prior to the respective acquisition dates of the Ferndale Refinery, the Trainer
Refinery, retail assets in the Pacific Northwest and Northern California from BP
Exploration & Oil, Inc., and Arizona retail properties from Exxon.
On March 31, 1997, the Company acquired Unocal's West Coast petroleum
refining, marketing, and related supply and transportation assets (the "76
Products Acquisition"). Through March 31, 2022, Unocal is responsible for all
environmental liabilities at the acquired sites arising out of or relating to
the period prior to closing, except that the Company will pay the first $7.0
million of such environmental liabilities each year, plus 40% of any amount in
excess of $7.0 million per year, with Unocal paying the remaining 60% each year.
The Company's aggregate maximum obligation for the 25-year period is $200.0
million. During 1999, 1998, and the nine-month period ended December 31, 1997
the Company incurred environmental costs at the acquired sites as follows:
(Millions of Dollars) 1999 1998 1997
---- ---- ----
Total costs incurred $ 19.2 $ 18.0 $ 7.5
Less costs reimbursed by Unocal 8.9 5.1 0.3
------ ------ -----
Costs charged to the environmental accrual $ 10.3 $ 12.9 $ 7.2
====== ====== =====
Environmental exposures are difficult to assess and estimate for
numerous reasons including the complexity and differing interpretations of
governmental regulations, the lack of reliable data, the number of potentially
responsible parties and their financial capabilities, the multiplicity of
possible solutions, the years of remedial and monitoring activity required, and
the identification of new sites. The Company believes that it has adequately
provided for environmental exposures. However, should these matters be resolved
unfavorably to the Company, they could have a material adverse effect on its
long-term consolidated financial position and results of operations.
12. Company-Obligated, Mandatorily Redeemable, Convertible Preferred Securities
In December 1996, Tosco Financing Trust (the "Trust"), a Delaware
business trust, whose common securities are owned by Tosco, issued, in a private
placement, 6,000,000 shares of 5.75% company-obligated, mandatorily redeemable,
convertible preferred securities (the "Trust Preferred Securities"). The net
proceeds were used to purchase an equal amount of 5.75% convertible junior
subordinated debentures of Tosco due on December 15, 2026 (the "Convertible
Debentures"). The sole assets of the Trust are the Convertible Debentures,
guaranteed by Tosco. The Trust Preferred Securities represent preferred
undivided interests in the Trust's assets, with a liquidation preference of $50
per security, for a total liquidation preference of $300.0 million.
Distributions on the Trust Preferred Securities, cumulative and
payable quarterly in arrears at the annual rate of 5.75% of the liquidation
amount, commenced on March 15, 1997. The Company has the option to defer payment
of distributions for an extension period of up to five years if it is in
compliance with the terms of the Trust Preferred Securities. The Trust Preferred
Securities are convertible, at the option of the holder, into 1.51899 shares of
Common Stock, equivalent to a conversion price of approximately $32.92 per share
of Common Stock, subject to adjustment in certain events. The Trust Preferred
Securities do not have a stated maturity date, although they are mandatorily
redeemable upon the repayment of the Convertible Debentures. The redemption
price decreases from 104.025% in 1999 to 100% of the liquidation preference in
2006 and thereafter.
13. Capital Stock
The Company is authorized to issue 12,000,000 shares of preferred
stock, par value $1.00 per share, ("Preferred Stock"). No shares of Preferred
Stock are issued or outstanding. At a special stockholder meeting on February
12, 1997, an amendment to increase authorized shares of Common Stock from
50,000,000 to 250,000,000 was approved. In 1997, the Company declared and
distributed a 3-for-1 Common Stock split, in the form of a 200 percent stock
dividend. The number of shares, per share prices, and earnings per share amounts
for all periods reflect this 3-for-1 stock split.
In January 1997, the Company filed a shelf registration statement
providing for the issuance of up to $1.5 billion aggregate principal amount of
its securities. The securities may consist of (1) one or more series of
debentures, notes or other uncollateralized forms of indebtedness, (2) Common
Stock, (3) Preferred Stock, and (4) preferred stock represented by depository
shares. The securities may be offered, separately or together, in amounts and at
prices and terms to be set forth in one or more supplements to the shelf
registration statement. At December 31, 1999, the Company had available for
issue $778.9 million of securities pursuant to this shelf registration statement
(Note 23).
On August 5, 1999, the Company announced the completion of its
previously authorized Common Stock repurchase program. Pursuant to this program,
the Company repurchased 13,157,862 shares of Common Stock for $317.6 million
(8,899,862 shares in 1999 for $216.5 million and 4,258,000 shares in 1998 for
$101.1 million). On September 10, 1999, an additional $300,000,000 for the
repurchase of Tosco Common Stock was authorized. Through December 31, 1999, no
shares had been repurchased pursuant to this program.
Under the terms of a Shareholders' Rights Plan, adopted in 1998,
shareholders received rights to purchase shares of a new preferred stock. The
rights expire on December 6, 2008 and are exercisable only if a person or group
acquires beneficial ownership of 15% or more of Common Stock, a person commences
a tender or exchange offer for more than 15% of Common Stock, or if an adverse
person (as defined by Tosco's Board of Directors) acquires beneficial ownership
of 10% or more of Common Stock.
The Company has paid a regular quarterly cash dividend on Common Stock
since the third quarter of 1989. Effective with the second quarter of 1999, the
Company increased its quarterly cash dividend from $0.06 per share to $0.07 per
share.
14. Stock Option Plans
The Company has three stock option plans, the 1998 Stock Incentive
Plan (the "1998 Plan"), the 1992 Stock Incentive Plan (the "1992 Plan"), and the
1989 Stock Incentive Plan (the "1989 Plan"), that reserve Common Stock for
issuance to key employees, consultants, and non-employee directors. The 1998
Plan, 1992 Plan, and 1989 Plan (collectively the "Option Plans") provide for the
grant of a maximum of 1.5 million, 6.6 million, and 3.8 million shares of Common
Stock, respectively, in the form of stock options, restricted stock awards,
and/or stock appreciation rights. Stock options may be granted as "Incentive
Stock Options" (as defined by the Internal Revenue Code) or as nonqualified
options. Options may be exercised as determined by the Compensation Committee of
the Board of Directors (the "Compensation Committee") but in no event after ten
years from the date of grant. The exercise price of stock options is determined
by the Compensation Committee. Awards under the 1998 Plan and 1992 Plan may be
granted until March 18, 2009 and March 13, 2002, respectively. Awards under the
1989 Plan may no longer be granted. Subject to severance agreements with certain
employees (Note 20), options may be exercised at any time after vesting,
currently one to five years.
<PAGE>
Information regarding the Option Plans as of December 31, 1999, 1998,
and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- -------------------- --------------------
(Millions of Shares) Shares Price (a) Shares Price (a) Shares Price (a)
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning
of year 7.6 $ 13.93 7.2 $ 12.31 7.0 $ 10.14
Granted - 1992 Plan (b) 0.2 33.72 0.8 30.24
Granted - 1998 Plan (b) 0.7 23.72 0.4 33.11
Exercised (0.7) 9.50 (0.2) 9.51 (0.5) 10.02
Expired or canceled (0.1) 29.93 24.34 (0.1) 16.56
------ ------ ------
Options outstanding, end of year 7.5 15.09 7.6 13.93 7.2 12.31
====== ====== ======
Options exercisable, end of year 6.0 $ 12.00 6.1 $ 10.50 5.2 $ 9.25
====== ====== ======
Shares available for future grant 0.6 1.3 0.3
====== ====== ======
(a) Weighted average price per share.
(b) All options granted had exercise prices equal to the average market
price of Common Stock on the grant date.
</TABLE>
Additional information regarding the Option Plans as of December 31,
1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------- ------------------------
(Millions of Shares) Shares Price (a) Life (b) Shares Price (a)
Exercise price range: ------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
$4.94 per share to $10.00 per share 3.3 $ 8.19 29 months 3.3 $ 8.19
$10.01 per share to $15.00 per share 1.7 11.28 64 months 1.7 11.28
$15.01 per share to $33.94 per share 2.5 26.79 95 months 1.0 24.97
------ ------
7.5 15.09 59 months 6.0 12.00
====== ======
(a) Weighted average price per share.
(b) Weighted average remaining contractual life.
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). Had the Company elected to adopt the recognition
provisions of SFAS No. 123, net income and earnings per share would have been
reduced by $3.4 million ($0.02 per share), $3.6 million, ($0.02 per share), and
$3.0 million ($0.02 per share) for 1999, 1998, and 1997, respectively.
The fair value of options granted was estimated using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
1999 1998 1997
---- ---- ----
Assumed risk-free interest rate 5.25% 5.60% 6.50%
Expected life 5.9 years 5.7 years 7.2 years
Expected volatility 30.99% 30.60% 28.70%
Assumed dividend yield 1.12% 0.80% 0.80%
In late 1996, the Company adopted the Tosco Corporation 1996 Long-Term
Incentive Plan (the "LTIP") which replaced the granting of incentive awards
under the Option Plans to participants in the LTIP. Under the LTIP, the
Compensation Committee may grant performance units to participants, the payment
of which is contingent on the meeting of performance goals as defined and
continued employment by the participant. Under certain circumstances, payments
in a calendar year may not exceed 400% of the participant's total annual
compensation for the year of the award. The participants received $14.0 million
on January 4, 2000 and $30.5 million on January 4, 1999. In addition, the
participants are scheduled to receive a total of $18.0 million on various dates
through July 2003 based on performance goals achieved to date. If a participant
voluntarily terminates employment with the Company or retires prior to age 65,
all unpaid amounts are forfeited. The Company accrues for such amounts on a
ratable basis over the required service period.
15. Employee Benefit, Savings, and Incentive Compensation Plans
Pension Plans
The Company has non-contributory, defined benefit pension plans
covering substantially all employees located at the Bayway Refinery, the Los
Angeles Area Refinery System, and the San Francisco Area Refinery System, and
its union employees at the Ferndale Refinery (the "Refinery Pension Plan"), and
store employees (the "Marketing Pension Plan") meeting minimum service periods
(collectively, the "Pension Plans"). Benefits under the Refinery Pension Plan
are generally based on the employee's years of service and average earnings for
the three highest consecutive calendar years of compensation during the ten
years immediately preceding retirement. Benefits are payable at the normal
retirement age of 65, with reduced benefits for early retirement (as defined).
Benefits under the Marketing Pension Plan are generally based upon a percentage
of the employee's covered earnings for each year of service and interest credits
on these amounts. Benefits are payable at the normal retirement age of 65, or
upon earlier termination of employment after five years of service.
Contributions to the Pension Plans are at least sufficient to meet the minimum
funding requirements of applicable laws and regulations but no more than the
amount deductible for federal income tax purposes. The assets of the Pension
Plans are held by a major financial institution and invested in a stock index
fund, a Treasury bond index fund, short-term investment funds, and a real estate
equity fund. The change in benefit obligation, plan assets, and funded status,
using end of year actuarial assumptions, consist of the following at December
31, 1999 and 1998:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998
---- ----
<S> <C> <C>
Benefit obligation at beginning of year $ 164.2 $ 137.0
Service cost (without load for expenses) 16.9 15.3
Interest cost 12.4 9.9
Actuarial (gain) loss (10.8) 5.0
Benefits paid (4.3) (3.0)
--------- --------
Benefit obligation at end of year 178.4 164.2
--------- --------
Fair value of plan assets at beginning of year 144.4 106.8
Actual return on plan assets (a) 22.7 26.4
Employer contributions 15.9 14.5
Benefits paid (4.3) (3.0)
Administrative expenses (0.3) (0.3)
--------- --------
Fair value of plan assets at end of year 178.4 144.4
--------- --------
Funded status at end of year - (19.8)
Unrecognized transition obligation 0.6 0.9
Unrecognized net investment and non-investment gain (a) (30.5) (9.6)
Unrecognized prior service cost 6.9 7.6
--------- --------
Accrued benefit liability at end of year $ (23.0) $ (20.9)
========= ========
(a) Only a portion of the investment gain on plan assets is available to
reduce the accrued benefit liability.
</TABLE>
Net pension cost, using beginning of year actuarial assumptions, for
the years ended December 31, 1999, 1998, and 1997 consists of the following:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Service cost $ 17.3 $ 15.5 $ 9.7
Interest cost 12.4 9.9 8.1
Expected return on plan assets (12.7) (8.4) (6.2)
Amortization of transition obligation 0.3 0.3 0.3
Amortization of prior service cost 0.7 0.7 0.7
------- ------- -------
$ 18.0 $ 18.0 $ 12.6
======= ======= =======
</TABLE>
<PAGE>
Major assumptions used to calculate pension obligations and pension
costs for the years ended December 31, 1999, 1998, and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ----- -----
<S> <C> <C> <C>
Assumed discount rate 7.75% 6.75% 7.00%
Assumed rate of future compensation increase 5.00% 5.00% 5.00%
Expected rate of return on plan assets 8.50% 7.50% 7.50%
</TABLE>
The Company has a Senior Executive Retirement Plan ("SERP") that
provides retirement benefits to selected senior executives. SERP provisions of
$1.9 million, $2.2 million, and $1.9 million are included in selling, general,
and administrative expenses in 1999, 1998, and 1997, respectively.
Employee and Retiree Benefit Plans
The Company provides health care and life insurance benefits for its
employees. The Company also provides postretirement health care and life
insurance benefits for certain employees (primarily refinery employees). Health
care benefits for eligible employees and retirees are provided through insurance
companies and health maintenance organizations whose premiums are based on the
benefits paid during the year. The health care plans are contributory (with
employee/retiree contributions adjusted periodically) and contain other
cost-sharing features such as deductibles and coinsurance. The life insurance
plans are noncontributory.
The change in benefit obligation, plan assets, and funded status,
using end of year actuarial assumptions, consists of the following at December
31, 1999 and 1998:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998
---- ----
<S> <C> <C>
Benefit obligation at beginning of year $ 33.8 $ 26.7
Service cost 1.5 1.2
Interest cost 2.2 1.9
Amendment 1.5 3.2
Actuarial (gain) loss (3.9) 2.0
Benefits paid (1.2) (1.2)
------- ------
Benefit obligation at end of year 33.9 33.8
-------- --------
Fair value of plan assets at beginning of year 4.8 4.9
Actual return on plan assets 0.1 0.3
Benefits paid (0.4) (0.4)
-------- --------
Fair value of plan assets at end of year 4.5 4.8
-------- --------
Funded status at end of year (29.4) (29.0)
Unrecognized transition obligation 11.2 12.1
Unrecognized net actuarial gain (7.2) (4.3)
Unrecognized prior service cost 7.4 6.6
-------- --------
Accrued benefit liability at end of year $ (18.0) $ (14.6)
======== ========
</TABLE>
Net postretirement benefit cost, using beginning of year actuarial
assumptions, for the years ended December 31, 1999, 1998, and 1997 consists of
the following:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Service cost $ 1.5 $ 1.2 $ 1.0
Interest cost 2.2 1.9 1.6
Expected return on plan assets (0.3) (0.3) (0.3)
Amortization of transition obligation over 20 years 0.9 0.9 0.9
Net amortization and deferral (0.2) (0.7) (0.8)
------ ------- ------
$ 4.1 $ 3.0 $ 2.4
====== ======= ======
</TABLE>
<PAGE>
Major assumptions used to calculate the benefit obligation and net
postretirement benefit cost for the years ended December 31, 1999, 1998, and
1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Assumed discount rate 7.75% 6.75% 7.00%
Current year health care cost trend rate 9.00% 9.00% 6.80%
Ultimate health care cost trend rate 5.75% 4.75% 5.50%
Year ultimate trend rate is achieved 2007 2008 2002
Expected rate of return on plan assets 7.00% 7.00% 5.50%
</TABLE>
A 1% change in the health care cost trend rates would have had the
following effect on benefit obligations and aggregate of service and interest
costs:
(Millions of Dollars) 1% Increase 1% Decrease
Benefit obligation at December 31, 1999 $ 1.8 $ (2.1)
Benefit obligation at December 31, 1998 1.5 (1.8)
Aggregate interest and service cost for 1999 0.2 (0.3)
Aggregate interest and service cost for 1998 0.2 (0.2)
Aggregate interest and service cost for 1997 0.2 (0.2)
Savings Plans
The Tosco Corporation Capital Accumulation Plan (the "CAP") and the
Tosco Store Savings Plan (the "TSSP"), have been established for eligible
employees. Participants may make, within certain limitations, voluntary
contributions under Section 401(k) of the Internal Revenue Code of a percentage
of their compensation. The Company makes matching contributions to the CAP based
upon years of contributory participation, as defined, for employees who elect to
make certain specified and minimum contributions. In addition, eligible
employees of the CAP receive an additional contribution equal to 5% of their
compensation, up to $150,000, in lieu of pension plan benefits. Participants of
the CAP and TSSP (collectively the "Savings Plan") are immediately vested in
their voluntary contributions. Participants in the CAP are immediately vested in
the Company contributions. Contributions by the Company to the Savings Plans for
the years ended December 31, 1999, 1998, and 1997 were $21.0 million, $20.4
million, and $17.8 million, respectively.
Management Incentive Plan
The Tosco Corporation Cash Incentive Plan (the "CIP") has been
established for members of middle and senior management. The CIP sets forth
discretionary and other awards computed as a variable percentage of a
participant's base salary, which percentage is dependent upon pre-tax income, as
defined, of the respective participant's operating division. The Company also
has a bonus plan for senior executives, who are not participants in the CIP,
based on pre-tax income per share, as defined. Results of operations for the
years ended December 31, 1999, 1998, and 1997 include incentive compensation of
$56.3 million, $54.3 million, and $56.1 million, respectively, of which $6.2
million, $5.9 million, and $5.8 million were special bonuses awarded to union
and other employees not covered by management incentive plans.
16. Avon Refinery Start-up Costs
On February 23, 1999, a fire at a crude unit at the San Francisco Area
Refinery, Avon facility resulted in four fatalities. The fire was quickly
isolated and extinguished with no offsite impacts or health risks to the
community. In March 1999, the Avon Refinery was shutdown while a thorough safety
review and extensive employee safety training were conducted. In May 1999, the
Company began the process of restarting the refinery and all major processing
units were restarted by the end of July 1999. The Company incurred non-recurring
expenses of $43.1 million primarily related to the restart of the Avon Refinery.
The start-up and related expenses consist primarily of safety and maintenance
projects, implementation of regulatory and independent safety consultant
recommendations, and the early write-off of Turnarounds. These start-up costs do
not include any normal recurring expenses for maintaining the refinery or
training employees during the stand-down period.
<PAGE>
17. Income Taxes
The provision (benefit) for income taxes for the years ended December
31, 1999, 1998, and 1997 is as follows:
(Millions of Dollars) 1999 1998 (a) 1997
Current:
Federal $ 115.3 $ (45.5) $ 87.5
State 36.2 (5.0) 23.8
Foreign 0.2 0.4 0.2
-------- -------- -------
151.7 (50.1) 111.5
-------- -------- -------
Deferred:
Federal 140.8 108.1 37.2
State 14.4 17.3 2.2
-------- ------- --------
155.2 125.4 39.4
-------- ------- --------
$ 306.9 $ 75.3 $ 150.9
======== ======= ========
(a) Current federal and state income tax benefits for 1998 relate primarily
to the inventory writedown.
A reconciliation of the provision for income taxes to income taxes
computed by applying the statutory federal income tax rate to earnings before
income taxes is as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income taxes at the statutory rate $ 262.0 $ 63.5 $ 127.2
State income taxes, net of credits and federal benefit 32.9 8.1 16.9
Permanent differences 10.8 10.8 11.3
Federal credits, adjustments, and other 1.2 (7.1) (4.5)
------- -------- --------
$ 306.9 $ 75.3 $ 150.9
======= ======== ========
</TABLE>
Temporary differences between financial and income tax reporting and
tax credit carryforwards that give rise to deferred income tax assets and
liabilities as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 (a)
---- -------
Deductible temporary differences:
<S> <C> <C>
Accounts receivable $ 18.5 $ 17.7
Accrued expenses and other current liabilities 132.2 144.3
Accrued environmental costs 251.6 251.7
Accrued postretirement benefit liability 40.8 35.7
Noncurrent liabilities 112.7 110.1
Other 3.8 9.1
Deferred state income taxes (b) 58.6 44.2
-------- ------
618.2 612.8
-------- ------
Taxable temporary differences:
Inventories (380.7) (136.6)
Property, plant, and equipment (335.6) (435.7)
Deferred Turnarounds (112.4) (123.7)
Intangible assets (primarily tradenames) (32.4) (32.4)
Capital leases (518.7) (364.1)
Other deferred charges and assets (16.6) (16.6)
Other (77.2) (39.0)
---------- ----------
(1,473.6) (1,148.1)
---------- ----------
Net temporary differences $ (855.4) $ (535.3)
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 (a)
---- --------
<S> <C> <C>
Federal income taxes at 35% $ (299.4) $ (187.3)
Alternative minimum tax ("AMT") credit carryforward 22.7
Research and experimentation and other tax credit carryforwards 6.0
---------- ----------
Federal deferred tax liability, net (299.4) (158.6)
State deferred tax liability, net (b) (58.6) (44.2)
---------- ----------
Total deferred tax liability, net (358.0) (202.8)
Current portion (74.4) (23.3)
---------- ----------
Noncurrent portion $ (283.6) $ (179.5)
========== ==========
(a) Certain amounts have been reclassified to conform with the 1999 grouping.
(b) Deferred state income tax liabilities are provided for temporary
differences, primarily differences between the book and tax bases of
property, plant, and equipment.
</TABLE>
18. Operating Leases
The Company distributes petroleum products throughout its marketing
areas through a combination of owned and leased terminals. Leases for product
distribution terminals are generally for short periods of time and continue in
effect until canceled by either party with contracted days of notice, generally
30 to 60 days. Most product distribution terminal leases are subject to
escalations based on various factors. The Company subleases portions of its
owned and leased product distribution terminals.
The Company has long-term leases with special purpose entities for
land and equipment at certain of the Company's service stations, refining
processing units, and an office building. These leases provide the Company the
option to purchase, at agreed-upon prices, (a) a portion of the leased assets
for resale to unaffiliated parties during the lease terms and (b) not less than
all of the leased assets at the end of the leases. The Company may cancel the
leases subject to the lessors receiving certain guaranteed minimum sales values
for the assets. Minimum annual rentals vary with commercial paper interest rates
and the reference interest rate (LIBOR). These leases are accounted for as
operating leases and extend, with renewal options, through 2004.
The Company leases certain of its stores and other property and
equipment. The store leases generally have primary terms of up to 25 years with
varying renewal provisions. Under certain of these leases, the Company is
subject to additional rentals based on store sales as well as escalations in the
minimum future lease amount. The leases for other property and equipment are for
terms of up to 15 years. Most of the Company's lease arrangements provide the
Company an option to purchase the assets at the end of the lease term. The
Company may also cancel certain of its leases provided the lessor receives
minimum sales values for the leased assets. Most of the leases require that the
Company provide for the payment of real estate taxes, repairs and maintenance,
and insurance.
Net rental expense for the years ended December 31, 1999, 1998, and
1997 consists of the following:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Minimum rental and warehousing charges $ 152.2 $ 188.2 $ 153.8
Contingent rental and warehousing charges 15.4 7.1 11.8
-------- ------- -------
167.6 195.3 165.6
Less sublease rental income 75.0 55.6 39.2
-------- ------- -------
$ 92.6 $ 139.7 $ 126.4
======== ======= =======
</TABLE>
<PAGE>
At December 31, 1999, future minimum obligations under non-cancelable
operating leases and warehousing agreements are as follows:
(Millions of Dollars)
2000 $ 159.8
2001 144.5
2002 (a) 126.5
2003 (a) 100.8
2004 (a) 108.1
Thereafter 369.1
--------
1,008.8
Less future minimum sublease income 134.2
--------
$ 874.6 (b)
========
(a) Excludes guaranteed residual payments totaling $180.6 million (2002),
$189.8 million (2003), and $155.5 million (2004) due at the end of the
lease term, which would be reduced by the fair market value of the
leased assets.
(b) The Company has contingent obligations for certain lease payments
totaling $10.9 million for convenience stores previously sold. The
Company believes it is unlikely that it will be required to perform
under these contingent obligations.
19. Financial Instruments
Fair Values
The carrying value of cash, cash equivalents, marketable securities,
short-term deposits, trade accounts receivable, accounts payable, and other
current liabilities approximates their fair value due to the relatively short
maturity of these financial instruments. The carrying value of the Revolving
Credit Facility approximates fair value due to its variable interest rate. The
fair value (based on quoted market prices and estimates) of long (obligation to
purchase) and short (obligation to deliver) derivative financial instruments
were $473.6 million and $381.0 million, respectively at December 31, 1999.
Estimated fair values of other financial instruments at December 31, 1999 and
1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
Carrying Fair Carrying Fair
(Millions of Dollars) Value Value (a) Value Value (a)
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
First Mortgage Bonds $ 200.0 $ 207.8 $ 200.0 $ 219.9
Bayway Bonds 150.0 152.3 150.0 161.6
7% Notes 125.0 125.2 125.0 126.9
7.625% Notes 240.0 235.6 240.0 250.7
7.25% Notes 200.0 191.1 200.0 208.6
7.8% Debentures 300.0 282.6 300.0 316.3
7.9% Debentures 100.0 92.1 100.0 106.0
Trust Preferred Securities 300.0 285.0 300.0 299.2
(a) The fair value of these instruments reflects quoted market prices.
</TABLE>
Derivatives
The Company utilizes commodity-based derivative instruments, at times
and when able, to reduce a portion of its exposure to price volatility.
Commodity futures are used to lock in what the Company considers to be
acceptable margins between the sales value of refined products produced and the
cost of raw materials purchased on a varying percentage of production, generally
for periods not exceeding one year. In addition, the Company enters into swap
contracts with counterparties (typically agreeing to sell at fixed forward
prices, and to buy at future variable market prices, stated volumes of residual
fuels) to hedge sales prices of residual fuels production. Futures and forward
contracts are also used to hedge inventories stored for future sale and to hedge
against adverse price movements between the cost of foreign and domestic crude
oil.
<PAGE>
At December 31, 1999 and 1998, the Company had open long and short
futures, swap and forward contracts for crude oil and products with a notional
volume (number of barrels under contract) and value (number of barrels under
contract multiplied by the per-barrel contract value) as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Contract Contract Contract Contract
(Millions of Dollars) Volume Value Volume Value
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Open long positions 24,902 $ 444.8 4,937 $ 61.6
Open short positions 22,621 340.1 7,679 97.2
</TABLE>
The net deferred gain / (loss) on futures and swap contracts totaled
$1.2 million and $(7.3) million at December 31, 1999 and 1998, respectively.
These amounts will be recognized in the following year as an offset to realized
margins on refined products sold (Note 24).
Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents,
marketable securities, short-term deposits, trade receivables, and derivative
instruments. The Company places its cash equivalents, marketable securities, and
short-term deposits with several high-quality financial institutions. The
Company's customer base consists of a large number of diverse customers. The
Company conducts ongoing evaluations of its customers and requires letters of
credit or other collateral arrangements as appropriate. Accordingly, trade
receivable losses have not been significant. 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.
20. Commitments and Contingencies
There are various legal proceedings and claims pending against the
Company that are common to its operations. While it is not feasible to predict
or determine the ultimate outcome of these matters, it is the opinion of
management that these suits will not result in monetary damages not covered by
insurance that in the aggregate would be material to the business or operations
of the Company.
Under the terms of the 76 Products Acquisition, Unocal could have
received up to $250.0 million of contingent participation payments over the
seven year period following the acquisition if retail market conditions and/or
California Air Resources Board ("CARB") gasoline margins increased above
specified levels. For completed participation periods, the Company's obligation
was not material to its consolidated financial position. In December 1999, Tosco
agreed to pay Unocal $50.0 million in settlement of retail participation
obligations for prior and future periods. In addition, the remaining maximum
contingent payment, related to improvements in CARB gasoline margins, was
reduced to $100.0 million. The $50.0 million participation payment, paid in
December 1999 and January 2000, was capitalized and will be depreciated and
amortized over the remaining useful lives of the acquired assets.
Litigation between Unocal and certain petroleum refiners has contested
the validity of patents held by Unocal covering certain formulations for clean
burning fuels meeting California fuel specifications and, in turn, alleged
infringement of those patents by certain refiners. The Company is not a party to
the patent litigation. Under the terms of the 76 Product Acquisition, the
Company has no liability to Unocal for any possible past infringement of the
patents, including to the date of final resolution of the matter, which,
considering appeals, could take several years.
The Company has employment agreements with certain of its executive
officers that provide for lump sum severance payments and accelerated vesting of
options upon termination of employment under certain circumstances or a change
of control, as defined. The Company's potential minimum obligation to seven
officers was $6.3 million at December 31, 1999.
The Company, in keeping with industry practice, schedules Turnarounds
as the units reach the end of their normal operating cycles. Unscheduled
Turnarounds or unit shutdowns also occur because of operating difficulties or
external factors. Throughput and earnings are lowered, and Turnaround
expenditures increased, during such periods.
The Company carries insurance policies on insurable risks, which it
believes to be appropriate at commercially reasonable rates. While management
believes the Company is adequately insured, future losses could exceed insurance
policy limits or, under adverse interpretations, be excluded from coverage.
Future liability or costs, if any, incurred under such circumstances would have
to be paid out of general corporate funds. Cost of sales was reduced by
insurance coverage recoveries of $42.4 million in 1999 for property damage and
business interruption claims, net of insurance policy deductibles and asset
write-offs, related to the Avon Refinery incident (Note 16). The Company is
pursuing additional claims for insurance recoveries from its carriers.
In the normal course of business, the Company has entered into
numerous crude oil and feedstock supply contracts, finished product sale and
exchange agreements, and transportation contracts. Because of the market related
pricing structure and/or generally short-term nature of these contracts, they
are not expected to negatively impact the Company's future operating results.
21. Business Segments
The Company has two operating business segments: refining and
marketing. The refining segment includes the acquisition of crude oil and other
feedstocks, the production of petroleum products, and the distribution and sale
of petroleum products to wholesale customers. The marketing segment includes the
sale of petroleum products and merchandise through company-owned gasoline
stations and convenience stores and branded dealers and jobbers. The
nonoperating segment consists of corporate activities and certain nonoperating
subsidiaries. Summarized financial information by segment for 1999, 1998, and
1997 is as follows:
<TABLE>
<CAPTION>
Operating Segments
---------------------------- Nonoperating Consolidated
1999 (Millions of Dollars) Refining Marketing Segment Total
---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Total sales $ 11,003.3 $ 5,826.8 $ - $ 16,830.1
Intersegment sales (2,453.2) (14.8) (2,468.0)
----------- ---------- ----------- -----------
Third party sales $ 8,550.1 $ 5,812.0 $ - $ 14,362.1
=========== ========== =========== ===========
Operating contribution (a) $ 727.6 $ 531.2 $ - $ 1,258.8
Depreciation and amortization (176.1) (131.0) (1.3) (308.4)
Special items:
Inventory recovery 240.0 240.0
Restructuring recovery 2.1 2.1
Avon Refinery start-up costs (43.1) (43.1)
Gain on sale of retail assets in
non- core markets 40.5 40.5
Net interest (expense) income (73.8) (48.1) 3.1 (118.8)
Income (loss) before income taxes and
distributions on Trust Preferred Securities 565.6 216.4 (16.1) 765.9
Capital and Turnaround expenditures $ 309.1 $ 227.0 $ - $ 536.1
Total assets at year-end $ 3,677.3 $ 2,442.2 $ 92.9 $ 6,212.4
Operating Segments
--------------------------- Nonoperating Consolidated
1998 (Millions of Dollars) Refining Marketing Segment Total
---------- --------- ------------- ------------
Total sales $ 8,608.4 $ 5,234.7 $ - $ 13,843.1
Intersegment sales (1,812.6) (9.0) (1,821.6)
----------- ----------- --------- -----------
Third party sales $ 6,795.8 $ 5,225.7 $ - $ 12,021.5
=========== =========== ========= ===========
Operating contribution (a) $ 682.3 $ 533.4 $ - $ 1,215.7
Depreciation and amortization (180.2) (132.0) (1.7) (313.9)
Special items:
Inventory writedown (240.0) (240.0)
Restructuring charge (40.0) (40.0)
Net interest expense (income) (79.3) (46.1) 2.7 (122.7)
Income (loss) before income taxes and
distributions on Trust Preferred Securities 60.2 153.9 (15.3) 198.8
Capital and Turnaround expenditures $ 337.2 $ 216.4 $ 0.1 $ 553.7
Total assets at year-end $ 3,436.0 $ 2,319.3 $ 87.5 $ 5,842.8
Operating Segments
--------------------------- Nonoperating Consolidated
1997 (Millions of Dollars) Refining Marketing Segment Total
---------- ---------- ------------- ------------
Total sales $ 9,707.3 $ 5,643.5 $ - $ 15,350.8
Intersegment sales (2,053.4) (15.8) (2,069.2)
----------- ----------- --------- -----------
Third party sales $ 7,653.9 $ 5,627.7 $ - $ 13,281.6
=========== =========== ========= ===========
Operating contribution (a) $ 628.2 $ 539.9 $ - $ 1,168.1
Depreciation and amortization (175.5) (126.5) (1.5) (303.5)
Special item:
Inventory writedown (53.0) (53.0)
Net interest expense (income) (80.2) (55.8) 1.5 (134.5)
Income (loss) before income taxes and
distributions on Trust Preferred Securities 233.1 163.2 (15.5) 380.8
Capital and Turnaround expenditures $ 384.9 $ 131.3 $ 5.9 $ 522.1
Total assets at year-end $ 3,567.9 $ 2,263.9 $ 143.1 $ 5,974.9
(a) Operating contribution is calculated as sales minus cost of sales.
</TABLE>
22. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
---- ----- ----
Cash paid during the year for:
<S> <C> <C> <C>
Interest, net of amounts capitalized $ 130.9 $ 134.4 $ 113.2
Income taxes, net of refunds received (a) 139.9 (27.1) 105.2
Detail of cash paid for acquisitions:
Fair value of assets acquired $ 118.1 $ 2,035.4
Liabilities assumed (441.0)
Common Stock issued (396.9)
------- ----------
Net cash paid for acquisitions 118.1 1,197.5
Cash acquired in acquisitions 0.3 3.0
------- ----------
$ 118.4 $ 1,200.5
======= ==========
(a) A $51.7 million refund of federal income taxes was received in
September 1998.
</TABLE>
<PAGE>
23. Subsequent Events
Exxon Mobil Acquisition
On February 29, 2000, the Company acquired and began operating retail
systems consisting of approximately 1,740 retail gasoline and convenience
outlets from Exxon Corporation and Mobil Oil Corporation (collectively
"ExxonMobil") for $860.0 million, plus transaction costs. Tosco is also
acquiring certain undeveloped sites and distribution terminals, all of which
ExxonMobil is divesting under a Federal Trade Commission consent decree
(collectively the "ExxonMobil Acquisition"). The acquired outlets comprise the
Exxon system from New York through Maine (the "Northeast Territory") and the
Mobil system from New Jersey through Virginia (the "Middle Atlantic Territory").
The outlets include approximately 685 owned or leased sites and 1,055 open
dealer and branded distributor sites. Tosco has exclusive rights to the "Exxon"
brand in the Northeast Territory and the "Mobil" brand in the Middle Atlantic
Territory for ten years.
Certain of the acquired gasoline and convenience outlets were
purchased directly from ExxonMobil by a special purpose entity that leased the
sites to the Company pursuant to a long-term operating lease. The lease provides
the Company the option to purchase, at agreed-upon contracted prices, (a) a
portion of the leased assets for resale to unaffiliated parties during the term
of the lease and (b) not less than all of the leased assets at the end of the
lease. The Company may cancel the lease subject to the lessor receiving certain
guaranteed minimum sales values for the assets. A portion of minimum annual
rentals vary with commercial paper interest rates. This lease extends through
February 2010.
Revolving Credit Facility
On February 8, 2000, the Company amended and restated its Revolving
Credit Facility (the "Amended Revolving Credit Facility"). The Amended Revolving
Credit Facility provides the Company with a $750.0 million uncollateralized
revolving credit facility that is available for working capital and general
corporate purposes, including acquisitions. Facility A (for $375.0 million)
matures on February 8, 2005 and Facility B (for $375.0 million) matures on
February 7, 2001. At the Company's option and the lenders consent, Facility B
may be renewed annually until February 7, 2005. At the Company's option, any
outstanding balance under Facility B can be converted into a two-year
non-amortizing term note.
Long-Term Debt
On February 8, 2000, the Company issued $400.0 million of 8.125% Notes
due on February 15, 2030 (the "8.125% Notes"). Interest on the 8.125% Notes is
payable each February 15 and August 15, commencing on August 15, 2000. The
proceeds from the 8.125% Notes of $392.3 million were used to finance a portion
of the ExxonMobil Acquisition. After this debt offering, the Company may issue
up to $378.9 million of securities pursuant to its shelf registration statement
(Note 13).
24. New Accounting Standard
During June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. The Company plans to adopt SFAS No. 133 on January 1, 2001. The
Company is currently evaluating the effect SFAS No. 133 will have on its
financial position and results of operations.
<PAGE>
25. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------- -------- ------- -------- -------
(Millions of Dollars, Except Per Share Data)
1999
<S> <C> <C> <C> <C> <C>
Sales $ 2,637.7 $ 3,678.4 $ 3,860.4 $ 4,185.6 $ 14,362.1
Operating contribution (a) 242.7 331.6 376.8 307.7 1,258.8
Special items:
Inventory recovery 240.0 240.0
Restructuring recovery 2.1 2.1
Avon Refinery start-up costs (39.3) (3.8) (43.1)
Gain on sale of retail assets
in non-core markets 40.5 40.5
Net income 27.9 84.6 113.9 215.3 441.7
Earnings per share (b):
Basic $ 0.18 $ 0.56 $ 0.78 $ 1.50 $ 2.97
Diluted (c) 0.18 0.53 0.74 1.40 2.83
1998
Sales $ 3,047.0 $ 3,168.4 $ 2,964.5 $ 2,841.6 $ 12,021.5
Operating contribution (a) 258.7 362.8 315.0 279.2 1,215.7
Special items:
Inventory writedown (240.0) (240.0)
Restructuring charge (40.0) (40.0)
Net income (loss) 41.5 100.3 80.3 (115.9) 106.2
Earnings (loss) per share (b):
Basic $ 0.27 $ 0.64 $ 0.52 $ (0.76) $ 0.69
Diluted (d) 0.26 0.61 0.49 (0.76) 0.67
(a) Operating contribution is calculated as sales minus cost of sales.
(b) Earnings per share calculations are based on the weighted average
number of shares outstanding for each quarter. The sum of the quarters
may not be equal to the full year amount.
(c) For the three-month period ended March 31, 1999, conversion of Trust
Preferred Securities was not assumed due to the anti-dilutive impact of
the conversion.
(d) For the three-month period ended December 31, 1998, conversion of stock
options and Trust Preferred Securities was not assumed due to the
anti-dilutive impact of the conversion. For the year ended December 31,
1998, conversion of Trust Preferred Securities was not assumed due to
the anti-dilutive impact of the conversion.
</TABLE>
TOSCO CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Millions of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------------------------------------- ------------ -------------------------- ----------- ----------
Charged
Balance at (Credited) to Charged Balance
Beginning Costs and to Other at End of
of Year Expenses Accounts Deductions Year
---------- -------------- -------- ----------- ------------
Allowance for uncollectible receivables:
<S> <C> <C> <C> <C> <C>
1999 $16.8 $9.3 $- $8.2 $17.9
1998 19.0 10.3 12.5 16.8
1997 (a) 8.3 8.2 7.2 4.7 19.0
Inventory net realizable value reserve:
1999 $293.0 $(293.0) $- $- $-
1998 53.0 240.0 - - 293.0
1997 - 53.0 - - 53.0
(a) The 1997 amount "Charged to Other Accounts" represents the allowance for uncollectible
credit card receivables acquired in the 76 Products Acquisition.
</TABLE>
Exhibit 10(a)
EXECUTION COPY
FIFTH AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of February 8, 2000
among
TOSCO CORPORATION
AS BORROWER
and
THE LENDERS NAMED HEREIN
AS LENDERS
BANKBOSTON, N.A.
AS ADMINISTRATIVE AGENT,
-- -------------- ------
and
ROYAL BANK OF CANADA
AS SYNDICATION AGENT,
-- ----------- -----
and
PNC BANK, NATIONAL ASSOCIATION
AS DOCUMENTATION AGENT,
-- ------------- -----
with
FLEETBOSTON ROBERTSON STEPHENS INC.
AS ARRANGER AND BOOK MANAGER,
-- -------- --- ---- -------
and
ROYAL BANK OF CANADA
and
PNC CAPITAL MARKETS, INC.
AS ARRANGERS
-- ---------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS..................................1
1.01. DEFINITIONS...................................................1
1.02. COMPUTATION OF TIME PERIODS...................................20
1.03. ACCOUNTING TERMS..............................................20
1.04. GENERAL PROVISIONS............................................20
ARTICLE II. AMOUNTS AND TERMS OF THE LOANS...................................21
2.01. REVOLVING CREDIT FACILITY A...................................21
2.02. REVOLVING CREDIT FACILITY B...................................22
2.03. NOTICE AND METHOD OF BORROWING................................23
2.04. LETTERS OF CREDIT.............................................25
2.05. PROCEDURES FOR OPENING LETTERS OF CREDIT......................26
2.06. ADDITIONAL PROVISIONS REGARDING LETTERS OF CREDIT.............27
2.07. LETTER OF CREDIT COMMISSIONS AND FEES.........................28
2.08. COMMITMENT AND UTILIZATION FEES...............................29
2.09. MANDATORY REPAYMENT...........................................31
2.10. OPTIONAL PREPAYMENTS OF LOANS.................................32
2.11. CONVERSION/CONTINUATION OPTION................................33
2.12. INTEREST......................................................33
2.13. INTEREST RATE DETERMINATION AND PROTECTION;
INABILITY TO DETERMINE EURODOLLAR RATE........................34
2.14. ILLEGALITY....................................................36
2.15. INCREASED COSTS; CAPITAL ADEQUACY.............................36
2.16. PAYMENTS AND COMPUTATIONS; APPLICATIONS OF PAYMENTS...........37
2.17. LOAN ACCOUNTS.................................................38
2.18. TAXES.........................................................38
2.19. SHARING OF PAYMENTS, ETC......................................40
2.20. INDEMNITY.....................................................41
2.21. REPLACEMENT OF COMMITMENTS....................................41
ARTICLE III. CONDITIONS PRECEDENT............................................42
3.01. CONDITIONS TO CLOSING DATE....................................42
3.02. CONDITIONS TO ALL LOANS AND LETTERS OF CREDIT.................44
ARTICLE IV. REPRESENTATIONS AND WARRANTIES...................................44
4.01. CORPORATE AUTHORITY...........................................44
4.02. LITIGATION, ETC...............................................45
4.03. BURDENSOME OBLIGATIONS; COMPLIANCE WITH OTHER
INSTRUMENTS, LAWS; NO DEFAULTS; PERMITS.......................45
4.04. INVESTMENT COMPANY ACT........................................46
4.05. CERTAIN TAX MATTERS...........................................46
4.07. FINANCIAL MATTERS.............................................47
4.08. CHANGES, ETC..................................................47
4.09. EMPLOYEE BENEFIT PLANS........................................47
4.10. ENVIRONMENTAL PROTECTION......................................48
4.11. COPYRIGHTS, PATENTS AND TRADEMARKS............................49
4.12. TITLE.........................................................49
4.13. FULL DISCLOSURE; PRO FORMA EFFECT OF THE ACQUISITION..........50
4.14. SENIORITY.....................................................50
4.15. HOLDING COMPANY AND INVESTMENT COMPANY ACTS...................50
ARTICLE V. AFFIRMATIVE COVENANTS.............................................50
5.01. CONDUCT OF BUSINESS...........................................50
5.02. INSURANCE.....................................................51
5.03. RECORDS AND ACCOUNTS..........................................51
5.04. REPORTS.......................................................51
5.05. RIGHT TO INSPECT PREMISES AND RECORDS.........................53
5.06. PAYMENT OF LIABILITIES........................................53
5.07. PAYMENT OF CHARGES AND INDEBTEDNESS...........................53
5.08. MATERIAL CHANGE IN BUSINESS...................................54
5.09. COMPLIANCE WITH SECURITIES LAWS...............................54
5.10. APPLICATION OF PROCEEDS.......................................54
5.11. ENVIRONMENTAL PROTECTION......................................54
ARTICLE VI. FINANCIAL COVENANTS..............................................55
6.01. INTEREST COVERAGE RATIO.......................................55
6.02. LEVERAGE......................................................55
ARTICLE VII. NEGATIVE COVENANTS..............................................55
7.01. LIMITATIONS ON INDEBTEDNESS...................................56
7.02. LIMITATION ON LIENS, ETC......................................56
7.03. LIMITATION ON RESTRICTED PAYMENTS, RESTRICTED PREPAYMENTS,
RESTRICTED INVESTMENTS AND DISCRETIONARY CAPITAL
EXPENDITURES..................................................58
7.04. LIMITATION ON SALE, CONSOLIDATION, MERGER, ETC.;
CHANGE IN BUSINESS............................................58
7.05. EMPLOYEE BENEFIT PLANS........................................59
7.06. SALES AND LEASEBACKS..........................................59
7.07. LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS
AND OTHER DISTRIBUTIONS.......................................59
7.08. PROHIBITED USES OF PROCEEDS...................................59
7.09. TRANSACTIONS WITH AFFILIATES..................................60
ARTICLE VIII. EVENTS OF DEFAULT; ACCELERATION................................60
8.01. EVENTS OF DEFAULT.............................................60
8.02. SURVIVAL OF OBLIGATIONS.......................................63
ARTICLE IX. THE AGENT AND CO-AGENTS..........................................63
9.01. AUTHORIZATION.................................................63
9.02. INDEMNIFICATION OF AGENT AND CO-AGENTS........................63
9.03. EXCULPATION, ETC..............................................64
9.04. RELIANCE ON DOCUMENTS, ETC....................................65
9.05. CREDIT INVESTIGATION..........................................65
9.06. RESIGNATION...................................................65
9.07. CO-AGENTS.....................................................66
ARTICLE X. MISCELLANEOUS.....................................................66
10.01. AMENDMENTS AND WAIVERS........................................66
10.02. ASSIGNMENTS AND PARTICIPATIONS................................67
10.03. COUNTERPARTS..................................................70
10.04. GOVERNING LAW; CONSENT TO JURISDICTION; SERVICE OF PROCESS....70
10.05. ADJUSTMENTS; RIGHTS OF SETOFF.................................71
10.06. CONFLICT OF TERMS.............................................71
10.07. NOTICES.......................................................72
10.08. SECTION TITLES................................................73
10.09. SEVERABILITY..................................................73
10.10. MAXIMUM INTEREST..............................................73
10.11. COSTS; EXPENSES; INDEMNITIES..................................73
ARTICLE XI. TRANSITIONAL ARRANGEMENTS........................................74
11.01. EXISTING CREDIT AGREEMENT SUPERSEDED..........................74
11.02. FEES UNDER EXISTING CREDIT AGREEMENT..........................75
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 Lenders, Lending Offices and Commitments
Schedule 4.01(d) Subsidiaries
Schedule 4.02 Litigation
Schedule 4.03(a) Burdensome Obligations
Schedule 4.03(d) Permits
Schedule 4.06 Liens
Schedule 4.08 Changes, etc.
Schedule 4.10 Environmental Protection
Schedule 4.12 Title to Properties
Schedule 7.01 Subsidiary Indebtedness
Exhibit A Form of Assignment and Acceptance
Exhibit B-1 Form of Facility A Note
Exhibit B-2 Form of Facility B Note
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Notice of Continuation or Conversion
Exhibit E Form of Instrument of Adherence
<PAGE>
FIFTH AMENDED AND RESTATED CREDIT AGREEMENT
This FIFTH AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 8, 2000,
among TOSCO CORPORATION, a Nevada corporation (the "Borrower"), the financial
institutions listed on SCHEDULE 1 hereto (the "Lenders"), BANKBOSTON, N.A.
("BKB"), as administrative agent for the Lenders (in that capacity, the
"Administrative Agent" or the "Agent"), ROYAL BANK OF CANADA ("RBC"), as
syndication agent for the Lenders (in that capacity, the "Syndication Agent")
and PNC BANK, NATIONAL ASSOCIATION ("PNC"), as documentation agent for the
Lenders (in that capacity, the "Documentation Agent" and collectively with the
Syndication Agent, the "Co-Agents").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Fourth Amended and Restated Credit Agreement
dated as of January 14, 1997 (as amended from time to time, the "Existing Credit
Agreement") by and among the Borrower, certain lenders party thereto, BKB as
agent thereunder and other parties listed therein, such lenders have made
available certain financing to the Borrower upon the terms and conditions
contained therein;
WHEREAS, the Borrower has requested that the terms of the Existing
Credit Agreement be amended and restated, and the lenders thereunder are willing
to make such amendments on the terms and conditions set forth herein or to
assign their interests under the Existing Credit Agreement to the Lenders;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the Borrower, the Lenders, the Administrative
Agent, the Syndication Agent and the Documentation Agent agree that as of the
Closing Date (as defined below), the Existing Credit Agreement shall be amended
and restated in its entirety as set forth herein:
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
1.01. DEFINITIONS. Capitalized terms used in this Agreement shall have
the following respective meanings when used herein:
"ACQUISITION" means the proposed acquisition by the Borrower of
approximately 1,740 retail gasoline stations and convenience outlets, a
distribution terminal and the right to buy undeveloped sites from Mobil
Corporation, Exxon Corporation, and/or the successor by merger to such
corporations on such terms and pursuant to such documentation as shall be
consistent in all material respects with the description of the terms of the
transaction set forth in documentation previously furnished to the Lenders by
the Borrower.
"ADVERSE ENVIRONMENTAL CONDITION" means the occurrence of any of the
matters referred to in the definition of Environmental Claim.
"AFFILIATE" means, as to any Person, any other Person that would be
considered an affiliate of the Borrower under Rule 144(a) of the Rules and
Regulations of the Securities and Exchange Commission, as in effect on the date
hereof, if the Borrower were issuing securities, by contract or otherwise.
Nothing in the foregoing definition shall be interpreted to construe the Agent
or any Lender as an Affiliate of the Borrower.
"AGENT" means BKB, in its capacity as Administrative Agent hereunder
and any successor thereto appointed pursuant to Section 9.06.
"AGREEMENT" means this Fifth Amended and Restated Credit Agreement,
including all exhibits and schedules hereto, as the same may be amended,
modified or supplemented and in effect from time to time.
"ANCILLARY AGREEMENTS" means, collectively, any supplemental agreement
or undertaking executed as a condition to or in connection with this Agreement
by any party hereto, including, without limitation, the Notes, the Applications
and the Letters of Credit.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender, its
Domestic Lending Office with respect to Base Rate Loans and Federal Funds Rate
Loans, and its Eurodollar Lending Office with respect to Eurodollar Rate Loans.
"APPLICABLE MARGIN" means at the relevant time of reference, in
respect of Base Rate Loans, Eurodollar Rate Loans or Federal Funds Rate Loans,
the applicable rate per annum, expressed in Basis Points, set forth in the
column below for such Type of Loan opposite the Debt Rating then in effect;
PROVIDED THAT, in the event of a split Debt Rating by S&P and Moody's, the
higher Debt Rating shall apply, unless the Debt Rating by S&P and Moody's is
split by more than one level, in which case the average rating shall apply:
Base Rate Eurodollar Federal Funds
Debt Rating Loan Rate Loan Rate Loan
S&P A- 0.0 42.5 42.5
Moody's: A3
or better
S&P: BBB+
Moody's: Baa1 0.0 55.0 55.0
S&P: BBB
Moody's: Baa2 0.0 65.0 65.0
S&P: BBB-
Moody's: Baa3 0.0 90.0 90.0
unrated or lower than
S&P: BBB-
Moody's: Baa3 0.0 120.0 120.0
"APPLICATION" means an application submitted by the Borrower to the
Agent requesting a Documentary Letter of Credit or a Standby Letter of Credit in
the standard forms used by the Issuing Lender.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee or an Affiliate of a Lender, and
accepted by the Borrower and the Agent, in substantially the form of EXHIBIT A
hereto.
"BALANCE SHEET DATE" means December 31, 1998.
"BASE RATE" means the higher of (a) the annual rate of interest
announced publicly from time to time by the Agent at its principal office in
Boston, Massachusetts as its "base rate", and (b) one-half of one percent (1/2%)
above the Overnight Federal Funds Rate.
"BASE RATE LOAN" means any Loan that bears interest at a rate
determined by reference to the Base Rate.
"BASIS POINT" means one one-hundredth of one percent (0.01%).
"BKB" has the meaning specified in the recitals hereof.
"BORROWER" has the meaning set forth in the recitals hereof.
"BUSINESS DAY" means any day that is not a Saturday or Sunday or a day
on which banks are required to be closed in Boston, Massachusetts or New York,
New York and, if the applicable Business Day relates to a Eurodollar Rate Loan,
a day on which dealings are also carried on in the London interbank market.
"CAPITAL ASSET" means each asset which would properly be classified as
an asset other than a current asset on a balance sheet of the Person owning such
asset, in accordance with GAAP, including, without limitation, all fixed assets
and investments consisting of the capital stock or Indebtedness of any other
Person.
"CAPITAL EXPENDITURES" means, (a) all expenditures by the Borrower and
its Subsidiaries (including capitalized interest) for any Capital Asset or for
replacements, substitutions or additions thereto, and (b) to the extent not
included in the foregoing clause (a), deferred costs of Turnarounds with respect
to the Facilities, so classified on a basis consistent with current practice.
"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 EQUIVALENTS" means, (a) repurchase agreements and short-term
obligations issued or guaranteed as to principal and interest by the United
States of America and having a maturity of not more than twelve months from the
date of acquisition, (b) short-term certificates of deposit issued by any bank
organized under the laws of the United States of America or any state thereof if
such bank has a short-term debt rating of not less than P-1 or A-1 or their
equivalent by Moody's or S&P, respectively, or any of their successors, (c)
short-term certificates of deposit issued by, and so-called Eurodollar "call
deposits" at, any Lender, or any foreign subsidiary or affiliate of such Lender,
if any investment issued by such Lender or foreign subsidiary or affiliate, as
applicable, has a rating of not less than Baa or BBB- or their equivalent, or
P-2 or A-2 or their equivalent, as applicable, by Moody's or S&P, respectively,
or any of their successors, or (d) commercial paper or finance company paper (in
each case, issued by a Person other than an Affiliate of the Borrower) that is
rated not less than P-1 or A-1 or their equivalents by Moody's or S&P or their
successors and that has a maturity of less than twelve months.
"CHIEF FINANCIAL OFFICER" means the chief financial officer, or, in
case of his or her unavailability, the treasurer, assistant treasurer or chief
accounting officer of the Borrower.
"CLOSING DATE" means the Business Day on which each of the conditions
set forth in Article III have been satisfied or waived, which, in any event,
shall not be later than February 11, 2000 or such later date acceptable to the
Agent.
"CO-AGENTS" has the meaning set forth in the recital hereof.
"CODE" means the Internal Revenue Code of 1986, and any regulations
promulgated thereunder.
"COMMITMENT" means the Facility A Commitments and/or the Facility B
Commitments, as the context may require.
"COMMITMENT FEES" means the Facility A Commitment Fee and the Facility
B Commitment Fee.
"COMMITMENT PERCENTAGE" means, for each Lender, such Lender's Facility
A Commitment Percentage and/or such Lender's Facility B Commitment Percentage,
as the context may require.
"COMPANY" means the Borrower and its Subsidiaries, on a consolidated
basis.
"COMPLIANCE CERTIFICATE" has the meaning specified in Section 5.04(d).
"CONSOLIDATED" OR "CONSOLIDATED", with reference to any term defined
herein, means that term as applied to the accounts of the Borrower and its
Subsidiaries consolidated in accordance with GAAP.
"CONSOLIDATED CAPITALIZATION" means as of any date, the sum of (i)
Indebtedness (other than Non-Recourse Debt) of the Borrower and its Subsidiaries
determined on a consolidated basis in accordance with GAAP, PLUS (ii) the common
stockholders' equity of the Borrower as would be reflected on the balance sheet
of the Borrower prepared in accordance with GAAP as of such date, PLUS (iii) the
total shareholder equity attributable to preferred shares of capital stock,
including the Trust Securities but excluding other shares of preferred capital
stock subject to mandatory redemption or repurchase.
"CONSOLIDATED EBITDA" means, in respect of any fiscal period, an
amount equal to (a) the Net Income of the Borrower and its Subsidiaries
determined on a FIFO basis for such period, PLUS (b) depreciation and
amortization expense and other non-cash charges of the Borrower and its
Subsidiaries for such period, PLUS (c) Consolidated Interest Expense for such
period, PLUS (d) total federal, state and local income tax expense of the
Borrower and its Subsidiaries on a consolidated basis for such period as
reflected on the Borrower's books of account during such period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the aggregate
amount of all interest required to be paid or accrued by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including the portion of any payments in respect of any Capitalized
Lease included in Indebtedness which is attributable to interest and including
commitment fees, utilization fees, letter of credit fees, agency fees, facility
fees, or similar fees or expenses in connection with the borrowing of money.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum derived
substance or waste, or any constituent of such substance or waste, including,
without limitation, any substance regulated under any Environmental Law.
"CONTINGENT OBLIGATION" means, as applied to the Borrower or any
Subsidiary (the "Guarantor"), any direct or indirect liability, contingent or
otherwise, of the Guarantor with respect to any Indebtedness of another Person
which is not the Borrower or a Subsidiary of the Borrower (the "primary
obligor"), if the purpose or intent thereof by the Guarantor is to provide
assurance to the obligee of such Indebtedness of the primary obligor that such
Indebtedness will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such Indebtedness will be
protected (in whole or in part) against loss in respect thereof. For
exemplification only and not to broaden the definition of Contingent Obligation,
Contingent Obligations may include, without limitation, (a) the direct or
indirect guarantee, endorsement (other than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by the Guarantor of the Indebtedness of the primary obligor, and (b)
any liability of the Guarantor for the Indebtedness of the primary obligor
through any agreement (contingent or otherwise) (i) to purchase, repurchase or
otherwise acquire such Indebtedness or any security therefor, or to provide
funds for the payment or discharge of such Indebtedness (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), (ii) to
maintain the solvency or any balance sheet item, level of income or financial
condition of the primary obligor, or (iii) to make take-or-pay or similar
payments, if required, regardless of nonperformance by any other party or
parties to an agreement, if in the case of any agreement described under
subclause (i), (ii) or (iii) of this sentence, the primary purpose or intent
thereof is as described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the amount of the Indebtedness so guaranteed or
otherwise supported.
"CREDIT FACILITY PERCENTAGE" means, for each Lender, (i) if neither
Commitment has been terminated, the percentage of the Total Commitment comprised
of the sum of such Lender's Facility A Commitment PLUS such Lender's Facility B
Commitment, or (ii) if the Facility B Loans have been converted to term loans
pursuant to Section 2.09(b) hereof, the percentage, expressed as a decimal,
calculated by dividing (a) the sum of such Lender's Facility A Commitment PLUS
outstanding Facility B Loans made by such Lender by (b) the sum of the Facility
A Total Commitment PLUS the Facility B Debt, or (iii) if the Facility A Total
Commitment has been terminated, the percentage, expressed as a decimal,
calculated by dividing (a) the sum of outstanding Facility A Loans made by such
Lender PLUS such Lender's Facility B Commitment by (b) the sum of the Facility A
Revolving Credit Debt PLUS the Facility B Total Commitment, or (iv) if both the
Facility A Commitments and the Facility B Commitments of the Lenders have
terminated, that percentage equal to such Lender's percentage interest in the
sum of the Facility A Revolving Credit Debt PLUS the Facility B Debt.
"DEBT RATING" means the rating issued by S&P or Moody's with respect
to unsecured Indebtedness of the Borrower not maturing within twelve months and
not subordinated by its terms in right of payment to other Indebtedness of the
Borrower.
"DEFAULT" means any event which with the passing of time or the giving
of notice or both would constitute an Event of Default.
"DISCRETIONARY CAPITAL EXPENDITURES" means all Capital Expenditures of
the Borrower and its Subsidiaries, other than Capital Expenditures of the
Company (i) for deferred costs of Turnarounds with respect to any Refinery, so
classified on a basis consistent with current practice, (ii) necessarily
incurred by the Company in order to maintain its property, plants and equipment
(including, without limitation, any Refinery) in compliance with applicable
Environmental Laws and other laws and regulations, and (iii) to restore
Facilities and Primary Assets to normal operations.
"DOCUMENTARY LETTERS OF CREDIT" means the irrevocable documentary
letters of credit opened for the account of the Borrower by an Issuing Lender
pursuant to this Agreement.
"DOLLARS" and the sign "$" each mean the lawful money of the United
States of America.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" below its name
on SCHEDULE 1 hereto or such other office of such Lender as such Lender may from
time to time specify to the Borrower and the Agent.
"DRAWDOWN DATE" means the date on which any Loan is made or is to be
made in accordance with ss.2.03.
"ELIGIBLE ASSIGNEE" means any of (a) (i) a commercial bank or finance
company organized under the laws of the United States, or any State thereof or
the District of Columbia, and having total assets in excess of $1,000,000,000;
(ii) a savings and loan association or savings bank organized under the laws of
the United States, or any State thereof or the District of Columbia, and having
a net worth of at least $1,000,000,000, calculated in accordance with GAAP;
(iii) a commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development (the
"OECD"), or a political subdivision of any such country, and having total assets
in excess of $1,000,000,000, PROVIDED THAT such bank is acting through a branch
or agency located in the country in which it is organized or another country
which is also a member of the OECD; (iv) the central bank of any country which
is a member of the OECD; (v) a domestic insurance company having total assets in
excess of $250,000,000; (vi) any institutional investor having a rating of not
less than A or its equivalent by Standard & Poor's Corporation; (vii) investment
companies (as defined in the Investment Company Act of 1940, as amended) or
other investment funds or mutual funds, in each case having total assets in
excess of $100,000,000; and (viii) if, but only if, an Event of Default has
occurred and is continuing, any other bank, insurance company, commercial
finance company or other financial institution or other person approved by the
Agent, such approval not to be unreasonably withheld; and (b) any Lender and any
Affiliate of any Lender and, with respect to any Lender that is a fund that
invests in loans, any other fund that invests in loans and is managed by the
same investment advisor of such Lender or by an Affiliate of such investment
advisor (and treating all such funds so managed as a single Eligible Assignee);
PROVIDED THAT no Affiliate of the Borrower shall be an Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the
meaning of ss.3(3) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
"ENVIRONMENTAL CLAIM" means any notice of violation, claim, demand,
abatement or other order or direction (conditional or otherwise) by any
Governmental Authority or any Person for personal injury (including sickness,
disease or death), tangible or intangible property damage, damage to the
environment, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, resulting from or based
upon (a) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
non-accidental Releases) of, or exposure to, any substance, chemical, material,
pollutant, Contaminant, odor or audible noise or other release or emission in,
into or onto the environment (including, without limitation, the air, ground,
water or any surface) at, in, by, from, or related to the Facilities, (b) the
environmental aspects of the transportation, storage, treatment or disposal of
materials in connection with the operation of the Facilities or any other assets
of the Borrower or any of its Subsidiaries, or (c) the violation, or alleged
violation, of any statutes, ordinances, orders, rules, regulations or Permits of
or from any Governmental Authority relating to environmental matters connected
with the Facilities, or any other assets of the Borrower or any of its
Subsidiaries.
"ENVIRONMENTAL LAW" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, the Hazardous Material
Transportation Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Federal Clean Water Act, as amended, the Federal Clean Air Act as
amended, the Toxic Substances Control Act as amended, the Superfund Amendments
and Reauthorization Act of 1986, as amended and the Occupational Safety and
Health Act, as amended, and any other federal, state or local statutes, present
or future, relating to health, safety, or the environment, including, without
limitation, transfer of ownership notification statutes such as the New Jersey
Environmental Cleanup Responsibility Act (New Jersey Stat. Ann. 13:1K-6 ET SEQ.)
and the Connecticut Industrial Transfer Law of 1985 (Conn. Gen. Stat. ss.22a-134
ET SEQ.) and statutes such as the California Safe Drinking Water and Toxic
Enforcement Act (Cal. Health and Safety Code ss.25249.5 ET SEQ.), the Alaska
Environmental Conservation Law (Alaska Stat. ss.46.03 ET SEQ.), the Oregon
Hazardous Waste Remedial Action Act (Or. Rev. Stat. ss.466.540 ET SEQ.), and the
Washington Hazardous Waste Cleanup Act (Wash. Rev. Code Chap. 70,105 B), and the
regulations promulgated pursuant thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), and any regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person which is treated as a single
employer, trade or business (whether or not incorporated) with the Borrower
under Section 414 of the Code.
"ERISA REPORTABLE EVENT" means a reportable event with respect to a
Guaranteed Pension Plan within the meaning of ss.4043 of ERISA and the
regulations promulgated thereunder as to which the requirement of notice has not
been waived.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EURODOLLAR INTERBANK MARKET" means any lawful recognized market in
which deposits of Dollars are offered by international banking units of United
States banking institutions and by foreign banking institutions to each other.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on SCHEDULE 1 hereto (or, if no such office is specified, its Domestic
Lending Office) or such other office of such Lender as such Lender may from time
to time specify to the Borrower and the Agent.
"EURODOLLAR RATE" means, for any Interest Period, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate determined
by the Agent at which Dollar deposits for such Interest Period are offered based
on information presented on Telerate Page 3750 (or any successor thereto) as of
11:00 a.m. London time on the second Business Day prior to the first day of such
Interest Period, by (b) a percentage equal to 1.00 minus the Eurodollar Rate
Reserve Percentage for such Interest Period; PROVIDED THAT, if information from
the Telerate Page 3750 (or its successor) is unavailable, then the numerator
shall be the rate based on information from the Reuters Screen LIBO Page as of
the same time; PROVIDED FURTHER THAT, if information from neither the Telerate
Page 3750 (or its successor) nor the Reuters Screen LIBO Page is available, the
numerator shall be the rate of interest determined by the Agent to be the
average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum,
if such average is not such a multiple) of the rates per annum notified to the
Agent by each Reference Lender as the rate at which deposits in Dollars in
immediately available funds are offered to the Eurodollar Lending Office of each
of the Reference Lenders, two Business Days before the first day of such
Interest Period by prime banks in any Eurodollar Interbank Market, selected by
the Reference Lenders at or about the Relevant Local Time of such Eurodollar
Lending Office, for delivery on the first day of such Interest Period in an
amount substantially equal to the amount of the Loan to be made or continued as,
or converted into, a Eurodollar Rate Loan by such Reference Lender and with a
maturity equal to the last day of such Interest Period. As used herein,
"Relevant Local Time", as to any Eurodollar Lending Office, shall be 11:00 a.m.
London time when such Eurodollar Lending Office is located in Europe, or 10:00
a.m. Boston, Massachusetts time, when such Eurodollar Lending office is located
in North America, the Caribbean or the Bahamas.
"EURODOLLAR RATE LOAN" means any Loan that bears interest at a rate
determined with reference to the Eurodollar Rate.
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period, means
the reserve percentage (expressed as a decimal) applicable two Business Days
before the first day of such Interest Period, under regulations issued from time
to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for the Agent at its principal office with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to any
other category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Rate Loans is determined) having a term equal to
such Interest Period.
"EVENT OF DEFAULT" has the meaning specified in Section 8.01.
"EXISTING CREDIT AGREEMENT" has the meaning set forth in the recitals
hereof.
"FACILITIES" means any building, structure, pipeline, Refinery,
distribution or storage terminal, plant operated in conjunction with a Refinery
or terminal, or any individual gasoline station and/or convenience store site,
in each case on real property owned or leased or used by the Borrower or any of
its Subsidiaries, and any other real property owned, leased or used by the
Borrower or any of its Subsidiaries.
"FACILITY A COMMITMENT" means for any Lender, the amount set forth
next to the name of such Lender on SCHEDULE 1 hereto under the caption "Facility
A Commitment", subject to reduction in accordance with the terms hereof.
"FACILITY A COMMITMENT FEE" has the meaning specified in Section
2.08(a).
"FACILITY A COMMITMENT PERCENTAGE" means, for each Lender, that
percentage equal to the percentage of the Facility A Total Commitment comprised
of such Lender's Facility A Commitment, or if the Facility A Commitments of the
Lenders have terminated, that percentage equal to such Lender's percentage
interest in the Facility A Revolving Credit Debt.
"FACILITY A LENDER" means a Lender with a Facility A Commitment or who
has advanced Facility A Loans.
"FACILITY A LOANS" means Loans made to the Borrower pursuant to
ss.2.01 hereof, including continuations or conversion thereof pursuant to
Section 2.11.
"FACILITY A MATURITY DATE" means February 8, 2005.
"FACILITY A NOTE" means each promissory note of the Borrower payable
to the order of each Lender in an amount equal to the amount of such Lender's
Facility A Commitment, in substantially the form of EXHIBIT B-1 hereto,
evidencing the Indebtedness of the Borrower to such Lender with respect to the
Facility A Revolving Credit Debt resulting from the Facility A Loans provided by
such Lender hereunder and such Lender's interest in any Unpaid Reimbursement
Obligations outstanding hereunder.
"FACILITY A REVOLVING CREDIT DEBT" means at any time, the sum of (i)
the aggregate principal amount of all Facility A Loans outstanding at such time,
PLUS (ii) the Maximum Drawing Amount at such time, PLUS (iii) the aggregate
principal amount of all Unpaid Reimbursement Obligations outstanding at such
time.
"FACILITY A TOTAL COMMITMENT" means, at the relevant time of reference
thereto, an amount equal to Three Hundred Seventy-Five Million Dollars
($375,000,000) MINUS an amount equal to all reductions in the Facility A Total
Commitment pursuant to the terms hereof.
"FACILITY A UTILIZATION FEE" has the meaning specified in Section
2.08(c).
"FACILITY B COMMITMENT" means for any Lender, the amount set forth
next to the name of such Lender on SCHEDULE 1 hereto under the caption "Facility
B Commitment", subject to reduction in accordance with the terms
hereof.
"FACILITY B COMMITMENT FEE" has the meaning specified in Section
2.08(b).
"FACILITY B COMMITMENT PERCENTAGE" means, for each Lender, that
percentage equal to the percentage of the Facility B Total Commitment comprised
of such Lender's Facility B Commitment, or if the Facility B Commitments of the
Lenders have terminated, that percentage equal to such Lender's percentage
interest in the Facility B Debt.
"FACILITY B DEBT" means at any time, the aggregate principal
outstanding amount at such time of all Facility B Loans.
"FACILITY B LENDER" means a Lender with a Facility B Commitment or who
has advanced Facility B Loans, including Section 21 Facility B Lenders.
"FACILITY B LOANS" means Loans made to the Borrower pursuant to
ss.2.02 hereof, including continuations or conversions thereof pursuant to
ss.2.11, and including the Loans converted to term loans pursuant to ss.2.09.
"FACILITY B MATURITY DATE" means February 6, 2001 or such later date
to which the Facility B Maturity Date is extended pursuant to Section 2.02.
"FACILITY B NOTE" means each promissory note of the Borrower payable
to the order of any Lender in an amount equal to the amount of such Lender's
Facility B Commitment, in substantially the form of EXHIBIT B-2 hereto,
evidencing the Indebtedness of the Borrower to such Lender with respect to the
Facility B Debt provided by such Lender hereunder.
"FACILITY B TOTAL COMMITMENT" means, at the relevant time of reference
thereto, (i) prior to the Facility B Maturity Date, an amount equal to Three
Hundred Seventy-Five Million Dollars ($375,000,000) MINUS an amount equal to all
reductions in the Facility B Total Commitment pursuant to the terms hereof, and
(ii) on or after the Facility B Maturity Date, zero.
"FACILITY B UTILIZATION FEE" has the meaning specified in Section
2.08(d).
"FEDERAL FUNDS RATE" shall mean for any Interest Period of three,
four, five, six or seven days, the rate of interest equal to the rate per annum
at which BKB is offered Federal funds for such number of days in the term
Federal funds market based on information presented on Telerate Page 5 as of
10:00 a.m. (Boston time) on the first Business Day of such Interest Period, for
settlement on such day in an amount comparable to the amount of the Federal
Funds Rate Loan of BKB to be outstanding for such Interest Period.
"FEDERAL FUNDS RATE LOANS" means any Loan that bears interest at a
rate determined by reference to the Federal Funds Rate.
"FEE LETTERS" means the fee letter among the Borrower, BKB, RBC, PNC,
FleetBoston Robertson Stephens Inc. and PNC Capital Markets, Inc. and the fee
letter among the Borrower, BKB and FleetBoston Robertson Stephens Inc., each
dated December 29, 1999.
"FIFO" means the first-in-first-out method of determining value of
inventory in accordance with GAAP.
"FINAL TERM B MATURITY DATE" shall have the meaning set forth in
Section 2.09(b).
"FISCAL QUARTER" means any fiscal quarter of the Borrower and its
Subsidiaries ending on March 31, June 30, September 30 or December 31.
Subsequent changes of the fiscal quarter of the Borrower and its Subsidiaries
shall not change the term "Fiscal Quarter" as used herein, unless the Agent
shall consent in writing to such a change.
"FISCAL YEAR" means the fiscal year of the Borrower and its
Subsidiaries ending on December 31. Subsequent changes of the fiscal year of the
Borrower and its Subsidiaries shall not change the term "Fiscal Year" as used
herein, unless the Agent shall consent in writing to such a change.
"GAAP" means (i) when used in Article VI, whether directly or
indirectly through reference to a capitalized term used therein, (A) principles
that are consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board of the United States and its predecessors, in effect
for the fiscal year ended on the Balance Sheet Date, and (B) to the extent
consistent with such principles, the accounting practice of the Borrower
reflected in its financial statements for the year ended on the Balance Sheet
Date, and (ii) when used in general, other than as provided above, means
principles that are (A) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (B) consistently applied with past financial statements of the
Borrower adopting the same principles, provided that in each case referred to in
this definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles have been properly applied.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"GUARANTEED PENSION PLAN" means any employee pension benefit plan
within the meaning of Section (3)(2) of ERISA (other than a Multiemployer Plan)
which the Borrower, any of its Subsidiaries or any ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
and which is guaranteed on termination in full or in part by the PBGC pursuant
to Title IV of ERISA.
"GUARANTOR" has the meaning specified in the definition of Contingent
Obligations.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, and including, without limitation, the face
amount available to be drawn under all letters of credit, reimbursement and
similar obligations with respect to surety bonds, letters of credit and banks'
acceptances, whether or not matured (but excluding, obligations with respect to
letters of credit backing current obligations of the Borrower and up to
$50,000,000 of non-trade letters of credit in support of dealer finance programs
and other obligations not reflected on the Borrower's balance sheet in
accordance with GAAP), (b) all obligations evidenced by notes, bonds, debentures
or similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all Capitalized Lease Obligations, (e) all
Contingent Obligations, (f) all Indebtedness referred to in clause (a), (b),
(c), (d) or (e) 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, without limitation, accounts and contracts rights)
owned by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness, (g) the Obligations, and (h) the amount at
which any redeemable preferred stock of such Person is required to be redeemed;
PROVIDED that Indebtedness shall not include (x) obligations of the Borrower or
TFT with respect to the Trust Securities, (y) current accounts payable arising
in the ordinary course of business, or (z) obligations supporting the
securitization of the Borrower's and its Subsidiaries' hydrocarbon inventories,
credit card receivables or trade receivables pursuant to hydrocarbon inventory,
credit card or trade receivable securitization programs.
"INTEREST COVERAGE RATIO" means, in respect of any specified period,
the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.
"INTEREST PERIOD" means as to the Borrower, in the event that the
Borrower shall have validly and effectively elected to have any Loan bear
interest at a rate determined by reference to (a) the Eurodollar Rate, (i)
initially, the period commencing on the date that such Loan is made or on the
date of conversion of the interest rate applicable to such Loan to a rate
determined by reference to the Eurodollar Rate, as the case may be, and ending
one, two, three or six months thereafter, as selected by the Borrower in its
Notice of Borrowing or Notice of Conversion or Continuation given to the Agent
pursuant to Section 2.03 or 2.11, respectively, and (ii) thereafter, if the
Borrower validly and effectively elects to have such Loan continue to bear
interest at a rate determined by reference to the Eurodollar Rate pursuant to
Section 2.11, a period commencing on the last day of the immediately preceding
Interest Period therefor and ending one, two, three or six months thereafter, as
selected by the Borrower in its Notice of Conversion or Continuation given to
the Agent pursuant to Section 2.11, or (b) the Federal Funds Rate, (i)
initially, the period of three, four, five, six or seven days as selected by the
Borrower in its Notice of Borrowing or Notice of Conversion or Continuation
given to the Agent pursuant to Section 2.03 or 2.11, respectively, commencing on
the date that such Loan is made or on the date of conversion of the interest
rate applicable to such Loan to a rate determined by reference to the Federal
Funds Rate and (ii) thereafter, if the Borrower validly and effectively elects
to have such Loan continue to bear interest at a rate determined by reference to
the Federal Funds Rate pursuant to Section 2.11, a period commencing on the last
day of the immediately preceding Interest Period therefor and ending three,
four, five, six or seven days thereafter, as selected by the Borrower in its
Notice of Conversion or Continuation given to the Agent pursuant to Section
2.11; PROVIDED, HOWEVER, that all of the foregoing provisions are subject to the
following:
(A) if any Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless with respect to Interest Periods
relating to Eurodollar Rate Loans, the result of such extension would
be to extend such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately
preceding Business Day;
(B) any Interest Period for a Eurodollar Rate Loan 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 a
calendar month; and
(C) the Borrower may not select any Interest Period which ends
after the Facility A Maturity Date with respect to any Facility
A Loan or the Facility B Maturity Date with respect to any Facility B
Loan.
"ISSUING LENDER" means, with respect to any Letter of Credit, the
Agent, or such other Lender that issues such Letter of Credit at the request of
the Agent.
"LENDERS" has the meaning specified in the recitals hereof.
"LETTERS OF CREDIT" means Documentary Letters of Credit and Standby
Letters of Credit.
"LEVERAGE RATIO" means the ratio of (a) Indebtedness (other than
Non-Recourse Debt) of the Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP to (b) Consolidated Capitalization.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, the
interest of a lessor under a Capitalized Lease Obligation, any financing lease
having substantially the same economic effect as any of the foregoing and the
filing of any financing statement naming the owner of the asset to which such
Lien relates as debtor.
"LIFO" means the last-in-first-out method of determining value of
inventory in accordance with GAAP.
"LOANS" means the Facility A Loans and the Facility B Loans.
"LOAN ACCOUNT" has the meaning specified in Section 2.17.
"MATERIAL ADVERSE CHANGE" means a change that results, or would
result, in a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, properties, assets, prospects or condition (financial or
otherwise) of the Borrower or the Company, or (b) the Borrower's ability to pay
the Obligations in accordance with the terms hereof and to perform its
obligations hereunder.
"MAXIMUM DRAWING AMOUNT" means the aggregate face amount available to
be drawn under all outstanding Letters of Credit issued pursuant to Section
2.04, 2.05 or 2.06 hereof.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means any multiemployer plan within the meaning
ofss.3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
"NET INCOME (LOSS)" means, in respect of any fiscal period, the net
income (or net loss, as the case may be) of the Borrower and its Subsidiaries
for such period, after deduction of all expenses, taxes and other proper charges
determined on a consolidated basis in accordance with GAAP, after eliminating
therefrom all extraordinary nonrecurring items of income.
"NON-CONSENTING LENDER" has the meaning specified in Section 2.02(d).
"NON-RECOURSE DEBT" with respect to the Borrower or any of its
Subsidiaries, means Indebtedness incurred by such Person to finance the
acquisition or construction on or after the date of such incurrence of any
Facility and/or other Capital Asset if and only if the rights and remedies
available to the lender of such Indebtedness are limited solely to recourse
against the Facility or Capital Asset acquired or constructed with the proceeds
of such Indebtedness and none of the Borrower or any of its Subsidiaries has any
additional liability or obligation in respect thereof, whether for deficiencies
or otherwise.
"NOTES" means the Facility A Notes and the Facility B Notes.
"NOTICE OF BORROWING" has the meaning specified in Section 2.03(a).
"NOTICE OF CONVERSION OR CONTINUATION" has the meaning specified in
Section 2.11.
"OBLIGATIONS" means all loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Agent or any of
the Lenders, present or future, whether or not evidenced by any note, guarantee
or other instrument, arising under this Agreement, any Ancillary Agreement or
any other document or instrument executed in connection herewith or therewith,
whether arising by reason of an extension of credit, opening, creation or
amendment of a Letter of Credit or payment thereunder or of any draft drawn
thereunder (including, without limitation, those arising from payment or
guarantee by any Lender in connection with a Letter of Credit opened for the
Borrower), loan (including the Loans), guarantee, indemnification or in any
other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, fees, commissions, charges, expenses, attorneys' fees and any
other sum chargeable to the Borrower under this Agreement, any Ancillary
Agreement or any other agreement with any Lender with respect to any of the
foregoing.
"OTHER TAXES" has the meaning specified in Section 2.18(b).
"OVERNIGHT FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System, arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it in its sole discretion acting in good faith.
"PBGC" means the Pension Benefit Guaranty Corporation created by
ss.4002 of ERISA and any successor entity or entities having similar
responsibilities.
"PERMIT" means any permit, approval, consent, authorization, license,
variance or permission required from a Governmental Authority under an
applicable Requirement of Law.
"PERMITTED BUSINESSES" means businesses substantially the same as the
primary businesses conducted by the Borrower and its Subsidiaries as of the date
hereof.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"PNC" has the meaning specified in the recitals hereto.
"PRIMARY ASSET" means those Capital Assets of the Borrower or its
Subsidiaries necessary for the continued operation of the business of the
Borrower or its Subsidiaries substantially as currently operated and shall
include, without limitation, each Refinery and each group of retail gasoline and
convenience outlets consisting of at least 200 sites in contiguous market
locations, but shall exclude office buildings, terminal and pipeline assets and
individual retail locations.
"PROJECTIONS" means those certain consolidated and consolidating
financial projections of the Company and the underlying assumptions relating
thereto, calculated on a PRO FORMA basis assuming the transactions pursuant to
the Acquisition have been consummated, for the five years commencing on the
Closing Date.
"QUALIFYING INVESTMENTS" means repurchase agreements and obligations
rated (on the date of such purchase or acquisition) AAA or A-1 by S&P or Aaa or
P-1 by Moody's, obligations of the United States of America or any agency
thereof, obligations guaranteed by the United States of America or any agency
thereof, money market preferred stocks rated AA or better by S&P or Aa or better
by Moody's, money market loan participation programs with companies with
short-term credit rated AAA or A-1 by S&P or Aaa or P-1 by Moody's, and
certificates of deposit issued by any bank organized under the laws of the
United States of America or any state thereof if such bank has a short-term debt
rating of not less than P-1 or A-1 or their equivalent by Moody's or S&P,
respectively, or any of their successors; PROVIDED, HOWEVER, that none of the
above instruments shall have a maturity of less than one year or more than five
years.
"RBC" has the meaning specified in the recitals hereto.
"REFERENCE LENDERS" means BKB, RBC and PNC.
"REFINERY" means any refinery owned by the Borrower and/or any of its
Subsidiaries.
"REGISTER" has the meaning specified in Section 10.02(c).
"RELEASE" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment or into or out of any
property owned, leased, or operated by such Person, including the movement of
Contaminants through or in the air, soil, surface water, ground water or
property.
"REMEDIAL ACTION" means all actions, including corrective actions,
required to (a) clean up, remove, treat or in any other way address any
Contaminant or other substance in the indoor or outdoor environment, (b) prevent
the Release or threat of Release or minimize the further Release of any
Contaminant or other substance so it does not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment, or (c)
perform pre-remedial studies and investigations and post-remedial monitoring and
care.
"REQUIRED FACILITY A LENDERS" means, as of a particular date, Lenders
having in aggregate a Facility A Commitment Percentage of at least fifty-one
percent (51%).
"REQUIRED FACILITY B LENDERS" means, as of a particular date, Lenders
having in aggregate a Facility B Commitment Percentage of at least fifty-one
percent (51%).
"REQUIRED LENDERS" means, as of a particular date, Lenders having an
aggregate Credit Facility Percentage of at least fifty-one percent (51%).
"REQUIREMENT OF LAW" means, as to any Person, the charter and bylaws
or other organizational or governing documents of such Person, and all federal,
state and local laws, rules, regulations, orders, decrees or other
determinations of an arbitrator, court or other Governmental Authority
including, without limitation, all disclosure requirements of ERISA and the
requirements of Environmental Laws, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"RESPONSIBLE OFFICER" means any of the principal executive officers of
the Borrower, including its Chief Financial Officer and any vice president.
"RESTRICTED INVESTMENT" means, (a) any purchase or other acquisition
of any Stock or other security, obligation or other interest in any Person
(including, without limitation, any loan, advance, or other extension of credit
to such Person) or any capital contribution to any Person (including, without
limitation, any capital contribution by the Borrower or any of its Subsidiaries
to any other Subsidiary of the Borrower) or (b) any loan, advance, or other
extension of credit by the Borrower or any of its Subsidiaries to any other
Subsidiary of the Borrower, except:
(i) investments in Cash Equivalents or Qualifying Investments;
(ii) investments in or capital contributions to a Subsidiary of
the Borrower in any Fiscal Year in an aggregate amount not in excess
of the amounts required to be repaid by such Subsidiaries in any
Fiscal Year under outstanding Indebtedness (other than Non-Recourse
Debt) permitted in Section 7.01 plus $50,000,000;
(iii) routine security deposits made in the ordinary course of
business;
(iv) normal trade receivables arising from the sale of Inventory
by the Borrower or any of its Subsidiaries in the ordinary course of
business; and
(v) indemnifications to officers, directors and other Persons to
the extent permitted by the corporation laws of any applicable
jurisdiction, customary indemnification to underwriters and other
Persons made in connection with any security offerings, and
indemnifications in connection with any permitted Sale of a Capital
Asset by the Borrower or a Subsidiary of the Borrower.
"RESTRICTED PAYMENT" means (a) the declaration of any dividend on, or
the making of or the incurrence of any liability to make any other payment or
distribution in cash or other property or assets in respect of, the Stock of the
Borrower other than one payable or paid solely in Stock of the Borrower or (b)
any payment on account of the purchase, redemption, retirement or other
acquisition of any of the Stock of the Borrower or any other payment or
distribution made in respect thereof, either directly or indirectly, except
solely in exchange for Stock of the Borrower.
"RESTRICTED PREPAYMENT" means any prepayment of any Indebtedness of
the Borrower or any of its Subsidiaries, other than the Notes, in advance of the
scheduled maturity thereof.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"SALE" or "SELL" means any sale, transfer, conveyance, assignment,
exchange, liquidation, long-term lease or other disposition of (other than the
grant of a Lien on), all or any portion of any asset or Stock or any interest
therein, whether or not for value.
"SECTION 21 FACILITY B LENDER" has the meaning specified in Section
2.21.
"SINGLE PURPOSE SUBSIDIARY" means any Subsidiary of the Borrower
established for the sole purpose of acquiring, constructing, owning, operating
or financing one or more Facilities or other Capital Assets, the acquisition or
construction of which is being or was financed with the proceeds of Non-Recourse
Debt secured by such Facilities or Capital Assets; PROVIDED that such Subsidiary
shall cease to be a Single Purpose Subsidiary when such Non-Recourse Debt is
paid in full.
"STANDBY LETTERS OF CREDIT" means irrevocable standby letters of
credit opened for the account of the Borrower by the Agent or any other Lender
pursuant to this Agreement.
"STOCK" means all shares, options, interests, participation's or other
equivalents (regardless of how designated) of or in a corporation or equivalent
entity (including, without limitation, a partnership, business trust or limited
liability company), whether voting or nonvoting, and including, without
limitation, common stock, preferred stock, membership interests, beneficial
interests in trusts, securities convertible into or exchangeable for stock, or
warrants or options for any of the foregoing.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership or other business entity (including business trusts) of which an
aggregate of more than 50% of the outstanding Stock, having ordinary voting
power to elect or appoint a majority of the members of the board of directors,
trustees or members of a similar governing body of such corporation, partnership
or other entity (irrespective of whether, at the time, Stock of any other class
or classes of such corporation, partnership or other entity shall have or might
have voting power by reason of the happening of any contingency), is, or of
which an aggregate of more than 50% of the interests in which are, at the time,
directly or indirectly, owned by such Person and/or one or more Subsidiaries of
such Person and, with respect to the Borrower, shall include TFT.
"TAXES" has the meaning specified in Section 2.18(a).
"TEL" means Tosco Europe Limited, a limited liability company
organized under the laws of England and Wales.
"TFT" means Tosco Financing Trust, a statutory business trust formed
under the laws of the State of Delaware.
"TOTAL COMMITMENT" means the sum of the Facility A Total Commitment
PLUS the Facility B Total Commitment.
"TRUST SECURITIES" means, collectively, (i) the 5-3/4% Trust
Convertible Preferred Securities representing preferred undivided beneficial
interests in the assets of TFT and (ii) the related 5-3/4% Convertible Junior
Subordinated Debentures issued pursuant to the Supplemental Indenture, dated as
of December 13, 1996, between the Borrower and State Street Bank and Trust
Company.
"TURNAROUNDS" means periodic shutdowns, or the substantial curtailment
of operations, of any Refinery or any particular processing unit at any Refinery
for inspection, repairs, replacements and other major maintenance work.
"TYPE" refers, with respect to any Loan, to whether such Loan is a
Base Rate Loan, a Eurodollar Rate Loan or a Federal Funds Rate Loan.
"UNPAID REIMBURSEMENT OBLIGATIONS" means, as to any Letter of Credit,
as at any date of determination, the aggregate amount of all drawings under such
Letter of Credit honored by the Agent (or other Issuing Lender) and not
theretofore reimbursed by the Borrower.
1.02. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including".
1.03. ACCOUNTING TERMS. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given to such term in accordance with GAAP applied on a consistent
basis. All financial computations hereunder shall be computed in accordance with
GAAP. The fact that certain terms or computations are explicitly modified by the
phrase "in accordance with GAAP" shall in no way be construed to limit the
foregoing.
1.04. GENERAL PROVISIONS. The words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole, including
the Exhibits and Schedules hereto, and not to any particular section, subsection
or clause contained in this Agreement. Wherever, from the context, it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter. Except
as otherwise provided herein, a reference to any document or agreement shall
include such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this Agreement. A
reference to any law includes any amendment or modification to such law. A
reference to any Person includes its permitted successors and permitted assigns.
The words "include", "includes" and "including" are not limiting. Reference to a
particular "ss." refers to that section of this Agreement unless otherwise
indicated.
ARTICLE II. AMOUNTS AND TERMS OF THE LOANS
2.01. REVOLVING CREDIT FACILITY A.
(a) On the terms and subject to the conditions contained in this
Agreement, including, without limitation, compliance with Section 2.03 hereof
and Article III hereof, each Facility A Lender severally agrees to make Facility
A Loans to the Borrower and to participate in Letters of Credit on behalf of the
Borrower, from time to time, in an aggregate principal amount up to but not in
excess of such Lender's Facility A Commitment as in effect from time to time,
during the period commencing on the Closing Date to but excluding the Facility A
Maturity Date; PROVIDED that the Facility A Revolving Credit Debt, after giving
effect to amounts requested, shall not at any time exceed the Facility A Total
Commitment as in effect at such time. Subject to the terms and conditions
contained in this Agreement, at any time prior to the Facility A Maturity Date,
the Borrower may borrow, prepay pursuant to Section 2.10 and reborrow Facility A
Loans pursuant to this Section 2.01(a).
(b) The Borrower shall have the right at any time and from time to
time upon five Business Days' written notice to the Agent to reduce by
$5,000,000 or an integral multiple thereof or terminate entirely the unused
portion of the Facility A Total Commitment, whereupon the Facility A Commitments
of the Lenders shall be reduced PRO RATA in accordance with their respective
Facility A Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated. Promptly after receiving any notice of the Borrower
delivered pursuant to this ss.2.01, the Agent will notify all the Lenders of the
substance thereof. No reduction or termination of the Facility A Commitments of
the Lenders may be reinstated.
(c) Upon the effective date of any such reduction or termination of
the Facility A Total Commitment, the Borrower shall pay to the Agent for the
respective accounts of the Lenders the full amount of any Facility A Commitment
Fee then accrued on the portion of the Facility A Total Commitment so reduced or
terminated.
2.02. REVOLVING CREDIT FACILITY B.
(a) On the terms and subject to the conditions contained in this
Agreement, including, without limitation, compliance with Section 2.03 hereof
and Article III hereof, each Facility B Lender severally agrees to make Facility
B Loans to the Borrower, from time to time, in an aggregate principal amount up
to but not in excess of such Lender's Facility B Commitment as in effect from
time to time, during the period commencing on the Closing Date to but excluding
the Facility B Maturity Date, PROVIDED that the Facility B Debt during such
period, after giving effect to amounts requested, shall not at any time exceed
the Facility B Total Commitment as in effect at such time. Subject to the terms
and conditions contained in this Agreement, at any time prior to the Facility B
Maturity Date, the Borrower may borrow, prepay pursuant to Section 2.10 and
reborrow Facility B Loans pursuant to this Section 2.02(a).
(b) The Borrower shall have the right at any time and from time to
time upon five Business Days' written notice to the Agent to reduce by
$5,000,000 or an integral multiple thereof or terminate entirely the unused
portion of the Facility B Total Commitment, whereupon the Facility B Commitments
of the Lenders shall be reduced PRO RATA in accordance with their respective
Facility B Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated. Promptly after receiving any notice of the Borrower
delivered pursuant to this ss.2.02, the Agent will notify all the Lenders of the
substance thereof. No reduction or termination of the Facility B Commitments of
the Lenders may be reinstated.
(c) Upon the effective date of any such reduction or termination of
the Facility B Total Commitment, the Borrower shall pay to the Agent for the
respective accounts of the Facility B Lenders the full amount of any Facility B
Commitment Fee then accrued on the portion of the Facility B Total Commitment so
reduced or terminated.
(d) The Borrower may, provided that no Default or Event of Default has
occurred and is continuing, by written notice to the Agent given not more than
ninety (90) days nor less than sixty (60) days prior to the then applicable
Facility B Maturity Date request that the Facility B Maturity Date be extended
to the date which is the earlier of (i) the Facility A Maturity Date and (ii)
364 days after the then applicable Facility B Maturity Date. The Agent shall
notify all the Lenders of such request promptly after receipt, and request each
Facility B Lender to notify the Agent of such Facility B Lender's determination
to consent or not to consent to such extension on or before the 28th day
immediately preceding the then applicable Facility B Maturity Date. A failure by
a Facility B Lender to respond on or before such date shall be deemed a
determination by such Facility B Lender not to consent to the extension (such
Facility B Lender, along with those Facility B Lenders who notify the Agent of
their determination not to consent to the extension, shall be hereinafter
referred to as "Non-Consenting Lenders" and each a "Non-Consenting Lender"). The
Agent shall promptly notify the Borrower and all the Lenders of the response of
the Facility B Lenders to the Borrower's request.
(e) If each Facility B Lender has notified the Agent of such Facility
B Lender's determination to consent to an extension of the Facility B Maturity
Date pursuant to Section 2.02(d), then each such Facility B Lender shall be
deemed to have delivered such consent on the then applicable Facility B Maturity
Date and the Facility B Maturity Date shall be extended to the date which is the
earlier of (i) the Facility A Maturity Date and (ii) 364 days after the then
applicable Facility B Maturity Date.
(f) If less than the Required Facility B Lenders have notified the
Agent of their determination to consent to an extension of the Facility B
Maturity Date pursuant to Section 2.02(d), then the Facility B Maturity Date
shall not be extended and the repayment provisions of Section 2.09(b) shall
apply.
(g) If the Required Facility B Lenders, but less than all the Facility
B Lenders, have notified the Agent of their determination to consent to an
extension of the Facility B Maturity Date pursuant to Section 2.02(d), then the
Borrower shall, within 10 days after notification from the Agent regarding the
determination of the Facility B Lenders, give written notice to the Agent of the
Borrower's election to either (i) decline the extension of the Facility B
Maturity Date, in which case the Facility B Maturity Date shall not be extended
and the repayment provisions of Section 2.09(b) shall apply (including the
option set forth therein to convert the Facility B Loans to term loans upon the
satisfaction of the requisite notice provisions set forth therein), or (ii)
accept the extension of the Facility B Maturity Date, in which case on the then
applicable Facility B Maturity Date, without giving effect to the request for
extension, (A) the Borrower shall pay to the Agent for the account of each
Non-Consenting Lender the outstanding Facility B Loans advanced by such
Non-Consenting Lender together with accrued interest thereon, and any accrued
Facility B Commitment Fee owing to such Non-Consenting Lender and such
Non-Consenting Lender's PRO RATA share of any accrued but unpaid Facility B
Utilization Fee, (B) the Facility B Total Commitment shall be decreased by the
Facility B Commitment of each Non-Consenting Lender, each Non-Consenting
Lender's Facility B Commitment shall be reduced to zero, and the Facility B
Commitment Percentage of the remaining Lenders with Facility B Commitments shall
be adjusted accordingly, (C) each Lender which has determined to give its
consent shall be deemed to have delivered such consent on the then applicable
Facility B Maturity Date, and (D) the Facility B Maturity Date shall be extended
to the date which is the earlier of (x) the Facility A Maturity Date and (y) 364
days after the Facility B Maturity Date then in effect. In addition, if the
Borrower elects to extend the Facility B Maturity Date pursuant to Section
2.02(g)(ii), the Borrower may exercise its right pursuant to Section 2.21 to
replace some or all of the Facility B Commitments held by the Non-Consenting
Lenders.
2.03. NOTICE AND METHOD OF BORROWING.
(a) Each Loan shall be made upon receipt of a notice (each, a "Notice
of Borrowing"), given by the Borrower requesting such Loans and received by the
Agent not later than 12:00 noon, Boston, Massachusetts time, at least (x) three
Business Days, in the case of Eurodollar Rate Loans and (y) one Business Day, in
the case of Base Rate Loans and Federal Funds Rate Loans, prior to the Drawdown
Date of such Loan. The Notice of Borrowing shall be in substantially the form of
EXHIBIT C hereto, specifying therein:
(i) the Drawdown Date of such proposed Loan, which shall be a
Business Day;
(ii) the amount of such proposed Loan which, in the case of Base
Rate Loans and Federal Funds Rate Loans shall be in an amount of not
less than $1,000,000 or an integral multiple of $500,000 in excess
thereof and, in the case of Eurodollar Rate Loans, shall be in an
amount of not less than $10,000,000 or an integral multiple of
$5,000,000 in excess thereof;
(iii) the Type of such Loans;
(iv) whether such Loan is a Facility A Loan or a Facility B Loan;
and
(v) if the proposed Loan is to be comprised of Eurodollar Rate
Loans or Federal Funds Rate Loans, the duration of the initial
Interest Period applicable to such Loans.
Unless the Notice of Borrowing specifies otherwise, such Loans shall
initially bear interest at a rate determined by reference to the Base Rate. The
Agent shall give to each Lender prompt notice of the Agent's receipt of a Notice
of Borrowing and, if the Borrower has properly requested in such Notice of
Borrowing that any Loans initially bear interest at a rate determined by
reference to the Eurodollar Rate or the Federal Funds Rate, the applicable
Interest Period and interest rate under Section 2.12(b) or (c). The delivery of
each Notice of Borrowing shall constitute a representation by the Borrower that
each condition precedent set forth in Section 3.01 in the case of Loans advanced
on the Closing Date, and in Section 3.02 in the case of all Loans, has been
satisfied.
(b) Not later than 11:00 a.m. (Boston time) on the proposed Drawdown
Date of any Loans, each of the Lenders, severally, will make available to the
Agent, at the address set forth in Section 10.07 hereof (or at such other
address of which the Agent shall notify the Lenders), in immediately available
funds, the amount of such Lender's Commitment Percentage of the amount of the
requested Loans. Upon receipt from each Lender of such amount, and upon receipt
of the documents required by Article III and the satisfaction of the other
conditions set forth therein, to the extent applicable, the Agent will make the
aggregate amount of such Loans available to the Borrower. The failure or refusal
of any Lender to make available to the Agent at the aforesaid time on any
Drawdown Date the amount of its Commitment Percentage of the requested Loans
shall not relieve any other Lender from its several obligation hereunder to make
available to the Agent the amount of its Commitment Percentage of any requested
Loans.
(c) The Agent may (unless notified to the contrary by any Lender prior
to a Drawdown Date) assume that each Lender has made available to the Agent on
such Drawdown Date the amount of such Lender's Commitment Percentage of the
Loans to be made on such Drawdown Date, and the Agent may (but it shall not be
required to), in reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Lender makes available to the Agent such amount
advanced by the Agent on a date after such Drawdown Date, such Lender shall pay
to the Agent on demand an amount equal to the product of (i) the average
computed for the period referred to in clause (iii) below, of the Overnight
Federal Funds Rate for federal funds acquired by the Agent during each day
included in such period, TIMES (ii) the amount equal to such Lender's Commitment
Percentage of such Loans, TIMES (iii) a fraction, the numerator of which is the
number of days that elapse from and including such Drawdown Date to the date on
which the amount of such Lender's Commitment Percentage of such Loans shall
become immediately available to the Agent, and the denominator of which is 360.
A statement of the Agent submitted to any Lender with respect to any amounts
owing under this paragraph shall be PRIMA FACIE evidence of the amount due and
owing to the Agent by such Lender. If the amount of such Lender's Commitment
Percentage of such Loans is not made available to the Agent by such Lender
within three (3) Business Days of such Drawdown Date, the Agent shall be
entitled to recover such amount from the Borrower on demand, with interest
thereon at the rate per annum applicable to the Loans made on such Drawdown
Date.
(d) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the event that any Notice of Borrowing specifies that any Loan is
to bear interest initially at a rate determined by reference to the Eurodollar
Rate or the Federal Funds Rate, the Borrower shall indemnify each Lender against
any loss, cost or expense incurred by such Lender as a result of any failure to
fulfill, on or before the date specified in such Notice of Borrowing as the
proposed Drawdown Date, any of the applicable conditions set forth in Article
III, including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund its Loans in the
event that such Loans, as a result of such failure, are not made on such date.
2.04. LETTERS OF CREDIT. Each Letter of Credit opened by the Issuing
Lender under this Agreement for the account of the Borrower shall have the
following characteristics:
(i) each Documentary Letter of Credit issued by the Issuing
Lender hereunder shall have an expiry date which is not more than 90
days following the date of issuance thereof;
(ii) each Standby Letter of Credit issued by the Issuing Lender
hereunder shall have an expiry date which is not more than 365 days
following the date of issuance thereof;
(iii) no Letter of Credit shall have an expiry date later than
the date which is ten days prior to the Facility A Maturity Date; and
(iv) each Letter of Credit shall be payable by drafts drawn at
sight in accordance with the appropriate Application, and shall be
used only for the purposes set forth in Section 5.10(a).
2.05. PROCEDURES FOR OPENING LETTERS OF CREDIT.
(a) The Borrower shall give the Agent at least one Business Day's
prior electronic, telephonic (to be confirmed in writing within twenty-four (24)
hours), written, telex, telecopy or telegraphic notice (effective upon receipt),
of any request for the establishment of a Letter of Credit under this Agreement.
Such notice from the Borrower shall be accompanied by all information which the
Agent or the Issuing Lender shall require for the issuance of the Letter of
Credit then being requested. Subject to the terms and conditions of this
Agreement, not later than 12:00 noon, Boston, Massachusetts time, on the date
specified in such notice (or, if not timely delivered, on the second Business
Day after receipt by the Agent), the Issuing Lender shall establish such Letter
of Credit by forwarding the original of such Letter of Credit to the beneficiary
thereof in the manner specified by the Borrower; PROVIDED that the Issuing
Lender shall have no obligation to establish a Letter of Credit if after giving
effect thereto the Facility A Revolving Credit Debt would exceed the Facility A
Total Commitment. The delivery to the Agent of a request for the establishment
of a Letter of Credit shall constitute a representation by the Borrower that
each condition precedent set forth in Section 3.01 in the case of Letters of
Credit issued or renewed on the Closing Date and in Section 3.02 in the case of
all Letters of Credit has been satisfied. The Agent shall notify the other
Lenders on a weekly basis of all Letters of Credit issued hereunder.
(b) Effective as of the date of opening of each Letter of Credit, the
Issuing Lender agrees to grant and does grant, and each Lender severally and
irrevocably agrees to take and does take, an undivided participating interest in
such Letter of Credit and the Application relating thereto in a percentage equal
to such Lender's Facility A Commitment Percentage. All Letters of Credit issued
and outstanding on the Closing Date under the Existing Credit Agreement shall be
deemed to be Letters of Credit issued and outstanding hereunder and each Lender
severally and irrevocably agrees to take and does take, an undivided
participating interest in each such Letter of Credit and the Application
relating thereto in a percentage equal to such Lender's Facility A Commitment
Percentage.
(c) If the Issuing Lender at any time makes a payment on account of
any Letter of Credit, the Issuing Lender shall immediately notify the Borrower
and the Agent, and if the Issuing Lender is not concurrently reimbursed therefor
by the Borrower pursuant to Section 2.06(a), the Issuing Lender shall notify the
Agent and the Agent shall promptly notify each Lender of such payment. Forthwith
upon its receipt of such notice, each Lender other than the Issuing Lender shall
transfer to the Agent for the account of the Issuing Lender, in immediately
available funds, an amount equal to such Lender's Facility A Commitment
Percentage of such payment under such Letter of Credit. The obligation of each
Lender to so pay the Agent for the account of the Issuing Lender shall be
absolute and unconditional and shall not be affected by the occurrence of a
Default or an Event of Default, the termination or reduction of the Facility A
Total Commitment, any right of setoff or counterclaim or defense to payment, or
any other occurrence or event.
2.06. ADDITIONAL PROVISIONS REGARDING LETTERS OF CREDIT. In order to
induce each Issuing Lender to establish Letters of Credit hereunder:
(a) The Borrower agrees to pay each Issuing Lender the amount of all
Unpaid Reimbursement Obligations owing to such Issuing Lender under any Letter
of Credit immediately when due, irrespective of any claim, setoff, defense or
other right which the Borrower may have at any time against the Issuing Lender
or any other Person. The Borrower agrees to reimburse the Issuing Lender for all
amounts which the Issuing Lender pays under such Letter of Credit no later than
the time specified in the related Application therefor. The Issuing Lender shall
immediately notify the Agent of all sums received from the Borrower by the
Issuing Lender, and the Agent shall notify the other Lenders of the receipt of
such sums. Before any Unpaid Reimbursement Obligation is due and payable, such
Unpaid Reimbursement Obligation shall bear interest at the rate of interest
applicable to Loans bearing interest at a rate based on the Base Rate during
such period. If the Borrower does not pay (either from the proceeds of a Loan or
otherwise) any such Unpaid Reimbursement Obligation when due, such Unpaid
Reimbursement Obligation shall immediately bear interest computed from the date
on which such Unpaid Reimbursement Obligation became due to the date of
repayment in full thereof at the rate of interest applicable to past due Loans
bearing interest at a rate based on the Base Rate during such period.
(b) The Borrower agrees that the Agent, the Issuing Lender and any
other Lender shall not be responsible or liable for, and the obligation of the
Borrower to reimburse the Issuing Lender for any payment made by the Issuing
Lender under any Letter of Credit opened by it shall not be affected by (i) the
validity, form, enforceability or genuineness of any note, draft, demand,
statement or other document (or any endorsement thereof) presented to the
Issuing Lender under such Letter of Credit which, upon examination by the
Issuing Lender with reasonable care, appears on its face to be in accordance
with the terms and conditions of such Letter of Credit even if such note, draft,
demand, statement or other document (or such endorsement) is proven to be
invalid, untrue, inaccurate, unenforceable, fraudulent or forged, or (ii) any
dispute between the Borrower and the beneficiary or beneficiaries under such
Letter of Credit.
(c) The Borrower agrees that any action taken or omitted to be taken
by the Issuing Lender in connection with any Letter of Credit, if taken or
omitted to be taken in good faith, shall be binding upon the Borrower and shall
not create any liability for the Issuing Lender, the Agent or any other Lender
to the Borrower.
(d) If the Issuing Lender is required at any time to return to the
Borrower or to a trustee, receiver, liquidator, custodian or other similar
official any portion of the payments made by the Borrower to the Issuing Lender
in reimbursement of a payment made in respect of any Letter of Credit, each
Lender participating therein shall, on demand of the Agent, forthwith deliver to
the Issuing Lender an amount equal to such Lender's Facility A Commitment
Percentage of any amounts so returned by the Issuing Lender, together with
interest thereon from the date such demand is made to but not including the date
such amounts are delivered by such Lender to the Agent, at a rate per annum
equal to the Overnight Federal Funds Rate.
2.07. LETTER OF CREDIT COMMISSIONS AND FEES.
(a) Commencing on the Closing Date and thereafter, in lieu of any
Letter of Credit commissions and fees provided for in the Applications relating
thereto or otherwise, the Borrower agrees to pay the following fees and
commissions in connection with any Letters of Credit:
(i) The Borrower agrees to pay to the Agent on behalf of the
Lenders in accordance with their respective Facility A Commitment
Percentages, with respect to any Letter of Credit, fees or commissions
calculated daily in an amount equal to the maximum drawing amount of
such Letter of Credit, MULTIPLIED BY the applicable rate per annum,
expressed in Basis Points, set forth in the table below opposite the
Debt Rating then in effect; PROVIDED that, in the event of a split
Debt Rating by S&P and Moody's, the higher Debt Rating shall apply;
unless the Debt Rating by S&P and Moody's is split by more than one
level, in which case the average rating shall apply; and PROVIDED
FURTHER that in the event of any change in the Debt Rating, such fees
or commissions on outstanding Letters of Credit shall be immediately
adjusted to reflect such change:
DEBT RATING STANDBY L/C'S DOCUMENTARY L/C'S
S&P: A- 42.5 20.0
Moody's: A3
or better
S&P: BBB+ 55.0 25.0
Moody's: Baa1
S&P: BBB 65.0 30.0
Moody's: Baa2
S&P: BBB- 90.0 40.0
Moody's: Baa3
unrated or lower than 120.0 50.0
S&P: BBB-
Moody's: Baa3
(ii) In addition to the fees and commissions provided for in
clause (i) of this Section 2.07(a), the Borrower agrees to pay to the
Issuing Lender of each Letter of Credit, a fee in an amount equal to
1/8% per annum of the maximum drawing amount of such Letter of Credit
from time to time outstanding.
(iii) In addition to the fees and commissions provided in clauses
(i) and (ii) of this Section 2.07(a), the Borrower agrees to pay to
the Issuing Lender of each Letter of Credit, minimum opening
commissions and fees in respect of any amendment or negotiation of any
Letter of Credit, in accordance with the Issuing Lender's published
schedule of such charges, effective as of the date of such amendment
or negotiation.
(b) All such fees specified in Section 2.07(a)(i), (ii) and (iii)
inclusive hereof shall be calculated, with respect to each Letter of Credit,
based on the maximum drawing amount thereunder during the period commencing on
the date of issuance thereof (or with respect to Letters of Credit outstanding
on the Closing Date, commencing on the Closing Date) through the expiry date
thereof or the date of negotiation or cancellation thereof, as the case may be
(calculated on the basis of a 360-day year for the actual number of days
elapsed) and shall be payable in arrears on the last day of each Fiscal Quarter
during which, or any part of which, such Letter of Credit is outstanding.
Promptly after receipt of such quarterly payment, the Agent shall pay to each
Lender such Lender's Facility A Commitment Percentage of all Letter of Credit
fees referred to in Section 2.07(a)(i) which are received. Notwithstanding any
provision contained herein to the contrary, no fees, commissions or other
amounts paid as of or prior to the Closing Date in respect of any Letter of
Credit existing as of the Closing Date shall be repaid or credited against any
amounts otherwise payable pursuant to this Section 2.07.
2.08. COMMITMENT AND UTILIZATION FEES. (a) The Borrower agrees to pay
to the Agent, on behalf of the Lenders in accordance with their Facility A
Commitment Percentages, a commitment fee (the "Facility A Commitment Fee")
calculated daily for the period commencing on the date hereof through and
including the Facility A Maturity Date, or such earlier date upon which the
Facility A Commitments shall terminate, at the rate per annum (expressed in
Basis Points), set forth in the table below, opposite the Debt Rating then in
effect MULTIPLIED BY the amount by which the Facility A Total Commitment exceeds
the aggregate Facility A Revolving Credit Debt outstanding on such day; PROVIDED
that, in the event of a split Debt Rating by S&P and Moody's, the higher rating
shall apply unless the Debt Rating by S&P and Moody's is split by more than one
level, in which case the average rating shall apply:
FACILITY A
DEBT RATING COMMITMENT FEE RATE
S&P: A- 10.0
Moody's: A3
or better
S&P: BBB+ 12.5
Moody's: Baa1
S&P: BBB 15.0
Moody's: Baa2
S&P: BBB- 20.0
Moody's: Baa3
unrated or lower than 30.0
S&P: BBB-
Moody's: Baa3
The Facility A Commitment Fee shall be payable to the Agent, on behalf
of each Lender PRO RATA in accordance with such Lender's Facility A Commitment
Percentage, in cash quarterly in arrears on the last day of each Fiscal Quarter,
commencing on the first such day to occur after the Closing Date, and on the
date upon which the Facility A Commitments shall terminate. Promptly after
receipt of such quarterly payment, the Agent shall pay to each Lender such
Lender's Facility A Commitment Percentage of such payment.
(b) The Borrower agrees to pay to the Agent, on behalf of the Lenders
in accordance with their Facility B Commitment Percentages, a commitment fee
(the "Facility B Commitment Fee") calculated daily for the period commencing on
the date hereof through and including the Facility B Maturity Date, or such
earlier date upon which the Facility B Commitments shall terminate, at the rate
per annum (expressed in Basis Points), set forth in the table below, opposite
the Debt Rating then in effect MULTIPLIED BY the amount by which the Facility B
Total Commitment exceeds the aggregate Facility B Debt outstanding on such day;
PROVIDED that, in the event of a split Debt Rating by S&P and Moody's, the
higher rating shall apply unless the Debt Rating by S&P and Moody's is split by
more than one level, in which case the average rating shall apply:
FACILITY B
DEBT RATING COMMITMENT FEE RATE
S&P: A- 7.5
Moody's: A3
or better
S&P: BBB+ 10.0
Moody's: Baa1
S&P: BBB 12.5
Moody's: Baa2
S&P: BBB- 17.5
Moody's: Baa3
unrated or less than 27.5
S&P: BBB-
Moody's: Baa3
The Facility B Commitment Fee shall be payable to the Agent, on behalf
of each Lender PRO RATA in accordance with its Facility B Commitment Percentage,
in cash quarterly in arrears on the last day of each Fiscal Quarter, commencing
on the first such day to occur after the Closing Date, and on the date upon
which the Facility B Commitments shall terminate. The Agent shall pay to each
Lender such Lender's Facility B Commitment Percentage of such quarterly payment
promptly after receipt thereof.
(c) The Borrower agrees to pay to the Agent, on behalf of the Facility
A Lenders in accordance with their Facility A Commitment Percentages, a
utilization fee (the "Facility A Utilization Fee") calculated daily for the
period commencing on the date hereof through and including the Facility A
Maturity Date or such earlier date upon which the Facility A Total Commitment
shall terminate at a rate of one-tenth of one percent (0.10%) per annum
MULTIPLIED BY the Facility A Revolving Credit Debt if on such day the Facility A
Revolving Credit Debt exceeds thirty-three percent (33%) of the Facility A Total
Commitment as then in effect. The Facility A Utilization Fee shall be payable to
the Agent, on behalf of each Facility A Lender PRO RATA in accordance with its
Facility A Commitment Percentage, in cash quarterly in arrears on the last day
of each such Fiscal Quarter, commencing on the first such day to occur after the
Closing Date, and on the date on which the Facility A Commitments shall
terminate. The Agent shall pay to each Facility A Lender such Lender's Facility
A Commitment Percentage of such quarterly payment promptly after receipt
thereof.
(d) The Borrower agrees to pay to the Agent, on behalf of the Facility
B Lenders, a utilization fee (the "Facility B Utilization Fee") calculated daily
for the period commencing on the date hereof through and including the later of
the Facility B Maturity Date and the date upon which all the Facility B Loans
are paid in full at a rate of one-tenth of one percent (0.10%) per annum
MULTIPLIED BY (i) prior to the Facility B Maturity Date, the Facility B Debt if
on such day the Facility B Debt exceeds thirty-three percent (33%) of the
Facility B Total Commitment as then in effect, or (ii) after the Facility B
Maturity Date, the Facility B Debt. The Facility B Utilization Fee shall be
payable to the Agent, on behalf of each Facility B Lender in accordance with its
Facility B Commitment Percentage, in cash quarterly in arrears on the last day
of each such Fiscal Quarter, commencing on the first such day to occur after the
Closing Date, and on the date which any Facility B Loans are payable pursuant to
Section 2.09(b). The Agent shall pay to each Facility B Lender such Lender's
Facility B Commitment Percentage of such quarterly payment promptly after
receipt thereof.
2.09. MANDATORY REPAYMENT. (a) FACILITY A LOANS. (i) If at any time
the Facility A Revolving Credit Debt exceeds the Facility A Total Commitment,
for whatever reason, the Borrower shall immediately pay to the Agent the amount
of such excess for the PRO RATA account of the Lenders in accordance with their
respective Facility A Commitment Percentages.
(ii) The aggregate outstanding principal amount of the Facility A
Loans and any Unpaid Reimbursement Obligations shall be paid by the Borrower to
the Agent on the Facility A Maturity Date for the PRO RATA account of the
Lenders in accordance with their respective Facility A Commitment Percentages.
(b) FACILITY B LOANS. (i) If at any time prior to the Facility B
Maturity Date the Facility B Debt exceeds the Facility B Total Commitment, for
whatever reason, the Borrower shall immediately pay to the Agent the amount of
such excess for the PRO RATA account of the Lenders in accordance with their
respective Facility B Commitment Percentages.
(ii) The aggregate outstanding principal amount of the Facility B
Loans shall be paid by the Borrower to the Agent on the Facility B Maturity Date
for the PRO RATA account of the Lenders in accordance with their respective
Facility B Commitment Percentages. Notwithstanding the foregoing, the Borrower
may elect, by giving the Agent notice at least 14 days prior to the Facility B
Maturity Date, to convert the Facility B Loans into a term loan which shall be
payable in full in a single installment on the date (the "Final Term B Maturity
Date") which is the earlier of (x) the Facility A Maturity Date, and (y) the
second anniversary of the Facility B Maturity Date in effect immediately prior
to such conversion. The outstanding Facility B Loans shall continue to bear
interest at the rates and at the times set forth in Section 2.12 hereof, payable
at the times herein provided for and determined in accordance with Section 2.16
hereof, and the Borrower may elect to convert or continue the Type of Facility B
Loans as provided in Section 2.11 hereof. On the Facility B Maturity Date, the
Facility B Total Commitment shall be reduced to zero.
2.10. OPTIONAL PREPAYMENTS OF LOANS. The Borrower may prepay the
Notes, in whole or in part, without premium or penalty, upon prior written,
telex or telegraphic notice (effective upon receipt) to the Agent, to be
received by the Agent not later than 4:00 p.m. Boston, Massachusetts time at
least one Business Day preceding the date of the prepayment (whereupon the Agent
shall promptly notify the Lenders) specifying the date and the amount of such
prepayment and whether such Loans are Facility A Loans or Facility B Loans;
PROVIDED, HOWEVER, that any prepayment of the Loans while such Loans bear
interest at a rate determined with respect to either the Eurodollar Rate or the
Federal Funds Rate made prior to the last day of the relevant Interest Period
applicable thereto shall be accompanied by any indemnification amounts payable
by the Borrower pursuant to Section 2.20. On the date of any such prepayment of
either Federal Funds Rate Loans or Eurodollar Rate Loans, the Borrower shall pay
accrued interest to the date of such prepayment on the principal amount so
prepaid. On the date of any such prepayment of Base Rate Loans, the Borrower
shall pay accrued interest on the principal amount of any Base Rate Loan so
prepaid as provided in Section 2.12(a) hereof, unless such prepayment is a
prepayment in full of all Loans outstanding, in which case the Borrower shall
pay, on the date of such prepayment, accrued interest to the date of such
prepayment on the principal amount of all Loans, including, without limitation,
Base Rate Loans, so prepaid. Partial prepayments of Base Rate Loans and Federal
Funds Rate Loans hereunder shall be in the principal amount of $1,000,000 or any
integral multiple in excess thereof (unless the outstanding principal amount of
such Loans is less than $1,000,000, in which case the prepayment shall be in the
full amount of such outstanding amount). Partial prepayments of Eurodollar Rate
Loans hereunder shall be in the principal amount of $10,000,000 or any integral
multiple of $5,000,000 in excess thereof (unless the outstanding principal
amount of such Loans is less than $10,000,000, in which case the prepayment
shall be in the full amount of such outstanding amount). The Borrower shall have
no right to prepay the principal amount of the Loans other than as provided in
this Section 2.10 or Section 2.02(g).
2.11. CONVERSION/CONTINUATION OPTION. The Borrower may elect (a) at
any time to convert Loans from Base Rate Loans to Federal Funds Rate Loans or
Eurodollar Rate Loans or (b) at the end of any Interest Period with respect to
Eurodollar Rate Loans, to convert Eurodollar Rate Loans to Federal Funds Rate
Loans or Base Rate Loans, or to continue such Eurodollar Rate Loans for an
additional Interest Period, or (c) at the end of any Interest Period with
respect to Federal Funds Rate Loans to convert Federal Funds Rate Loans to Base
Rate Loans or Eurodollar Rate Loans, or to continue such Federal Funds Rate
Loans for an additional Interest Period. Each such election shall be in
substantially the form of EXHIBIT D hereto (a "Notice of Conversion or
Continuation") and shall be made by giving the Agent at least (x) in the case of
conversions to or continuations of Eurodollar Rate Loans, three Business Days'
prior written notice thereof and (y) in the case of conversions to, or
continuations of, Federal Funds Rate Loans or Base Rate Loans, one Business
Day's prior written notice thereof, specifying: (i) whether the Loan is a
Facility A Loan or a Facility B Loan, (ii) the amount of conversion or
continuation, (iii) the Interest Period therefor, and (iv) in the case of a
conversion, the date of conversion, which date shall be a Business Day. The
Agent shall promptly notify each Facility A Lender or Facility B Lender, as
appropriate, of its receipt of a Notice of Conversion or Continuation and of the
contents thereof. Notwithstanding the foregoing, no conversion of Base Rate
Loans to either Federal Funds Rate Loans or Eurodollar Rate Loans, and no
continuation of either Federal Funds Rate Loans or Eurodollar Rate Loans upon
the expiration of any Interest Period therefor, shall be permitted at any time
at which a Default or an Event of Default shall have occurred and be continuing.
If, within the time period required under the terms of this Section 2.11, the
Agent does not receive a Notice of Conversion or Continuation from the Borrower
containing an election to continue either Federal Funds Rate Loans or Eurodollar
Rate Loans for an additional Interest Period or to convert such Loans to another
Type, then, upon the expiration of the Interest Period therefor, such Loans will
be automatically converted to Base Rate Loans. Each Notice of Conversion or
Continuation shall be irrevocable.
2.12. INTEREST. The Borrower shall pay interest on the unpaid
principal amount of the Loans from the date thereof until the principal amount
thereof shall be paid in full, at the following rates per annum:
(a) BASE RATE ELECTION. Unless the Borrower shall have validly and
effectively elected to have a Loan made or continued as a Eurodollar Rate Loan
or Federal Funds Rate Loan pursuant to the provisions of this Agreement, such
Loan shall bear interest at a rate per annum at all times equal to the sum of
the Base Rate PLUS the Applicable Margin for Base Rate Loans in effect from time
to time, payable quarterly in arrears on the first day of each Fiscal Quarter,
on the Facility A Maturity Date with respect to Facility A Loans, on the
Facility B Maturity Date with respect to Facility B Loans which are not
converted to term loans pursuant to Section 2.09(b) and on the Final Term B
Maturity Date with respect to any Facility B Loans which are so converted to
term loans.
(b) FEDERAL FUNDS RATE ELECTION. In the event that the Borrower shall
have validly and effectively elected to have a Loan made or continued as a
Federal Funds Rate Loan pursuant to the provisions of this Agreement, such Loan
shall bear interest at a rate per annum equal at all times during the applicable
Interest Period to the sum of the Federal Funds Rate for such Interest Period
PLUS the Applicable Margin for Federal Funds Rate Loans in effect from time to
time, payable in arrears on the last day of such Interest Period, and on the
Facility A Maturity Date with respect to Facility A Loans, on the Facility B
Maturity Date with respect to Facility B Loans which are not converted to term
loans pursuant to Section 2.09(b) and on the Final Term B Maturity Date with
respect to any Facility B Loans which are so converted to term loans.
(c) EURODOLLAR RATE ELECTION. In the event that the Borrower shall
have validly and effectively elected to have a Loan made or continued as a
Eurodollar Rate Loan pursuant to the provisions of this Agreement, such Loan
shall bear interest at a rate per annum equal at all times during the applicable
Interest Period to the sum of the Eurodollar Rate for such Interest Period PLUS
the Applicable Margin for Eurodollar Rate Loans in effect from time to time,
payable in arrears on the last day of such Interest Period (or, if such Interest
Period has a duration of more than three months, on each day during such
Interest Period which is the first day of a Fiscal Quarter, and on the last day
of such Interest Period), on the Facility A Maturity Date with respect to
Facility A Loans, on the Facility B Maturity Date with respect to Facility B
Loans which are not converted to term loans pursuant to Section 2.09(b) and on
the Final Term B Maturity Date with respect to any Facility B Loans which are so
converted to term loans.
(d) DEFAULT INTEREST. During the continuance of any Event of Default,
the Borrower shall pay, on demand, interest (after as well as before judgment to
the extent permitted by law) on the principal amount of all Loans outstanding at
a rate per annum equal to the interest rate otherwise applicable to such Loan
PLUS 2% and on all other Obligations due and unpaid at the default rate of
interest then applicable to the principal of the Base Rate Loans.
2.13. INTEREST RATE DETERMINATION AND PROTECTION; INABILITY TO
DETERMINE EURODOLLAR RATE.
(a) The Agent shall promptly notify the Borrower and the Lenders of
the applicable interest rate determined for the Loans for purposes of Section
2.12, including, without limitation, any change in the Base Rate or any change
in the Applicable Margin as a consequence of a change in the Debt Rating in
effect from time to time and such notification shall be conclusive and binding
for all purposes, absent manifest error. Any change in the Base Rate shall be
effective at 12:01 a.m. Boston, Massachusetts time on the date of such change
and shall apply to all Base Rate Loans then outstanding. Any change in the
Applicable Margin in respect of the Loans and Unpaid Reimbursement Obligations
shall be effective at 12:01 a.m. Boston Massachusetts time on the date of such
change and shall apply to all Loans and Unpaid Reimbursement Obligations then
outstanding.
(b) The Agent shall determine the Eurodollar Rate and the Federal
Funds Rate, as applicable, in respect of any Loan. If both the Telerate Page
3750 and the Reuters Screen LIBO Page are unavailable at the time of determining
a Eurodollar Rate and any one or more of the Reference Lenders do not furnish
information on a timely basis to the Agent for the purpose of determining the
Eurodollar Rate to be applied to any Eurodollar Rate Loan during any Interest
Period, the Agent shall determine such Eurodollar Rate on the basis of timely
information furnished by the remaining Reference Lender(s) and, if none of the
Reference Lenders furnishes such information on a timely basis, then on the
basis of such information furnished to the Agent by such prime Lender or Lenders
in the Eurodollar Interbank Market, that the Agent, in its sole discretion
acting in good faith, may select.
(c) If the Required Facility A Lenders or Required Facility B Lenders,
as applicable, notify the Agent that the interest rate determined pursuant
hereto by reference to the Eurodollar Rate or the Federal Funds Rate for any
Interest Period will not adequately reflect the cost to such Lenders of making,
funding or maintaining their respective Eurodollar Rate Loans or Federal Funds
Rate Loans, as the case may be, for such Interest Period, the Agent shall
forthwith so notify the Borrower and all the Lenders, whereupon:
(i) all such Eurodollar Rate Loans or Federal Funds Rate Loans,
as the case may be, will automatically, on the last day of the then
existing Interest Period therefor, convert into Base Rate Loans unless
the Borrower elects another Type of Loan pursuant to the provisions of
this Agreement which is not then subject to any restriction limiting
the availability of such Type of Loan, whether under this Section 2.13
or elsewhere in this Agreement; and
(ii) the obligations of the Facility A Lenders or the Facility B
Lenders, as applicable, to make Eurodollar Rate Loans or Federal Funds
Rate Loans, as the case may be, or to convert any Loans into
Eurodollar Rate Loans or Federal Funds Rate Loans, as the case may be,
shall be suspended until the Agent shall have notified the Borrower
that the Required Facility A Lenders or the Required Facility B
Lenders, as applicable, have determined that the circumstances causing
such suspension no longer exist.
(d) In the event that, prior to the commencement of any Interest
Period relating to any Eurodollar Rate Loan, the Agent shall determine that
adequate and reasonable methods do not exist for ascertaining the Eurodollar
Rate that would otherwise determine the rate of interest applicable to any
Eurodollar Rate Loan during any Interest Period, the Agent shall forthwith give
notice of such determination (which shall be conclusive and binding on the
Borrower and the Facility A Lenders and/or the Facility B Lenders, as
applicable) to the Borrower and all the Lenders. In such event, (i) any Notice
of Borrowing or Notice of Continuation or Conversion with respect to Eurodollar
Rate Loans shall be automatically withdrawn and, unless a Federal Funds Rate
Loan is elected by the Borrower pursuant to ss.2.03 or ss.2.11, shall be deemed
to be a request for a Base Rate Loan, (ii) each Eurodollar Rate Loan shall
automatically, on the last day of the then current Interest Period relating
thereto, become a Base Rate Loan (unless a Federal Funds Rate Loan is elected by
the Borrower pursuant to ss.2.11), and (iii) the obligations of the Facility A
Lenders or the Facility B Lenders, as applicable, to make Eurodollar Rate Loans
shall be suspended until the Agent or the Required Facility A Lenders or the
Required Facility B Lenders, as applicable, determine that the circumstances
giving rise to suspension no longer exist, whereupon the Agent shall so notify
the Borrower and all the Lenders.
2.14. ILLEGALITY. Notwithstanding any other provision in this
Agreement, if the introduction of, or any change in or in the interpretation of,
any law or regulation shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender or its
Eurodollar Lending Office to fund any of such Lender's Eurodollar Rate Loans or
to continue to fund or maintain such Lender's Eurodollar Rate Loans, then, on
notice thereof by such Lender to the Borrower through the Agent, (a) the
obligations of such Lender to make or continue Eurodollar Rate Loans and to
convert Loans of another Type into Eurodollar Rate Loans shall terminate, and
(b) all outstanding Eurodollar Rate Loans of such Lender shall automatically be
converted to Base Rate Loans on the last day of the Interest Period applicable
to such Eurodollar Rate Loans or on such earlier date as may be required by law.
2.15. INCREASED COSTS; CAPITAL ADEQUACY.
(a) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
included in the Eurodollar Rate Reserve Percentage) in the interpretation of any
law or regulation or (ii) the compliance with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost of any Lender of agreeing to make
or making, funding or maintaining any Eurodollar Rate Loans or Federal Funds
Rate Loans, the Borrower shall from time to time, upon demand by such Lender
(with a copy of such demand to the Agent), pay to the Agent for the account of
such Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost, submitted
to the Borrower and the Agent by such Lender, shall be conclusive and binding
for all purposes, absent manifest error.
(b) If either (i) the introduction of, or any change in, any law or
regulation or in the interpretation thereof, or (ii) compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by any Lender or any corporation
controlling any Lender, and such Lender reasonably determines that such amount
is based upon the existence of such Lender's commitment to lend hereunder and
other commitments of this type including, without limitation, in respect of
Letters of Credit, or similar contingent obligations, then, upon demand by such
Lender (with a copy of such demand to the Agent), the Borrower shall pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, such additional amounts sufficient to compensate such Lender in the
light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's Commitment or Loans and the issuance or maintenance of Letters of
Credit (including Unpaid Reimbursement Obligations). A certificate as to such
amounts submitted to the Borrower and the Agent by such Lender shall be
conclusive and binding for all purposes absent manifest error.
2.16. PAYMENTS AND COMPUTATIONS; APPLICATIONS OF PAYMENTS.
(a) The Borrower shall deliver to the Agent at its address referred to
in Section 10.07 each payment due hereunder and under the Notes not later than
12:00 noon Boston, Massachusetts time on the date due, in immediately available
funds denominated in Dollars without setoff or counterclaim. The Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal or interest or fees or commissions or any other amount as set forth
in Section 2.16(f). Payments to the Lenders shall be for the account of their
respective Applicable Lending Offices. Payments received by the Agent after
12:00 noon Boston, Massachusetts time shall be deemed to be received on the next
Business Day. Notwithstanding any term or provision of this Agreement to the
contrary, the Agent shall have no obligation under any circumstances to pay any
Lender such Lender's Commitment Percentage of any amounts due and payable under
this Agreement, unless and until such time as the Agent shall have received such
amounts in immediately available funds from the Borrower.
(b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under any Note
held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate, the Federal
Funds Rate, the Eurodollar Rate or the Overnight Federal Funds Rate and of fees
and commissions shall be made by the Agent on the basis of a year of 360 days,
in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest and fees
or commissions are payable. Each determination by the Agent of any interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever any payment hereunder or under any of the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fees or
commissions, as the case may be; PROVIDED, HOWEVER, if such extension would
cause payment of interest on or principal of any Eurodollar Rate Loans to be
made in the next calendar month, such payment shall be made on the next
preceding Business Day.
(e) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Overnight Federal Funds Rate.
(f) All payments received by the Agent from the Borrower shall be
applied to the specific Obligations in respect of which such payments are made
as set forth in this Agreement, PROVIDED that if the Agent does not receive an
amount sufficient to pay in full all Obligations then due and payable, the Agent
shall apply the amount received, first, to the costs and expenses incurred by
the Agent and payable by the Borrower pursuant to this Agreement, second, to any
interest and fees due and payable hereunder, and third, to the principal amount
of the Loans. Any amounts to be applied to the payment of fees, interest and
principal shall be applied between the Facility A Lenders and the Facility B
Lenders PRO RATA based upon the amounts of fees, principal and interest, as
applicable, then payable in respect of Facility A Revolving Credit Debt and the
Facility B Debt, and among the Facility A Lenders PRO RATA in accordance with
each Lender's Facility A Commitment Percentage (except to the extent of any
offset made in respect of amounts paid by any Issuing Lender in respect of
Letters of Credit which were not reimbursed by any Lender in accordance with its
Facility A Commitment Percentage), and among the Facility B Lenders PRO RATA in
accordance with each Lender's Facility B Commitment Percentage.
2.17. LOAN ACCOUNTS. The Agent shall establish on its books loan
accounts for the Borrower in respect of the Loans and Letters of Credit
(collectively, the "Loan Accounts") which shall be administered by the Agent.
The Agent shall debit the Loan Accounts, and the Loan Accounts shall evidence,
the Maximum Drawing Amount, Unpaid Reimbursement Obligations, and the then
outstanding principal amount of all Facility A Loans and Facility B Loans from
time to time made by each Lender hereunder, and the Agent shall credit the Loan
Accounts with all payments made on account of the Loans, Unpaid Reimbursement
Obligations, other Obligations, and for the cash collateralizations related to
the Maximum Drawing Amount. The failure of the Agent to make any such debit or
credit to the Loan Accounts shall not affect the obligations of the Borrower
hereunder.
2.18. TAXES.
(a) Any and all payments by the Borrower hereunder or under the Notes
or in respect of Letters of Credit (including Unpaid Reimbursement Obligations)
shall be made, in accordance with Sections 2.02, 2.06, 2.08, 2.09, 2.10, 2.12
and 2.15, free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto imposed on it by any jurisdiction (excluding,
in the case of each Lender, the Agent, the Syndication Agent and the
Documentation Agent, (y) franchise taxes imposed on or measured by its income by
the jurisdiction under the laws of which such Lender, the Agent, the Syndication
Agent or the Documentation Agent (as the case may be) is organized or any
political subdivision thereof, and, (z) if such Lender, the Agent, the
Syndication Agent or the Documentation Agent is entitled at such time to a total
or partial exemption from withholding that is required to be evidenced by a
United States Internal Revenue Service Form 1001 or 4224 or any successor or
additional form, taxes imposed on it by reason of any failure of such Lender,
the Agent, the Syndication Agent or the Documentation Agent to deliver to the
Agent or the Borrower, from time to time as required by the Agent or the
Borrower, such Form 1001 or 4224 (as applicable) or any successor or additional
form, completed in a manner reasonably satisfactory to the Agent or the
Borrower) (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Lender, the Agent, the
Syndication Agent or the Documentation Agent (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.18) such Lender, the Agent, the Syndication Agent or the Documentation Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions,
and (iii) the Borrower shall pay the full amount deducted to the relevant taxing
authority or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes, mortgage registration, transfer and recording taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or under the Notes or from the execution,
delivery, recordation or registration of, or otherwise with respect to, this
Agreement, any Ancillary Agreement or the Notes (hereinafter referred to as
"Other Taxes").
(c) The Borrower will indemnify each Lender, the Agent, the
Syndication Agent and the Documentation Agent for the full amount of Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 2.18) paid by such
Lender, the Agent, the Syndication Agent or the Documentation Agent (as the case
may be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within thirty
(30) days from the date such Lender, the Agent, the Syndication Agent or the
Documentation Agent (as the case may be) makes written demand therefor.
(d) Within thirty (30) days after the date of any payment of Taxes or
Other Taxes, the Borrower will furnish to the Agent, at its address referred to
in Section 10.07, the original or a certified copy of a receipt evidencing
payment thereof.
(e) Prior to the Closing Date, in the case of each Lender which is an
original signatory hereto, and on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender in the case of each other Lender, and from
time to time thereafter if requested by the Borrower or the Agent, each Lender
organized under the laws of a jurisdiction outside the United States that is
entitled to an exemption from United States withholding tax, or that is subject
to such tax at a reduced rate under an applicable tax treaty, shall provide the
Agent and the Borrower with an Internal Revenue Service Form 4224 or Form 1001
or other applicable form, certificate or document prescribed by the Internal
Revenue Service of the United States certifying as to such Lender's entitlement
to such exemption or reduced rate with respect to all payments to be made to
such Lender hereunder and under the Notes. Unless the Borrower and the Agent
have received forms or other documents satisfactory to them indicating that
payments hereunder or under any Note are not subject to United States
withholding tax or are subject to such tax at a rate reduced by an applicable
tax treaty, the Borrower or the Agent shall withhold taxes from such payments at
the applicable statutory rate in the case of payments to or for any Lender
organized under the laws of a jurisdiction outside the United States.
(f) Any Lender claiming any additional amounts payable pursuant to
this Section 2.18 shall use its best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Applicable Lending Office to a jurisdiction in which such Lender already has a
lending office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
(g) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.18 shall survive the payment in full of principal and interest
hereunder and under the Notes.
2.19. SHARING OF PAYMENTS, ETC.
(a) If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of setoff, or otherwise) on
account of the portion of the Facility A Revolving Credit Debt or Facility B
Debt owing to it in excess of its Commitment Percentage of payments on account
of such Facility A Revolving Credit Debt or Facility B Debt, respectively,
obtained by all the Lenders (other than pursuant to Section 2.02 in the case of
payments to Non-Consenting Lenders or Sections 2.15 or 2.18), such Lender shall
forthwith purchase from the other Lenders such participations in the portions of
the Facility A Revolving Credit Debt or Facility B Debt, as applicable, owing to
such other Lenders as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of such other Lenders; PROVIDED,
HOWEVER, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each other Lender
shall be rescinded and such other Lender shall repay to the purchasing Lender
the purchase price to the extent of such recovery together with an amount equal
to such other Lender's ratable share (according to the proportion of (i) the
amount of such other Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.19 may, to the fullest 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 Lender were the direct
creditor of the Borrower in the amount of such participation.
(b) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.19 shall survive the payment in full of principal and interest
hereunder and under the Notes.
2.20. INDEMNITY. If any Lender receives any payment of any principal
of, or is subject to a conversion of, any Eurodollar Rate Loan or Federal Funds
Rate Loan other than on the last day of an Interest Period relating to such
Loan, as a result of any payment or conversion made by the Borrower or
acceleration of the maturity of the Notes pursuant to Sections 2.01, 2.02, 2.09,
2.10 or 8.01 or for any other reason, the Borrower shall, upon demand by such
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender all amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably incur as a result
of such payment or conversion, including, without limitation, any loss
(including, without limitation, loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund or maintain such Loan.
2.21. REPLACEMENT OF COMMITMENTS. If, in connection with any extension
of the Facility B Maturity Date to which the Required Facility B Lenders have
consented, the Facility B Commitment of any Non-Consenting Lender is to be
terminated as provided in Section 2.02(g), the Borrower may replace some or all
of the Facility B Commitments of the Non-Consenting Lenders by delivering to the
Agent not less than five (5) Business Days prior to such extension of the
Facility B Maturity Date, a written commitment to provide all or a part of such
Facility B Commitment from an existing Lender or from one or more Eligible
Assignees reasonably acceptable to the Agent (each such Lender or Eligible
Assignee providing such new Facility B Commitment hereunder, a "Section 21
Facility B Lender"); PROVIDED that the aggregate amount of the Facility B
Commitments to which such Section 21 Facility B Lenders are then committing
shall not exceed the aggregate Facility B Commitments of the Non-Consenting
Lenders which will be terminated on such Facility B Maturity Date. On the then
applicable Facility B Maturity Date (prior to giving effect to the extension
thereof), (i) the Borrower shall execute and deliver one or more new Facility B
Notes payable to the order of each Section 21 Facility B Lender in the principal
amount equal to such Section 21 Facility B Lender's Facility B Commitment, or in
the case of an existing Facility B Lender, equal to the increase in such
Facility B Lender's Facility B Commitment, such new Facility B Notes to be dated
as of such date and to be otherwise in substantially the form of EXHIBIT B-2
attached hereto, (ii) each Section 21 Facility B Lender shall execute and
deliver to the Borrower and the Agent an Instrument of Adherence in
substantially the form attached hereto as EXHIBIT E with such changes as agreed
to by the Agent, (iii) each Section 21 Facility B Lender shall pay a $3,500
recordation fee for the account of the Agent, and (iv) the Agent shall record
each Section 21 Facility B Lender and such Section 21 Facility B Lender's
Facility B Commitment in the Register. The Facility B Commitment Percentage of
each Facility B Lender shall be automatically adjusted as appropriate to reflect
the new Facility B Commitments, and the Facility B Lenders shall make any
appropriate adjustments and payments necessary to make each Facility B Lender's
percentage of the Facility B Debt equal to such Lender's Facility B Commitment
Percentage after giving effect to such adjustment.
ARTICLE III. CONDITIONS PRECEDENT
3.01. CONDITIONS TO CLOSING DATE. This Agreement will be effective as
of the Closing Date. The occurrence of the Closing Date and the obligation of
each Lender to make its initial Loans and the obligation of any Issuing Lender
to extend or renew any Letter of Credit hereunder on the Closing Date is subject
to the fulfillment of the following conditions precedent and receipt by the
Agent of the following documents, each dated as of the Closing Date or such
other date as is satisfactory to the Agent, in form and substance satisfactory
to the Agent and the Lenders and (except for the Notes) in sufficient copies for
each Lender:
(a) this Agreement duly executed and delivered to the Agent by the
Borrower, the Lenders and the Agent and one or more Notes, payable to the order
of each Lender, duly executed by the Borrower, in the amount of each such
Lender's Facility A Commitment and/or Facility B Commitment, as the case may be;
(b) Certificate of the Secretary or Assistant Secretary of the
Borrower as to (i) the charter documents and Bylaws of the Borrower, (ii) the
resolutions of the Board of Directors of the Borrower approving this Agreement
and each of the Ancillary Agreements and each of the transactions contemplated
hereby and thereby, (iii) all documents evidencing other necessary corporate
action and required governmental and third party approvals, licenses and
consents with respect to this Agreement and each Ancillary Agreement to be
executed as of the Closing Date and the transactions contemplated hereby and
thereby, and (iv) the names and true signatures of the officers of the Borrower
who have been authorized to execute and deliver this Agreement and each
Ancillary Agreement on behalf of the Borrower, in each case, together with
copies of such documents certified to be true, complete and in full force and
effect as of the Closing Date;
(c) (i) A certificate, dated as of a recent date, of the Secretary of
State of Nevada attesting to the good standing of the Borrower, and (ii) a
certificate of good standing for the Borrower, certified as of a recent date by
the Secretary of State (or comparable authority) of the states of California,
Pennsylvania, Washington, Oregon, New Jersey, Arizona, Connecticut and New York;
(d) A favorable opinion of Stroock & Stroock & Lavan, counsel to the
Borrower, in form and substance satisfactory to the Agent and the Lenders, as to
such matters as the Agent may reasonably request;
(e) The Ancillary Agreements, duly executed by each of the Borrower
and the Agent;
(f) The Projections (which shall be acceptable to the Agent and the
Co-Agents) certified by the Chief Financial Officer as satisfying the
requirements set forth in Section 4.07(c) with respect thereto and as to the
economic assumptions providing the basis therefor;
(g) Payment by the Borrower to the Agent of the fees provided for in
the Fee Letters, for the benefit of the parties specified therein, and payment
by the Borrower to the Agent of all costs and expenses referred to in Section
10.11 (including legal fees and expenses);
(h) Determination by each Lender, in its sole judgment exercised
reasonably, (i) that there has been no Material Adverse Change since the Balance
Sheet Date, (ii) that nothing shall have occurred since the Balance Sheet Date
which, in the judgment of any Lender has had or has any reasonable likelihood of
having a Material Adverse Effect, and (iii) that the financial statements
delivered pursuant toss.4.07 fairly and accurately represent the business and
financial condition of the Borrower and its Subsidiaries;
(i) Nothing contained in any public disclosure made by the Borrower or
any of its Subsidiaries after December 31, 1998 or in any information disclosed
to the Lenders by the Borrower or any of its Subsidiaries after such date shall
lead any Lender in its sole judgment exercised reasonably, to determine that the
Borrower's or any of its Subsidiaries' condition (financial or otherwise),
operations, performance, properties or prospects are different in any material
and adverse respect from that contained in public filings of the Borrower or any
of its Subsidiaries prior to or as of December 31, 1998 or nonpublic information
delivered by the Borrower to the Lenders prior to or as of December 31, 1998;
(j) A certificate, signed by a Responsible Officer, stating that the
conditions specified in Section 3.02 have been met;
(k) Evidence of receipt by each of the Lenders, the Agent, the
Co-Agents and the Borrower of all necessary approvals, consents and permits from
any Governmental Authority or any other party relating to the transactions
contemplated by this Agreement;
(l) Evidence that there shall have occurred no material adverse change
in any law or regulation or in the syndication, capital or financing markets
affecting any of the Lenders, the Agent or the Co-Agents;
(m) Payment by the Borrower of all interest, fees and expenses
provided for in Section 11.02 hereof; and
(n) Payment by the Borrower to the Agent for the benefit of each
"Bank" (as defined in the Existing Credit Agreement) of the outstanding
principal amount of Loans (as defined in the Existing Credit Agreement) made by
such Bank pursuant to the Existing Credit Agreement.
3.02. CONDITIONS TO ALL LOANS AND LETTERS OF CREDIT. The obligation of
each Lender to make any Loan and the obligation of any Issuing Lender to issue
any Letter of Credit shall be subject to the fulfillment of the following
conditions precedent:
(a) No Default or Event of Default shall have occurred and be
continuing on the date such Loan is advanced or such Letter of Credit is issued,
nor would any such Default or Event of Default result from the making of such
Loan or the issuing of such Letter of Credit;
(b) The representations and warranties of the Borrower in this
Agreement and in each of the Ancillary Agreements shall be true and correct on
and as of the date of such Loan or Letter of Credit and after giving effect to
such Loan or Letter of Credit as though made on and as of such date, except to
the extent of changes resulting from transactions contemplated or permitted by
the Credit Agreement and changes occurring in the ordinary course of business
that singly or in the aggregate do not have a Material Adverse Effect on the
business, assets or financial condition of the Borrower, and except to the
extent that such representations and warranties related expressly to an earlier
date (and the same shall have been true at and as of such specified date); and
(c) The Agent shall have received, as appropriate, a Notice of
Borrowing or an Application.
Each request for a Loan or Letter of Credit under this Agreement shall
constitute a representation by the Borrower that each of the foregoing
conditions has been satisfied.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders and the Agent as
follows, which representations and warranties shall survive the execution,
delivery and closing of this Agreement:
4.01. CORPORATE AUTHORITY.
(a) INCORPORATION; GOOD STANDING. Each of the Borrower and each of its
Subsidiaries (i) is a corporation (or, in the case of TEL, a limited liability
company and, in the case of TFT, a Delaware business trust) duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, (ii) has all requisite power and authority and
legal right to own and operate its property, to lease the property it operates
as lessee, and to conduct its business as now conducted and as presently
contemplated, and (iii) is in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction where such qualification is
necessary except where a failure to be so qualified would in an individual case
or in the aggregate not have a Material Adverse Effect.
(b) AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby (i) are within the corporate authority and legal right of the
Borrower, (ii) have been duly authorized by all necessary corporate proceedings,
(iii) do not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which the Borrower is subject
or any judgment, order, writ, injunction, license or permit applicable to the
Borrower which could have a Material Adverse Effect, (iv) do not conflict with
any provision of the corporate charter or bylaws of, or any agreement or other
instrument binding upon, the Borrower and (v) do not require any consent,
approval or authorization of any Governmental Authority or any other Person not
a party hereto.
(c) ENFORCEABILITY. The execution and delivery of this Agreement and
the Ancillary Agreements will result in valid and legally binding obligations of
the Borrower enforceable against it in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
(d) SUBSIDIARIES. On the Closing Date, the Borrower and each of its
Subsidiaries has only those Subsidiaries listed on SCHEDULE 4.01(D) hereto with
respect to each such Person.
4.02. LITIGATION, ETC. Except as disclosed on SCHEDULE 4.02 hereto,
there is no litigation, at law or in equity, or any proceeding before any
federal, state or municipal board or other governmental or administrative agency
or any arbitration pending or to the knowledge of the Borrower threatened which
is likely to involve any risk of any material judgment or liability not covered
by insurance or which may otherwise result in a Material Adverse Effect, or
which seeks to enjoin the consummation of, or which questions the validity of,
any of the transactions contemplated by this Agreement or any of the Ancillary
Agreements, and no judgment, decree or order of any court, board or other
governmental or administrative agency or arbitrator has been issued against or
binds the Borrower or any of its Subsidiaries which has, or could have, a
Material Adverse Effect.
4.03. BURDENSOME OBLIGATIONS; COMPLIANCE WITH OTHER INSTRUMENTS, LAWS;
NO DEFAULTS; PERMITS.
(a) Except as set forth on SCHEDULE 4.03(A) hereto, neither the
Borrower nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or, to the Borrower's knowledge, is expected in the future to have a
Material Adverse Effect. Except as set forth on SCHEDULE 4.03(A) hereto, neither
the Borrower nor any of its Subsidiaries is a party to any contract or agreement
that has or, to the best of the Borrower's knowledge, in the judgment of the
Borrower's officers, could have, a Material Adverse Effect.
(b) Neither the Borrower nor any of its Subsidiaries is in violation
of any provision of its charter documents, bylaws, or any agreement or
instrument to which it is subject or by which it or any of its properties are
bound or any law, decree, order, judgment, statute, license, rule or regulation,
(including, without limitation, all Environmental Laws) in a manner that is
reasonably likely to result in the imposition of substantial penalties or have a
Material Adverse Effect.
(c) No Default or Event of Default has occurred and is continuing.
(d) Except as set forth on SCHEDULE 4.03(D) hereto, the Borrower and
each of its Subsidiaries has all necessary Permits from or by, has made all
necessary filings with, and has given all necessary notices to, each
Governmental Authority having jurisdiction over it, to the extent required to
own and operate its properties, to lease the properties it operates under lease,
and to conduct its business as now conducted or presently proposed to be
conducted by it, except for (x) Permits which can be obtained by the taking of
ministerial action to secure the grant or transfer thereof and where the failure
to have such Permits would not have a Material Adverse Effect, or (y) where the
failure to have such Permits would not have a Material Adverse Effect.
4.04. INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended (15 U.S.C.ss.80(a)(1), ET SEQ.). The making of
the Loans and the issuing of Letters of Credit contemplated hereunder by the
Lenders, the application of the proceeds and repayment thereof by the Borrower
and the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements will not violate any provision of said Act or any rule,
regulation or order issued by the Securities and Exchange Commission thereunder.
4.05. CERTAIN TAX MATTERS. The Borrower and its Subsidiaries have (a)
made or filed all federal, state, local and foreign income and all other
material tax returns, reports and declarations required by any jurisdiction to
which any of them is subject or properly filed for and received extensions with
respect thereto which are still in full force and effect and which have been
fully complied with in all material respects, (b) paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith by
appropriate proceedings and for which adequate reserves, to the extent required
by GAAP, have been established and (c) set aside on their books provisions
reasonably adequate for the payment of all estimated taxes for periods
subsequent to the periods to which such returns, reports or declarations apply
except where the failure to do so could not reasonably be expected to be
materially misleading. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Borrower know of no basis for any such claim.
4.06. LIENS. Except as set forth on SCHEDULE 4.06 hereto or as
permitted by Section 7.02 hereof, there are no Liens on or rights of third
parties in, nor has there occurred any event which could give any third party a
claim to such a right in, any of the properties or assets of the Borrower or any
of its Subsidiaries.
4.07. FINANCIAL MATTERS.
(a) There has been delivered to each Lender a complete and correct
copy of the consolidated balance sheet of the Company as at the end of the
Fiscal Year ended December 31, 1998 and the related consolidated statements of
income, common shareholders' equity and cash flows of the Company for such
Fiscal Year, prepared in each case in accordance with Section 5.04(b) hereof,
together with the accountant's report with respect thereto as required by such
Section. Such financial statements have been prepared in accordance with GAAP
consistently applied and present fairly the consolidated financial condition of
the Company as at December 31, 1998, and the results of operations of the
Company for the Fiscal Year ended December 31, 1998.
(b) There has been delivered to each Lender a complete and correct
copy of the consolidated balance sheet of the Company as at the end of the
Fiscal Quarter ended September 30, 1999 and the related consolidated statements
of income and cash flows of the Company for such Fiscal Quarter, prepared in
each case in accordance with Section 5.04(a) hereof. Such financial statements
have been prepared in accordance with GAAP consistently applied and present
fairly the consolidated financial condition of the Company as at September 30,
1999, and the results of operations of the Company for the Fiscal Quarter ended
September 30, 1999, subject only to normal year-end audit adjustments.
(c) The Projections have been delivered to each Lender and disclose
all material assumptions made with respect to the Acquisition and to general
economic, financial and market conditions in formulating such Projections. The
Projections (i) are based upon reasonable estimates and assumptions, all of
which the Borrower believes are fair in light of current conditions, (ii) have
been prepared on the basis of the assumptions stated therein, and (iii) reflect
the reasonable estimates of the Borrower of the results of operations and other
information presented therein. No facts, to the knowledge of the Borrower, exist
which would result in any material change in any of such Projections.
4.08. CHANGES, ETC. Except as set forth on SCHEDULE 4.08 hereto, or as
disclosed in or reflected on the consolidated balance sheet of the Company as at
December 31, 1998 or as at September 30, 1999 referred to in Section 4.07(b), no
event has occurred and is continuing which has had or could reasonably be
expected to have a Material Adverse Effect.
4.09. EMPLOYEE BENEFIT PLANS.
(a) IN GENERAL. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions. The Borrower has
heretofore delivered to the Agent the most recently completed annual report,
Form 5500, with all required attachments, and actuarial statements required to
be submitted underss.103(d) of ERISA, with respect to each Guaranteed Pension
Plan.
(b) TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan
which is an employee welfare benefit plan within the meaning ofss.3(1)
orss.3(2)(B) of ERISA, no benefits are due unless the event giving rise to the
benefit entitlement occurs prior to plan termination (except as required by
Title I, Part 6 of ERISA). The Borrower or an ERISA Affiliate, as appropriate,
may terminate each such plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of the
Borrower or such ERISA Affiliate without liability to any Person.
(c) GUARANTEED PENSION PLANS. Each contribution required to be made to
a Guaranteed Pension Plan, without regard to any waiver or extension, whether
required to be made to avoid the incurrence of an accumulated funding
deficiency, the notice or lien provisions of ss.302(f) of ERISA, or otherwise,
has been timely made. No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to any
Guaranteed Pension Plan. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by the Borrower or any
ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not
been any ERISA Reportable Event, or any other event or condition which presents
a material risk of termination of any Guaranteed Pension Plan by the PBGC, other
than those ERISA Reportable Events or other events or conditions which have been
disclosed in writing to the Agent and the Lenders and which have not been deemed
by the Lenders to pose a material risk of termination of any Guaranteed Pension
Plan by the PBGC. Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed for that
valuation, the aggregate benefit liabilities of all such Guaranteed Pension
Plans within the meaning of ss.4001 of ERISA did not exceed the aggregate value
of the assets of all such Guaranteed Pension Plans by more than $500,000,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
(d) MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA Affiliate
has incurred any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan underss.4201 of ERISA or as a result of a sale of assets
described inss.4204 of ERISA. Neither the Borrower nor any ERISA Affiliate has
been notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning ofss.4241 orss.4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated underss.4041A of
ERISA.
4.10. ENVIRONMENTAL PROTECTION. Except as disclosed on SCHEDULE 4.10
hereto: (a) the operations of the Borrower and each of its Subsidiaries comply
with all Environmental Laws except to the extent that the non-compliance
therewith could not reasonably be expected to have a Material Adverse Effect,
(b) the Borrower and each of its Subsidiaries has obtained all environmental,
health and safety Permits necessary for its operation except where the failure
to obtain such Permit could not reasonably be expected to have a Material
Adverse Effect, and all such Permits are in good standing, and the Borrower and
each of its Subsidiaries is in material compliance with all terms and conditions
of such Permits, (c) none of the operations of the Borrower or any of its
Subsidiaries is subject to any material proceeding by or before any Governmental
Authority alleging the violation of any Environmental Laws, (d) neither the
Borrower nor any of its Subsidiaries (including, without limitation, all of
their present Facilities and operations, as well as its past Facilities and
operations), is subject to any material outstanding written order or agreement
with any Governmental Authority or private party respecting (i) any
Environmental Laws, (ii) any Remedial Action, or (iii) any Environmental Claims,
(e) to the best of the Borrower's knowledge, none of the operations of the
Borrower or any of its Subsidiaries is the subject of any material federal or
state investigation evaluating whether any Remedial Action is needed to respond
to a Release of any Contaminant into the environment, (f) no material Lien in
favor of any Governmental Authority for (i) any liability under Environmental
Laws, or (ii) damages arising from or costs incurred by such Governmental
Authority in response to a Release of a Contaminant into the environment has
been filed or attached to the Facilities, (g) none of the operations of the
Borrower or any of its Subsidiaries is subject to any other Environmental Law,
enacted by the state or federal legislatures or by popular vote, which could
have a Material Adverse Effect upon such operations, taken as a whole and (h)
neither the Borrower nor any of its Subsidiaries has received notice that any
Contaminant which any one of them has generated, transported or disposed of has
been found at any site at which any third party (including any Governmental
Authority) has conducted any Remedial Action.
4.11. COPYRIGHTS, PATENTS AND TRADEMARKS. The Borrower and its
Subsidiaries own or possess all patents, trademarks, service marks, copyrights
and licenses, and all rights with respect to the foregoing, necessary for the
conduct of its business as now conducted, without any known material conflict
with the rights of others.
4.12. TITLE. The Borrower and each of its Subsidiaries has good and
marketable title to its assets reflected in the balance sheet for the Fiscal
Year ended December 31, 1998 referred to in Section 4.07(a) (except as set forth
on SCHEDULE 4.12 and except for assets disposed of since such date in the
ordinary course of business), and none of the properties and assets of the
Borrower or such Subsidiary is subject to any Liens, except Liens permitted by
this Agreement. The Borrower and its Subsidiaries enjoy peaceful and undisturbed
possession under all leases of real property on which facilities operated by
them are situated (other than leases which are not, either individually or in
the aggregate, material to the operation of the business of the Borrower or such
Subsidiary), and each of such leases is valid and enforceable in accordance with
its terms and is in full force and effect. Neither the Borrower nor any of its
Subsidiaries nor, to the Borrower's knowledge, any other party to any such lease
is in default of its obligations thereunder or has delivered or received any
notice of default under any such lease, nor has any event occurred which, with
the giving of notice, the passage of time or both, would constitute a default
under any such lease, except for any default which would not have a Material
Adverse Effect.
4.13. FULL DISCLOSURE; PRO FORMA EFFECT OF THE ACQUISITION. Neither
this Agreement (including the schedules and exhibits hereto), nor any of the
Ancillary Agreements, nor any written statement prepared or furnished by or on
behalf of the Borrower to the Agent or any Lender in connection with the
negotiation, preparation, execution or performance of this Agreement and the
Ancillary Agreements contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Borrower which the Borrower has not
disclosed to the Lenders in writing which had or could reasonably be expected to
have a Material Adverse Effect or which would, immediately after giving effect
to the Acquisition, cause any of the representations and warranties of the
Borrower set forth in thisss.4 to be untrue in any material respect or which
would cause any of the statements made herein to be misleading.
4.14. SENIORITY. The Obligations are not subordinate or junior in
right of payment, in any manner, to any other Indebtedness of the Borrower (it
being understood that, notwithstanding the foregoing, the Indebtedness of the
Borrower secured by Liens permitted underss.7.02, shall be secured on a priority
basis by the assets subject to the Liens securing such Indebtedness).
4.15. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it an "investment company", or an "affiliated company" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940.
ARTICLE V. AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, from and after the date
hereof and so long as any of the Commitments remains in effect or any Note or
Unpaid Reimbursement Obligation remains unpaid or any Letter of Credit remains
outstanding, in whole or in part, unless the Required Lenders otherwise consent
in writing:
5.01. CONDUCT OF BUSINESS.
(a) CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Borrower will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, material rights, and those of its
Subsidiaries except to the extent that the Borrower's failure to do so will not
have a Material Adverse Effect. The Borrower (a) will cause all of its material
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all reasonably necessary
equipment, (b) will cause to be made all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; PROVIDED that
nothing in this ss.5.01 shall prevent the Borrower from discontinuing the
operation and maintenance of any of its properties or those of its Subsidiaries
if such discontinuance is, in the reasonable discretion of the Borrower,
desirable in the conduct of its or their business and would not have a Material
Adverse Effect.
(b) COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
Borrower will, and will cause each of its Subsidiaries to, comply with (a) the
applicable laws and regulations wherever its business is conducted, including
all Environmental Laws which may be in effect from time to time, (b) the
provisions of its charter documents and by-laws, (c) all agreements and
instruments by which it or any of its properties or business may be bound and
(d) all applicable decrees, orders, and judgments; if in each such case failure
to comply would have a Material Adverse Effect. If at any time any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order
that the Borrower may fulfill any of the Obligations, the Borrower will promptly
take or cause to be taken all reasonable steps within the power of the Borrower
to obtain such authorization, consent, approval, permit or license and furnish
the Lenders with evidence thereof
5.02. INSURANCE. The Borrower shall, and shall cause its Subsidiaries
to, keep their respective assets which are of an insurable character insured by
financially sound and reputable insurers or make adequate and prudent provisions
for self-insurance against loss or damage (i) to the extent and in the manner
customary for companies in similar businesses similarly situated and (ii) to the
extent such coverage is available on commercially reasonable terms.
5.03. RECORDS AND ACCOUNTS. The Borrower will (i) keep, and cause each
of its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with GAAP, (ii)
maintain adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties and the
properties of its Subsidiaries, contingencies, and other reserves, and (iii) at
all times engage independent certified public accountants satisfactory to the
Agent as the independent certified public accountants of the Borrower and its
Subsidiaries and will not permit more than thirty (30) days to elapse between
the cessation of such firm's (or any successor firm's) engagement as the
independent certified public accountants of the Borrower and its Subsidiaries
and the appointment in such capacity of a successor firm as shall be
satisfactory to the Agent.
5.04. REPORTS. The Borrower shall deliver to the Agent and to each
Lender:
(a) As soon as available, and in any event within fifty (50) days
after the last day of each of the first three Fiscal Quarters of each Fiscal
Year, commencing with the Fiscal Quarter ending immediately after the Closing
Date, the consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries (including a statement of the amount of the Company's LIFO reserve)
as at the end of such quarter and the consolidated and consolidating statements
of income, retained earnings and cash flows of the Borrower and its Subsidiaries
for such quarter and for the portion of the current Fiscal Year then ended, all
in reasonable detail and accompanied by a certificate from the Chief Financial
Officer stating that such statements have been properly prepared in accordance
with the books and records of the Company and fairly present the financial
condition and operations of the Borrower and its Subsidiaries subject only to
normal year-end audit adjustments.
(b) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, the consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries (including a statement of the amount
of the Company's LIFO reserve) as at the end of such year and the consolidated
and consolidating statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case
in comparative form the consolidated figures for the Borrower and its
Subsidiaries for the previous Fiscal Year (all in reasonable detail), which
consolidated statements of the Borrower and its Subsidiaries shall be audited
and certified by PricewaterhouseCoopers, or other independent public accountants
of recognized national standing selected by the Borrower and reasonably
satisfactory to the Agent, and accompanied by the certification of such
accountants that such financial statements have been prepared in accordance with
GAAP, together with the statement of such accountants that they have caused the
provisions Article VI and Article VII of this Agreement to be reviewed and that
in the course of their audit of the Borrower and its Subsidiaries nothing has
come to their attention to lead them to believe that any Default or Event of
Default under such provisions has occurred or is continuing, or, if such
accountants have knowledge of any Default or Event of Default under such
provisions, specifying the nature and period of existence thereof.
(c) Together with the financial statements delivered pursuant
toss.5.04(a) andss.5.04(b), a certificate of the Chief Financial Officer setting
forth a computation showing compliance by the Company with the financial tests
set forth in Article VI hereof and stating that such officer has caused the
provisions of this Agreement to be reviewed and has no knowledge of any Default
or Event of Default, or, if such signing officer has such knowledge, specifying
such Default or Event of Default and the nature thereof, and what action the
Borrower has taken, is taking, or proposes to take with respect thereto (the
"Compliance Certificate").
(d) Promptly upon its receipt thereof, copies of all audit reports
(including so-called "management letters") submitted by independent public
accountants in connection with each annual, interim or special audit of the
books of the Borrower or any of its Subsidiaries made by such accountants.
(e) Promptly (but in no event later than three (3) Business Days after
obtaining knowledge thereof) upon any principal officer of the Borrower
obtaining knowledge of any Default or Event of Default, a certificate of the
President or a Vice President and the Comptroller or the Treasurer of the
Borrower specifying the nature and period of existence thereof and what action
has been taken, is being taken or is proposed to be taken with respect thereto.
(f) Promptly and in any event within thirty (30) days after the
Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has reason to
know that any ERISA Reportable Event has occurred.
(g) As soon as available, copies of all (i) notices, proxy statements,
reports and financial statements which the Borrower or any of its Subsidiaries
shall send or make available to its shareholders and all registration statements
and reports which the Borrower or any of its Subsidiaries shall file with the
Securities and Exchange Commission and (ii) press releases.
(h) Notice of any change in a Debt Rating, promptly following such
change, and in any event within 10 days of such change.
(i) With reasonable promptness, such other information respecting the
business, properties, assets, operations or condition, financial or otherwise,
of the Borrower or any of its Subsidiaries as from time to time any of the
Lenders through the Agent may reasonably request.
5.05. RIGHT TO INSPECT PREMISES AND RECORDS. The Borrower will agree
to all reasonable requests by the Agent or any Lender (a) for access to any and
all premises leased, owned or occupied by the Borrower or any of its
Subsidiaries for the purpose of inspecting the books of account and financial
records of the Borrower and its Subsidiaries as well as their other properties
or assets, (b) for consultation with the Borrower with respect to the financial
or other affairs of the Borrower and its Subsidiaries, and (c) to make extracts
from the books of account and financial records of the Borrower or any of its
Subsidiaries solely for its own use in connection with the Loans and Letters of
Credit advanced or issued hereunder.
5.06. PAYMENT OF LIABILITIES. The Borrower shall pay and discharge,
and shall cause each of its Subsidiaries to pay and discharge, at or before
their maturity or in accordance with customary trade terms, all of their
respective Indebtedness due and payable, except where such Indebtedness is
contested in good faith and by appropriate proceedings diligently conducted and
reserves or other appropriate provisions, if any, as shall be required by GAAP,
shall have been made therefor, and except to the extent otherwise provided by
any subordination provisions applicable to such Indebtedness.
5.07. PAYMENT OF CHARGES AND INDEBTEDNESS. The Borrower shall, and
shall cause each of its Subsidiaries to, timely file or cause to be filed all
tax returns, and shall timely pay and discharge all taxes and other governmental
charges and assessments, due and payable, and shall pay all claims for labor,
materials or supplies which if unpaid might by law become a Lien or charge upon
any property of the Borrower or any of its Subsidiaries; PROVIDED, HOWEVER, that
any such taxes and other governmental charges and assessments or claims, the
nonpayment of which would not be reasonably likely to have a Material Adverse
Effect, need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if the Borrower or such
Subsidiary shall, in accordance with GAAP, have set aside on its books adequate
reserves with respect thereto; and PROVIDED FURTHER, HOWEVER, that the Borrower
shall, and shall cause each Subsidiary to, pay all such taxes, governmental
charges, assessments or claims forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor. The obligations
of the Borrower under this Section 5.07 with respect to the filing of tax
returns and the payment of taxes, governmental charges, assessments and claims
shall survive the payment, prepayment or redemption of the Notes and the
termination of this Agreement.
5.08. MATERIAL CHANGE IN BUSINESS. The primary business of the
Borrower and its Subsidiaries shall continue to be Permitted Businesses.
5.09. COMPLIANCE WITH SECURITIES LAWS. Any and all purchases or
redemptions by the Borrower and/or any of its Subsidiaries of any securities
issued by the Borrower or any of its Subsidiaries or any other Person shall be
effected in compliance with all applicable Requirements of Law, including, but
not limited to, the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. Any and all offers to sell and sales of
securities or of obligations of the Borrower or any of its Subsidiaries
evidenced by notes, bonds, debentures or similar instruments, shall be effected
in compliance with all applicable Requirements of Law, including, but not
limited to, the Trust Indenture Act of 1939, as amended.
5.10. APPLICATION OF PROCEEDS.
(a) FACILITY A. The Borrower shall use the proceeds of the Facility A
Revolving Credit Debt solely (i) for general corporate purposes including,
without limitation, to provide bridge financing of permitted uncontested
investments in and acquisitions of, businesses which consist of Permitted
Businesses (PROVIDED that the board of directors or similar governing group of
the acquired business has approved such acquisition) and to finance the
Acquisition, (ii) to provide working capital in the ordinary course of its
business, including, without limitation, to fund receivables and the purchases
of inventory, or (iii) to secure bonding and performance requirements.
(b) FACILITY B. The Borrower shall use the proceeds of the Facility B
Debt solely (i) for general corporate purposes and (ii) to provide working
capital in the ordinary course of its business, including, without limitation,
to fund receivables and the purchase of inventory.
5.11. ENVIRONMENTAL PROTECTION.
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
(i) comply in all material respects with the requirements of all Environmental
Laws applicable to it except where non-compliance could not reasonably be
expected to result in a Material Adverse Effect, (ii) notify the Agent promptly
in the event of any Release or other Adverse Environmental Condition upon or
affecting any premises owned or occupied by such Person which Release or Adverse
Environmental Condition could result in a Material Adverse Effect, and (iii)
promptly forward to the Agent copies of all orders, notices, permits,
applications or other communications and reports in connection with any such
Release or other Adverse Environmental Condition or any other matter relating to
the Environmental Laws as they may affect such premises which could result in a
Material Adverse Effect.
(b) The Borrower shall fully and promptly pay, perform, discharge,
defend, indemnify and hold harmless the Agent and each Lender, their
Subsidiaries and Affiliates, and their respective directors, officers, employees
and agents from and against any action, suit, proceeding, claim, loss, cost,
damage, liability, deficiency, fine, penalty or expense (including, without
limitation, reasonable attorneys' fees, investigation, removal, cleanup and
remedial costs and modification costs incurred to permit continued or resumed
normal operation of any of the Borrower's or any of its Subsidiaries'
facilities, properties or assets) suffered or incurred by the Agent, any Lender
or any such other indemnified party: (i) under or on account of any
Environmental Laws, including, without limitation, the asserting of any Lien
thereunder; (ii) with or without respect to any Release, Contaminant or other
Adverse Environmental Condition affecting any such facilities, properties or
assets, whether or not the same originates or emanates from such facilities,
properties or assets or any contiguous facilities, properties and assets; and
(iii) with respect to any other matter affecting any such facilities, properties
or assets arising under, pursuant to or in connection with any Environmental
Laws.
ARTICLE VI. FINANCIAL COVENANTS
The Borrower hereby covenants and agrees that from and after the date
hereof and for so long as any of the Commitments remain in effect or any Note or
Unpaid Reimbursement Obligation remains unpaid or any Letter of Credit remains
outstanding, in whole or in part, the Borrower shall be in compliance with the
following tests:
6.01. INTEREST COVERAGE RATIO. The Interest Coverage Ratio, determined
on the last day of each Fiscal Quarter for the period of the four consecutive
Fiscal Quarters then ended, shall not be less than 2.50 to 1.00.
6.02. LEVERAGE. The Leverage Ratio, determined on the last day of each
Fiscal Quarter, shall not exceed 0.60 to 1.00.
ARTICLE VII. NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that from and after the date
hereof and for so long as any of the Commitments remains in effect or any Note
or Unpaid Reimbursement Obligation remains unpaid or any Letter of Credit
remains outstanding, in whole or in part:
7.01. LIMITATIONS ON INDEBTEDNESS.
(a) The Borrower shall not, and shall not permit any of its
Subsidiaries to, create, incur or assume after the Closing Date any Indebtedness
if a Default or Event of Default shall be continuing hereunder immediately prior
to the incurrence of such Indebtedness or would occur under Article VI on a PRO
FORMA basis after giving effect to the incurrence of such Indebtedness.
(b) The provisions of Section 7.01(a) notwithstanding, the
Subsidiaries of the Borrower shall not (and the Borrower shall not permit its
Subsidiaries to) create, incur or assume after the Closing Date any Indebtedness
(other than Indebtedness permitted pursuant to Sections 7.01(d) and 7.01(e) of
this Agreement) if after giving effect to such creation, incurrence or
assumption, the aggregate amount of Indebtedness owing by the Subsidiaries of
the Borrower would exceed the SUM of (A) the aggregate amount of Indebtedness of
the Subsidiaries of the Borrower existing on the Closing Date and disclosed on
SCHEDULE 7.01 hereto, PLUS (B) $100,000,000.
(c) The provisions of Sections 7.01(a) and 7.01(b) notwithstanding,
the Borrower shall not and shall not permit any of its Subsidiaries to create or
incur after the Closing Date any additional Indebtedness secured by a Lien
(other than Indebtedness permitted pursuant to Sections 7.01(d) and 7.01(e) of
this Agreement) in an amount at any one time outstanding in excess of
$100,000,000.
(d) Subject to compliance with Section 7.01(a) of this Agreement, the
Borrower and its Subsidiaries may incur purchase money Indebtedness, the
proceeds of which shall be used to finance the purchase on or after the date of
incurrence of such Indebtedness of equipment; PROVIDED that the aggregate amount
of such Indebtedness shall not exceed the fair market value of the equipment so
acquired.
(e) Subject to compliance with Section 7.01(a) of this Agreement, the
Borrower and its Subsidiaries may incur Non-Recourse Debt.
(f) The provisions of Section 7.01(a) notwithstanding, the Borrower
may not create, incur or assume Contingent Obligations other than Contingent
Obligations in support of dealer or franchisee financing programs.
(g) The provisions of Section 7.01(a) notwithstanding, the Borrower
shall not, nor shall the Borrower permit any of its Subsidiaries to, use the
proceeds of any Indebtedness or proceeds of securitization programs to pay
dividends or similar distributions (other than dividends or similar
distributions paid by a Subsidiary to the Borrower).
7.02. LIMITATION ON LIENS, ETC. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist, any Lien of any kind upon or with respect to any of its
properties or assets reflected on its balance sheet other than Liens:
(a) existing on the Closing Date securing Indebtedness outstanding on
the Closing Date or securing Indebtedness permitted to be incurred under Section
7.01(c); PROVIDED that the collateral subject to Liens permitted pursuant to
this Section 7.02(a) shall not have a fair market value substantially in excess
of the amount of the Indebtedness secured thereby;
(b) existing on the Closing Date and listed on SCHEDULE 4.06 hereto,
or the extensions or renewal of such Liens; PROVIDED that the amount of
Indebtedness secured by such Lien is not increased;
(c) on accounts, accounts receivable and hydrocarbon inventory sold by
the Company in connection with the securitization of such accounts, accounts
receivable and inventory of the Company;
(d) on equipment acquired after the date hereof to secure purchase
money Indebtedness permitted under Section 7.01(d) incurred to finance the
acquisition of such equipment provided that such Liens cover only the equipment
so acquired; and
(e) on any Facility or other Capital Asset solely to secure
Non-Recourse Debt in an amount incurred to finance the acquisition or
construction of such Facility or Capital Asset; PROVIDED that such Liens cover
only the Facility or Capital Assets so acquired;
(f) for taxes, assessments or governmental charges or levies if the
same shall not at the time be due and delinquent or thereafter can be paid
without penalty or (if foreclosure, distraint, sale or other similar proceedings
shall not have been commenced) are being contested in good faith and by
appropriate proceedings diligently conducted, and such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;
(g) of mechanics and materialmen for sums not yet due or being
contested in good faith and by appropriate proceedings diligently conducted, if
such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(h) in connection with workers' compensation, unemployment insurance
and other social security, other than Liens created by Section 4068 of ERISA;
(i) to secure the performance of statutory obligations, surety and
appeal bonds, performance and return of money bonds and other obligations of a
like nature (not involving the borrowing of money or the deferred purchase price
of property, services or assets) incurred in the ordinary course of business;
(j) constituting easements, rights of way, restrictions and other
similar encumbrances not interfering with the ordinary conduct of the business
of the Borrower or any of its Subsidiaries and not materially detracting from
the value or intended use of the property to which they are applicable;
(k) imposed by law, carriers', warehousemen's or mechanics' liens and
liens to secure taxes, assessments and other governmental charges or levies or
claims for labor, material or supplies to the extent that payment thereof shall
not at the time be required to be made in accordance with Section 5.06 hereof;
and
(l) on tangible personal property located on, or constituting
leasehold improvements to, real property leased by the Borrower or any of its
Subsidiaries to secure obligations to the landlord under such lease.
7.03. LIMITATION ON RESTRICTED PAYMENTS, RESTRICTED PREPAYMENTS,
RESTRICTED INVESTMENTS AND DISCRETIONARY CAPITAL EXPENDITURES. The Borrower and
its Subsidiaries shall not, directly or indirectly, make, or enter into any
agreement to make, any Restricted Investment, Restricted Payment, Restricted
Prepayment or Discretionary Capital Expenditure if any Default or Event of
Default shall exist and be continuing immediately before, or would exist
immediately after, the making of such Restricted Investment, Restricted Payment,
Restricted Prepayment or Discretionary Capital Expenditure, as the case may be.
Notwithstanding anything herein to the contrary, the Borrower shall not, and
shall not permit any of its Subsidiaries to make any Restricted Investment or
any Discretionary Capital Expenditure other than (x) Restricted Investments in
the Stock or obligations of a Person whose primary business consists of
Permitted Businesses and (y) Discretionary Capital Expenditures for assets to be
used in connection with Permitted Businesses.
7.04. LIMITATION ON SALE, CONSOLIDATION, MERGER, ETC.; CHANGE IN
BUSINESS.
(a) The Borrower and its Subsidiaries shall not Sell any Primary Asset
if (i) any Default or Event of Default has occurred or is continuing, or would
result from such Sale, or (ii) the Borrower and its Subsidiaries would no longer
continue to be primarily engaged in Permitted Businesses after the consummation
of such sale.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, consolidate with or merge with or into any other corporation or
entity, or permit any other corporation or entity to consolidate with or merge
with or into the Borrower or any such Subsidiary; except that (i) any
corporation may merge into the Borrower or any of its Subsidiaries and any
Subsidiary may merge into another corporation if, contemporaneously therewith,
such corporation becomes a Subsidiary of the Borrower, (ii) the Borrower may
merge or consolidate one or more Subsidiaries with and into the Borrower or with
and into another of its Subsidiaries, and (iii) the Borrower may liquidate or
dissolve any of its Subsidiaries; PROVIDED that in the case of each of (i), (ii)
and (iii), after consummation of such merger, (A) no Default or Event of Default
shall exist, and (B) the Borrower shall be a surviving corporation.
(c) The Borrower shall not permit any of its Subsidiaries to issue
Stock or options to acquire Stock in such Subsidiaries unless after giving
effect to such issuance or the exercise of such option, such Subsidiary remains
a Subsidiary and no Default or Event of Default is then continuing or would
occur on a PRO FORMA basis under Article VI hereof.
7.05. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning ofss.406
of ERISA orss.4975 of the Code which could result in a material liability for
the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined inss.302 of ERISA, in excess of
$1,000,000, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could result
in the imposition of a lien or encumbrance on the assets of the Borrower or any
of its Subsidiaries pursuant toss.302(f) orss.4068 of ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning ofss.4001 of ERISA) of all Guaranteed
Pension Plans exceeding the value of the aggregate assets of such plans by more
than $1,000,000, disregarding for this purpose the benefit liabilities and
assets of any such plan with assets in excess of benefit liabilities.
7.06. SALES AND LEASEBACKS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or
transfer any Primary Asset owned by it in order then or thereafter to lease
Primary Assets that the Borrower or such Subsidiary intends to use for
substantially the same purpose as the property being sold or transferred if a
Default or Event of Default shall be continuing hereunder immediately prior to
such transaction or would occur under Article VI on a PRO FORMA basis after
giving effect to such transaction.
7.07. LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND OTHER
DISTRIBUTIONS. Except as otherwise provided in Section 7.03, the Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any such Subsidiary to (a) pay dividends or
make any other distributions on its Stock owned by the Borrower or any of its
Subsidiaries, or pay any Indebtedness owed to the Borrower or any of its
Subsidiaries, (b) make loans or advances to the Borrower, or (c) transfer any of
its properties or assets to the Borrower, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement, or (iii) customary provisions restricting subletting or assignment of
any lease under which the Borrower or any of its Subsidiaries is lessee.
7.08. PROHIBITED USES OF PROCEEDS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, use the proceeds
of any Loans or Letters of Credit hereunder in any manner which would result in
a violation of Regulation T, U or X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect.
7.09. TRANSACTIONS WITH AFFILIATES. The Borrower shall not and shall
not permit any of its Subsidiaries to, enter into any transaction with any
Affiliate on terms that are less favorable to the Borrower or such Subsidiary,
as the case may be, than terms which might be obtained at the time from Persons
that are not Affiliates if a Default or Event of Default shall be continuing
hereunder immediately prior to such transaction or would occur under Article VI
on a PRO FORMA basis after giving effect to such transaction.
ARTICLE VIII. EVENTS OF DEFAULT; ACCELERATION
8.01. EVENTS OF DEFAULT.
(a) If any of the following events ("Events of Default") shall occur:
(i) the failure by the Borrower (A) to pay any portion of the
principal of any Note (including any Unpaid Reimbursement Obligation)
when due or any mandatory prepayment thereof, or (B) to pay any
interest on any Note, any Letter of Credit commission or fee or any
commitment, utilization or other fee or commission hereunder within
five (5) days after any such interest, commission or fee becomes due;
or
(ii) any representation or warranty made by the Borrower in this
Agreement or in any of the Ancillary Agreements or in connection with
any Loan made hereunder or any Letter of Credit issued hereunder or in
any certificate or financial or other statement delivered pursuant
hereto or thereto shall prove to have been untrue or misleading in any
material respect on the date as of which made; or
(iii) default by the Borrower in the observance or performance of
any term, covenant or agreement contained in Articles VI or VII or of
the covenant contained in Section 5.04(e); or
(iv) default by the Borrower in the observance or performance of
any other term, covenant or agreement (except for those matters
referred to in clauses (i), (ii) and (iii) above) contained in this
Agreement or in any Ancillary Agreement and the continuance of the
same unremedied for a period of five (5) days after notice thereof to
the Borrower by the Agent (the Agent hereby agreeing to give such
notice if requested to do so by the Required Lenders) or after a
Responsible Officer becomes aware thereof; or
(v) the Borrower or any of its Subsidiaries shall (A) default in
the payment of any portion of the principal of or interest on (x) any
obligation under any securitization of accounts receivable or (y) any
Indebtedness (other than the Notes which are included in Section
8.01(a)(i)), beyond any period of grace provided with respect to
either, or (B) default in the performance or observance of any other
term, condition or agreement contained in any such obligation or in
any agreement relating thereto; if in either case the effect of such
default is to cause, or permit the holder or holders of at least
$25,000,000 of such obligations (or a trustee on behalf of such holder
or holders) to cause, such obligations to become due prior to their
stated maturity; or
(vi) a final judgment for more than $25,000,000 (net of insurance
proceeds receivable) shall be rendered against the Borrower or any of
its Subsidiaries and within sixty (60) days after entry thereof such
judgment shall not have been discharged or execution thereof stayed
pending appeal; or
(vii) there shall occur any Material Adverse Change or any event
shall have occurred which could have a Material Adverse Effect; or
(viii) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Required Lenders shall
have determined in their reasonable discretion that such event
reasonably could be expected to result in liability of the Borrower or
any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in
an aggregate amount exceeding $1,000,000 and such event in the
circumstances occurring reasonably could constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a
trustee to administer such Guaranteed Pension Plan; or a trustee shall
have been appointed by the United States District Court to administer
such Guaranteed Pension Plan; or the PBGC shall have instituted
proceedings to terminate such Guaranteed Pension Plan;
then, and in any such event:
(A) the Agent may, and upon the written or telephonic request of the
Required Facility A Lenders the Agent shall, (x) terminate
forthwith the Facility A Commitments, whereupon the Facility A
Commitments shall be terminated immediately, and/or (y) declare,
by notice of default given to the Borrower, the Facility A
Revolving Credit Debt to be forthwith due and payable, whereupon
the principal amount of the Facility A Revolving Credit Debt,
together with accrued interest thereon, and all other Obligations
arising in connection therewith shall become immediately due and
payable, and/or (z) require that the Borrower deposit with the
Agent, at once and in full, all sums sufficient to reimburse the
Agent and the Lenders for all payments, present or future,
contingent or otherwise, that may be required to be made by the
Agent or the Lenders on account of any or all Letters of Credit,
and such sums shall be deposited in a non-interest-bearing cash
collateral account maintained by the Agent, to be held by the
Agent and applied thereby in reduction of any Obligations arising
out of any Application or Letter of Credit, and
(B) the Agent may, and upon the written or telephonic request of the
Required Facility B Lenders the Agent shall, (x) terminate
forthwith the Facility B Commitments, whereupon the Facility B
Commitments shall be terminated immediately, and/or (y) declare,
by notice of default given to the Borrower, the Facility B Debt
to be forthwith due and payable, whereupon the principal amount
of the Facility B Debt, together with accrued interest thereon,
and all other Obligations arising in connection therewith shall
become immediately due and payable.
(b) If any of the following events of default shall occur (both of
which also being referred to as an "Event of Default"):
(i) the Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a
trustee or other custodian, liquidator or receiver of the Borrower or
any of its Subsidiaries or of any substantial part of the assets of
the Borrower or any of its Subsidiaries or shall commence any case or
other proceeding relating to the Borrower or any of its Subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other
proceeding shall be commenced against the Borrower or any of its
Subsidiaries; and the Borrower or any of its Subsidiaries shall
indicate its approval thereof, consent thereto or acquiescence therein
or if such petition or application shall not have been dismissed
within forty-five (45) days following the filing thereof; or
(ii) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any
of its Subsidiaries bankrupt or insolvent, or approving a petition in
any such case or other proceeding, or a decree or order for relief is
entered in respect of the Borrower or any of its Subsidiaries in an
involuntary case under federal bankruptcy laws as now or hereafter
constituted;
then, and in any such event, without requirement of notice to the Borrower (A)
the Commitments shall thereupon be automatically and immediately terminated (B)
the principal amount of the Loans, together with accrued interest thereon, and
all other Obligations shall become automatically and immediately due and payable
and (C) the Borrower shall be required to immediately deposit with the Agent in
full, all sums sufficient to reimburse the Agent and the Lenders for all
payments, present or future, contingent or otherwise, that may be required to be
made by the Agent on account of any and all outstanding Letters of Credit, and
such sums shall be deposited in a non-interest-bearing cash collateral account
maintained by the Agent, and such amounts shall be held by the Agent and applied
by the Agent in reduction of any Obligations of the Borrower arising out of any
Letter of Credit.
8.02. SURVIVAL OF OBLIGATIONS. Except as otherwise expressly provided
for in this Agreement and in the Ancillary Agreements, no termination or
cancellation (regardless of cause or procedure) of this Agreement or of any of
the Ancillary Agreements shall in any way affect or impair the powers,
obligations, duties, rights and liabilities of the Borrower in any way or
respect relating to any transaction or event occurring prior to such termination
or cancellation, and any of the undertakings, agreements, covenants, warranties
and representations contained in this Agreement and in the Ancillary Agreements
shall survive such termination or cancellation.
ARTICLE IX. THE AGENT AND CO-AGENTS
9.01. AUTHORIZATION. Each Lender irrevocably appoints and designates
the Agent to act on behalf of such Lender in connection with the transactions
contemplated by this Agreement to the extent provided herein or in any document
or instrument delivered hereunder or in connection herewith and to take such
other action as may be reasonably incidental thereto. Without limiting the
generality of the foregoing, each Lender hereby authorizes the Agent to act on
behalf of such Lender to take all such actions necessary or appropriate with
respect to the enforcement of this Agreement and the Ancillary Agreements.
Without limiting the rights of the Lenders hereunder, each Lender authorizes the
Agent to act on its behalf to execute and accept on its behalf any and all
payments and collections to be made by or for each of them in their individual
capacities pursuant to this Agreement and to take all such actions necessary or
appropriate with respect to the payment and/or enforcement of the Obligations to
each such Lender.
9.02. INDEMNIFICATION OF AGENT AND CO-AGENTS. The Lenders severally
agree to indemnify each of the Agent, the Co-Agents and, to the extent not
reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so, any Issuing Lender in its respective capacity as an Issuing Lender
with respect to Letters of Credit, ratably according to each Lender's Commitment
Percentage (except in the case of indemnification owing hereunder to such
Issuing Lender, which shall be ratably in accordance with each Lender's Facility
A Commitment Percentage), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes and including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
and the allocated costs of in-house counsel) be imposed on, incurred by or
asserted against the Agent, any Co-Agent, or any other Issuing Lender in its
capacity as an Issuing Lender, as the case may be, in any way relating to or
arising out of this Agreement, or any documents contemplated by or referred to
herein or the transactions contemplated hereby or any action taken or omitted by
the Agent, any Co-Agent, or any other Issuing Lender in its capacity as such,
under or in connection with any of the foregoing, including, without limitation,
with respect to any amounts advanced by the Agent, any Co-Agent, or any other
Issuing Lender in its capacity as such, on behalf of the respective Lenders
(together with any interest thereon) pursuant to the provisions of Article II
hereof; PROVIDED, HOWEVER, that no Lender shall be liable for the losses
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's, any Co-Agent's, or any other Issuing
Lender's, as the case may be, gross negligence or willful misconduct. The
agreements in this Section 9.02 shall survive the payment of the Notes and all
other amounts payable hereunder.
9.03. EXCULPATION, ETC.
(a) The Agent shall be entitled to rely upon the advice of counsel
concerning legal matters, and upon this Agreement and the Ancillary Agreements,
as well as any schedule, certificate, report, notice or other writing which it
believes to be genuine and to have been presented by a proper Person. None of
the Agent, any Co-Agent or any of their respective directors, officers,
employees or agents shall: (i) be responsible for any recitals, representations
or warranties contained in, or for the execution, validity, genuineness,
effectiveness or enforceability of, this Agreement, the Ancillary Agreements or
any other instrument or document delivered hereunder or thereunder or in
connection herewith or therewith; (ii) be responsible for the validity,
genuineness, perfection, effectiveness, enforceability, existence, value or
enforcement of any collateral security; (iii) be under any duty to inquire into
or pass upon any of the foregoing matters, or to make any inquiry concerning the
performance by the Borrower or any other obligor of the Obligations; or (iv) in
any event, be liable as such for any action taken or omitted by it or them,
except for its own gross negligence or willful misconduct. The agency hereby
created shall in no way impair or affect any of the rights and powers of, or
impose any duties or obligations upon, the Agent or any Co-Agent in its
individual corporate capacity as a Lender hereunder.
(b) As to any matters not expressly set forth in this Agreement or any
Ancillary Agreement as a function or responsibility of the Agent, the Agent
shall not be required to exercise any discretion or take any action, except that
the Agent may, in its sole discretion, act or refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, the Required Facility A Lenders, or the Required Facility
B Lenders, as applicable, and such instructions shall be binding upon the Agent
and also on all Lenders, the Facility A Lenders and the Facility B Lenders,
respectively. If, with respect to a proposed action to be taken by it, the Agent
shall determine in good faith that the provisions of this Agreement or any
Ancillary Agreement relating to the functions or responsibilities or
discretionary powers of the Agent are or may be ambiguous or inconsistent, the
Agent may so notify the Facility A Lenders and/or the Facility B Lenders, as
appropriate (identifying the proposed action and the provisions that it
considers are or may be ambiguous or inconsistent) and may decline either to
perform such function or responsibility or to exercise such discretionary power
unless it has received the written confirmation of the Required Lenders, the
Required Facility A Lenders or the Required Facility B Lenders, as appropriate,
that such Lenders (including the Agent) concur in the circumstances that the
action proposed to be taken by the Agent is consistent with the terms of this
Agreement or any Ancillary Agreement or is otherwise appropriate. The Agent
shall be fully protected in acting or refraining from action upon the
confirmation of the Required Lenders, the Required Facility A Lenders or the
Required Facility B Lenders, as applicable, in this respect, and such
confirmation shall be binding upon the Agent and upon all Lenders, the Facility
A Lenders, and the Facility B Lenders, respectively. The Agent shall not be
required to obtain any such written confirmation of the Required Lenders, the
Required Facility A Lenders or the Required Facility B Lenders in order to
perform any function or responsibility or to exercise any discretionary power of
the Agent set forth in this Agreement or any Ancillary Agreement.
(c) The Agent shall not in any event be required to take any action
which exposes it to personal liability or which, in the judgment of the Agent,
is contrary to the provisions of this Agreement, any Ancillary Agreement or
applicable law.
(d) If in one or more instances the Agent takes any action or assumes
any responsibility not specifically delegated to it pursuant to the provisions
of this Agreement or any Ancillary Agreement, neither the taking of such action
nor the assumption of such responsibility shall be deemed to be an express or
implied undertaking on the part of the Agent that it will take the same or
similar action or assume the same or similar responsibility in any other
instance.
9.04. RELIANCE ON DOCUMENTS, ETC. In acting as Agent hereunder, the
Agent, and its respective officers and agents shall be under no liability to the
other Lenders or to the Borrower for action or failure to act taken or suffered
in good faith, and may rely on all certificates, documents and other papers
believed by such officers and agents to be genuine, and any action or failure to
act upon advice of its counsel shall conclusively be deemed to be in good faith.
9.05. CREDIT INVESTIGATION. Each Lender acknowledges that it has made
such inquiries and taken such care on its own behalf as would have been the case
had credit been granted, and the Loans made and the Letters of Credit issued,
directly by such Lender to or for the account of the Borrower without the
intervention of the Agent, any Co-Agent or any other Lender. Each Lender agrees
and acknowledges that none of the Agent nor the Co-Agents makes any
representations or warranties about the creditworthiness of the Borrower or any
other party to this Agreement or with respect to the legality, validity,
sufficiency or enforceability of this Agreement, any of the Ancillary Agreements
or the value of any collateral security therefor.
9.06. RESIGNATION. The Agent or any Co-Agent may resign as such at any
time upon at least thirty (30) days' prior written notice to the Borrower and
the Lenders. In the event of any such resignation, the Required Lenders may
appoint another Lender as a successor Agent or Co-Agent. If no successor Agent
or Co-Agent shall have been so appointed and shall have accepted such
appointment within thirty (30) days after receipt by the Borrower and the
Lenders of such notification from the retiring or resigning Agent or Co-Agent,
as the case may be, then such retiring or resigning Agent or Co-Agent may
appoint a successor from among the Lenders. Upon the appointment of a new Agent
or Co-Agent hereunder, the term "Agent" or "Co-Agent", respectively, shall for
all purposes of this Agreement thereafter mean such successor. After any
retiring Agent's or Co-Agent's resignation hereunder, the provisions of this
Agreement shall continue to inure to the benefit of such retiring Agent or
Co-Agent as to any actions taken or omitted to be taken by it while it was Agent
or Co-Agent under this Agreement.
9.07. CO-AGENTS. None of the Lenders identified herein as a Co-Agent
shall have any obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders as such. Each Lender
acknowledges that it has not relied, and will not rely, on any of the Lenders so
identified as a Co-Agent in deciding to enter into this Agreement or in taking
or not taking action hereunder.
ARTICLE X. MISCELLANEOUS
10.01. AMENDMENTS AND WAIVERS. Except as otherwise expressly provided
in this Agreement, any consent or approval required or permitted by this
Agreement to be given by the Lenders may be given, and any term of this
Agreement or of any other instrument related hereto or mentioned herein may be
amended, and the performance or observance by the Borrower of any terms of this
Agreement or such other instrument or the continuance of any Default or Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Borrower and the written consent of the Required Lenders and the Agent.
Notwithstanding the foregoing, (i) the term of the Notes, (ii) the rate of
interest on the Loans and Unpaid Reimbursement Obligations and the amount of
fees hereunder including, without limitation, the Commitment Fees, the Facility
A Utilization Fee, the Facility B Utilization Fee and fees in respect of Letters
of Credit hereunder, (iii) the terms of this ss.10.01 and of ss.8.01 hereof,
(iv) the definition of "Required Lenders", "Required Facility A Lenders",
"Required Facility B Lenders", "Facility A Maturity Date", "Facility B Maturity
Date", "Final Facility B Maturity Date", "Facility A Total Commitment",
"Facility B Total Commitment", "Total Commitment", "Facility A Commitment
Percentage", "Facility B Commitment Percentage", and "Credit Facility
Percentage" (v) the extension of the maturity date of any Letter of Credit
beyond the Facility A Maturity Date, (vi) the provisions in Sections 2.02(d)
through (g) and Sections 2.09 relating to the option to extend the Facility B
Maturity Date, and (vii) the date on which any payment of principal, interest,
or any other amount payable hereunder is due or any Event of Default under
Section 8.01(a)(i) hereof, may not be amended or waived without the written
consent of each of the Lenders directly affected thereby. Notwithstanding the
foregoing, the terms of Article IX hereof, this Article X, or any other
provision of this Agreement or any Ancillary Agreement that inures to the
benefit of the Agent shall not be amended, waived, or otherwise modified without
the consent of the Agent. No provision of Article IX hereof that inures to the
benefit of the Co-Agents shall be amended, waived or otherwise modified without
the consent of the Co-Agents. No waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of any Lender or the Agent in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrower shall entitle the
Borrower to other or further notice or demand in similar or other circumstances.
10.02. ASSIGNMENTS AND PARTICIPATIONS.
(a) ASSIGNMENT. Each Lender may, with the prior written approval of
the Agent and, so long as no Default or Event of Default is then continuing, the
Borrower (such approvals not to be unreasonably withheld), sell, transfer,
negotiate or assign to one or more other Lenders or Eligible Assignees, all or a
portion of its Facility A Commitment and/or Facility B Commitment hereunder, the
portion of the Loans hereunder owing to it and the Notes held by it hereunder
and a commensurate portion of its rights and obligations hereunder and under the
Ancillary Agreements; PROVIDED, HOWEVER, that (i) each such assignment relating
to Facility A Loans and Facility A Commitments shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and obligations
relating to such Facility A Loans and Facility A Commitments under this
Agreement (including rights and obligations relating to Letters of Credit and
Unpaid Reimbursement Obligations), (ii) each such assignment relating to
Facility B Loans and Facility B Commitments shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and obligations
relating to such Facility B Loans and Facility B Commitments under this
Agreement, (iii) the aggregate amount of the Commitment and Loans made hereunder
being assigned pursuant to each such assignment (determined as of the date of
the Assignment and Acceptance with respect to such assignment), shall in no
event be less than the lesser of (A) $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (B) the aggregate amount of the assigning
Lender's Commitment and Loans outstanding immediately prior to such assignment,
and (iv) the making of Loans by such assignee hereunder would not be unlawful as
set forth in Section 2.14 hereof. The parties to each assignment shall execute
and deliver to the Agent, for its acceptance and recording, with a copy to the
Borrower for its acceptance, an Assignment and Acceptance, together with the
Notes subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least three (3) Business Days after
the execution thereof, (A) the assignee thereunder shall be a party hereto and,
to the extent that rights and obligations under the Ancillary Agreements have
been assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder and thereunder, and (B) the assignor
thereunder shall, to the extent that rights and obligations under this Agreement
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement, and the
Ancillary Agreements (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Agreement and the Ancillary Agreements, such Lender shall cease to be
a party hereto and thereto). Anything herein to the contrary notwithstanding, no
Lender shall need the approval of the Agent or the Borrower for an assignment
resulting by operation of law pursuant to any merger, acquisition, consolidation
or other extraordinary corporate event in which the Lender is not the surviving
entity.
(b) REPRESENTATIONS AND WARRANTIES. By executing and delivering an
Assignment and Acceptance, the Lender assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or any Ancillary Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement, or any Ancillary Agreement or any other instrument or
document furnished pursuant hereto or thereto, (ii) such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any of its Subsidiaries or the
performance or observance by the Borrower or any of its Subsidiaries of their
respective obligations under this Agreement, or any Ancillary Agreement or of
any other instrument or document furnished pursuant hereto or thereto, (iii)
such assignee confirms that it has received a copy of this Agreement and each
Ancillary Agreement, together with copies of the financial statements referred
to in Section 4.07 and the most recent financial statements delivered to the
Lenders pursuant to Sections 5.04(a) and 5.04(b) of this Agreement and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance, (iv)
such assignee will, independently and without reliance upon such assigning
Lender or any other Lender or the Agent and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement or any
Ancillary Agreement, (v) such assignee confirms that it is an Eligible Assignee,
(vi) such assignee appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement and the
Ancillary Agreements as are delegated to the Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto, and
(vii) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement and the Ancillary
Agreements are required to be performed by it as a Lender.
(c) REGISTER. The Agent shall maintain at its address referred to in
Section 10.07 a copy of each Assignment and Acceptance delivered to and accepted
by it and by the Borrower and a register for the recordation of the names and
addresses of the Lenders and the Commitments of, and principal amount of the
Loans and Unpaid Reimbursement Obligations owing to, each Lender and the Maximum
Drawing Amount from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower, the Agent or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) EFFECTIVENESS. Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee, together with the Notes subject
to such assignment and a $3,500 recordation fee for the account of the Agent,
the Agent shall, if such Assignment and Acceptance has been completed and if
such assignee is reasonably acceptable to the Agent, promptly forward a
counterpart thereof to the Borrower. The Borrower shall, within five Business
Days after receipt thereof from the Agent, return said counterpart, duly
executed by the Borrower, to the Agent (which shall thereupon accept such
Assignment and Acceptance, and record the information contained therein in the
Register) together with one or more new Notes executed by the Borrower to the
order of such assignee in the principal amount equal to the portion of the Loans
assumed by it pursuant to such Assignment and Acceptance and, if the assigning
Lender has assigned less than all of its Loans hereunder, one or more new Notes
to the order of the assigning Lender in the principal amount equal to the
Commitments retained by it hereunder. Such new Notes shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of EXHIBIT B-1 or EXHIBIT B-2 attached hereto, as
appropriate.
(e) EXEMPTION FROM WITHHOLDING. If any assignee is entitled to a total
or partial exemption from withholding that is required to be evidenced by United
States Internal Revenue Service Form 1001 or Form 4224 or any successor or
additional form, such assignee shall, contemporaneously with such Person
becoming a party hereto, deliver to the Agent and the Borrower such Form 1001 or
Form 4224, as applicable, or any successor or additional form, completed in a
manner reasonably satisfactory to the Agent and the Borrower.
(f) PARTICIPATIONS. Each Lender may sell participations to one or more
lenders or other entities in or to all or a portion of its rights and
obligations under this Agreement and the Ancillary Agreements (including,
without limitation, all or a portion of its Commitment, the Loans owing to it
and the Notes held by it); PROVIDED, HOWEVER, that each such participation shall
in no event be less than $5,000,000 and, if in excess of $5,000,000, shall be in
integral multiples of $1,000,000 in excess thereof. The terms of such
participation shall not, in any event, require the participant's consent for any
amendments, waivers or other modifications of any provision of this Agreement or
any Ancillary Agreement, the consent to any departure by the Borrower or any of
its Subsidiaries therefrom, or to exercise or refrain from exercising any powers
or rights which such Lender may have under or in respect of this Agreement or
the Ancillary Agreements (including, without limitation, the right to enforce
the obligations of the Borrower or any of its Subsidiaries), except in
connection with any such actions requiring the consent of all the Lenders in
accordance with Section 10.01. In the event of the sale of any participation by
any Lender, (i) such Lender's obligations under this Agreement and the Ancillary
Agreements (including, without limitation, its Commitment) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of its Notes for all purposes of this Agreement, (iv) such Lender
shall disclose to the Borrower and to the Agent the identity of each lender or
other entity purchasing a participation within a reasonable time after the sale
and purchase of such participation, and (v) the Borrower, the Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement.
(g) NO INCREASE IN TAXES. Anything herein to the contrary
notwithstanding, the Borrower shall not without its prior written consent, at
any time, be obligated to pay to any assignee or participant of any interest of
any Lender hereunder, under Section 2.18, any sum in excess of the sum which the
Borrower would have been obligated to pay to such Lender in respect of such
interest had such assignment not been effected or had such participation not
been sold.
(h) DISCLOSURE. Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.02, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower or any of its Subsidiaries
furnished to such Lender by or on behalf of the Borrower; PROVIDED, HOWEVER,
that prior to any such disclosure, the assignee or participant or proposed
assignee or participant shall agree to preserve the confidentiality of any
confidential information relating to the Borrower or any of its Subsidiaries
received by it from such Lender.
(i) ASSIGNMENT BY BORROWER. In no event may the Borrower assign or
transfer any of its rights or obligations under this Agreement without the
written consent of each Lender and the Agent, and any such purported assignment
shall be void and of no force or effect. Subject to the foregoing provisions of
this Section 10.02, this Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agent, the Co-Agents, and any future
holders of the Notes and their respective successors and permitted assigns.
(j) PLEDGE TO FEDERAL RESERVE LENDERS. Anything contained in this
Section 10.02 to the contrary notwithstanding, any Lender may at any time pledge
all or any portion of its interest and rights under this Agreement (including
all or any portion of its Notes) to any Federal Reserve Bank organized underss.4
of the Federal Reserve Act, 12 U.S.C.ss.341. No such pledge or the enforcement
thereof shall release the pledgor Lender from its obligations hereunder or under
any of the Ancillary Agreements.
10.03. COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts each of
which shall be deemed an original and all of said counterparts, when taken
together, shall be deemed to constitute one and the same instrument.
10.04. GOVERNING LAW; CONSENT TO JURISDICTION; SERVICE OF PROCESS.
(a) 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 INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
(b) THE BORROWER CONSENTS TO THE JURISDICTION IN ANY OF THE FEDERAL OR
STATE COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS IN CONNECTION WITH ANY
SUIT TO ENFORCE THE RIGHTS OF THE LENDERS, THE AGENT, AND THE CO-AGENTS UNDER
THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS.
(c) The Borrower irrevocably consents to the service of process of any
of the aforesaid courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Borrower
at its address provided herein. Nothing contained in this Section 10.04 shall
affect the right of the Agent, any Lender or any holder of a Note to serve
process in any other manner permitted by law or commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction.
10.05. ADJUSTMENTS; RIGHTS OF SETOFF.
(a) Upon (i) the occurrence and during the continuance of any Event of
Default and (ii) if applicable, the making of the request specified by Section
8.01(a) to authorize the Agent to declare the Notes due and payable pursuant to
the provisions of Section 8.01(a), each Lender and the Agent is hereby
authorized, after prior written notice to, and confirmation of receipt thereof
from, the Agent, at any time and from time to time, to the fullest 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, and other indebtedness
at any time owing by such Lender or the Agent, as the case may be, to or for the
credit or the account of the Borrower against any and all of the Obligations of
the Borrower now or hereafter existing, irrespective of whether or not such
Lender shall have made any demand under this Agreement or such Note and although
such Obligations may be unmatured. Each Lender and the Agent agrees promptly to
notify the Borrower after any such setoff and application made by such Lender or
the Agent, as the case may be; PROVIDED, HOWEVER, that the failure to give such
notice to the Borrower shall not affect the validity of such setoff and
application. The rights of each Lender and the Agent under this Section 10.05(a)
are in addition to, and not in limitation of, the other rights and remedies
(including, without limitation, other rights of setoff) which such Lender may
have.
(b) If any Lender shall be entitled to exercise a right of setoff
against any of the Obligations of the Borrower to such Lender, and such Lender
shall decide to exercise such right of setoff, the proceeds of such setoff shall
be applied ratably, first, among the Lenders in accordance with their respective
Credit Facility Percentages, and second, for each Lender, ratably among such
Lender's Facility A Loans and Facility B Loans. Nothing contained in this
Section 10.05(b) shall be deemed to require any Lender to exercise a right of
setoff; PROVIDED, HOWEVER, that any Lender which maintains, whether or not at
the request of the Agent, a lock box arrangement or cash management facility for
the Borrower, may charge back against that account or against any other account
maintained by the Borrower, with that Lender, the amount of any item with
respect to which a right of immediate withdrawal has been given to the Borrower
or funds have been transmitted to any concentration account maintained by the
Agent and which are returned uncollected for any reason, and such charge back
shall not be considered a setoff subject to the provisions of this Section
10.05(b) requiring any sharing of the benefits thereof with any of the other
Lenders.
10.06. CONFLICT OF TERMS. Except as otherwise provided in this
Agreement, and except as otherwise provided in any of the Ancillary Agreements
by specific reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement is in conflict with, or inconsistent with,
any provision in any of the Ancillary Agreements, the provision contained in
this Agreement shall govern and control.
10.07. NOTICES. Except as otherwise provided herein, all notices, and
other communications made or required to be given under this Agreement or under
the Notes shall be in writing and shall be delivered by hand, mailed by
first-class mail (registered or certified, return receipt requested), or sent by
telex, telecopy or overnight air courier guaranteeing next day delivery,
addressed as follows:
If to the Borrower:
Tosco Corporation
72 Cummings Point Road
Stamford, Connecticut 06902
Telecopy No.: (203) 964-3187
Attn: Jefferson F. Allen, Executive Vice
President and Chief Financial Officer
with a copy to:
Wilkes McClave III, Esq.
Senior Vice President and General Counsel
at the address set forth above for the Borrower
If to the Agent:
BankBoston, N.A.
Energy & Utilities Division
100 Federal Street, 01-08-04
Boston, Massachusetts 02110
Telecopy No.: (617) 434-3652
Attn: Christopher C. Holmgren, Director
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Telecopy No.: (617) 951-8736
Attn: Sula R. Fiszman, Esq.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if telecopied, sent by telex, or delivered
by hand to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer, (ii) if sent by overnight courier,
the next Business Day after the date mailed, and (iii) if sent by registered or
certified first-class mail, three Business Days after the date mailed.
10.08. SECTION TITLES. The captions in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
10.09. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate 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.
10.10. MAXIMUM INTEREST.
(a) Anything to the contrary notwithstanding contained in this
Agreement or the Notes, the parties hereto agree and intend that the Lenders
shall not charge, take or receive, and the Borrower shall not be obligated to
make any payment to or for the account of any Lender, of interest on Unpaid
Reimbursement Obligations and the Loans made under this Agreement and evidenced
by the Notes in excess of the maximum rate from time to time permitted by
applicable law, and, if the amount of interest otherwise payable hereunder would
exceed the maximum amount permitted, the amount so payable shall be
automatically reduced to such maximum permissible amount. The provisions of this
Section 10.10(a) are not intended (i) to limit, and any Lender shall be entitled
to charge, take or receive, the maximum rate of interest which may be charged,
taken or received by such Lender if under the law applicable to it, it may
charge, take or receive interest at a higher rate, or (ii) to make the criminal
laws of any jurisdiction applicable in circumstances in which they would not
otherwise apply.
(b) If the amount of interest payable for the account of any Lender,
in respect of any interest computation period, is reduced pursuant to Section
10.10(a) hereof, and the amount of interest payable for its account in respect
of any subsequent interest computation period would be less than the maximum
amount permitted by applicable law to be charged by such Lender, then the amount
of interest payable for its account in respect of such subsequent interest
computation period shall be automatically increased to such maximum permissible
amount; PROVIDED, HOWEVER, that at no time shall the aggregate amount by which
interest paid for the account of such Lender has been increased pursuant to this
Section 10.10(b) exceed the aggregate amount by which interest paid for its
account has theretofore been reduced pursuant to Section 10.10(a) hereof.
10.11. COSTS; EXPENSES; INDEMNITIES.
(a) The Borrower agrees to pay on demand all costs and expenses of the
Agent in connection with the preparation, negotiation, execution, delivery,
administration, modification and amendment of this Agreement, each of the other
Ancillary Agreements and the other documents to be delivered hereunder and
thereunder, including, without limitation, (i) the reasonable fees and
out-of-pocket expenses of counsel to the Agent, with respect thereto and with
respect to advising the Agent as to its rights and responsibilities under this
Agreement and the Ancillary Agreements and (ii) audit and other professionals'
(which professionals may be employees of the Agent) costs and expenses. The
Borrower agrees to pay on demand all costs and expenses of the Agent and the
Lenders (including, without limitation, reasonable counsel fees, disbursements
and expenses and the allocated costs of in-house counsel), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement, the Ancillary Agreements and the other documents to be
delivered hereunder and thereunder.
(b) The Borrower agrees to indemnify and hold harmless the Agent, the
Co-Agents and each Lender and their respective Affiliates, directors, officers,
employees, agents and advisors from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and disbursements of counsel, including
those incurred upon any appeal and the allocated costs of in-house counsel)
which may be instituted or asserted against or incurred by the Agent, any
Co-Agent or such Lender as a result of its having entered into this Agreement or
any of the Ancillary Agreements or having extended credit hereunder; PROVIDED,
HOWEVER, that the Borrower shall not be liable for such indemnification to such
indemnified Person to the extent that any such suit, action, proceeding, claim,
damage, loss, liability or expense results from such indemnified Person's gross
negligence or willful misconduct.
ARTICLE XI. TRANSITIONAL ARRANGEMENTS
11.01. EXISTING CREDIT AGREEMENT SUPERSEDED. Upon the effectiveness of
this Agreement, this Agreement shall supersede the Existing Credit Agreement in
its entirety, except as provided in this Article XI. As of the Closing Date, the
rights and obligations of the parties under the Existing Credit Agreement and
the "Notes" as defined in the Existing Credit Agreement shall be subsumed within
and be governed by this Agreement and the Notes, and each of the "Loans" as
defined in the Existing Credit Agreement (other than unpaid reimbursement
obligations relating to letters of credit under the Existing Credit Facility,
which shall be treated as overdue Unpaid Reimbursement Obligations hereunder)
advanced by the Lenders and outstanding under the Existing Credit Agreement on
the Closing Date shall, for purposes of this Agreement, be Loans, and shall bear
interest at (x) if such Loans are Eurodollar Rate Loans or Federal Funds Rate
Loans, the then applicable Eurodollar Rate or Federal Funds Rate (as the case
may be) PLUS, in each case, the Applicable Margin calculated pursuant to the
terms of this Agreement or (y) if such Loans are Base Rate Loans, at the Base
Rate PLUS the Applicable Margin calculated pursuant to the terms of this
Agreement; and each "Letter of Credit" (as defined in the Existing Credit
Agreement) outstanding under the Existing Credit Agreement on the Closing Date
shall, for purposes of this Agreement, be a Letter of Credit. Unpaid interest
with respect to Loans outstanding under the Existing Credit Agreement shall be
paid on the Closing Date. The promissory notes outstanding under the Existing
Credit Agreement shall be reissued as Notes hereunder.
11.02. FEES UNDER EXISTING CREDIT AGREEMENT. All interest, commitment
fees, and other fees and expenses owing or accruing under or in respect of the
Existing Credit Agreement (including, without limitation, any breakage fees
payable pursuant to Section 2.20 of the Existing Credit Agreement) shall be
calculated as of the Closing Date and paid by the Borrower to the Agent for the
accounts of the Agent and/or the "Banks" under, and as defined in, the Existing
Credit Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as an
Agreement under seal as of the day and year first above written.
TOSCO CORPORATION
By:
-----------------------------
Title:
BANKBOSTON, N.A., individually
and as Administrative Agent
By:
-----------------------------
Title:
ROYAL BANK OF CANADA, individually
and as Syndication Agent
By:
------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION,
individually and as Documentation Agent
By:
-------------------------------
Title:
THIS AGREEMENT made as of the 26th day of January, 2000, by and between Tosco
Corporation, a Nevada corporation ("TOSCO"), and Thomas D. O'Malley (the
"Executive").
W I T N E S S E T H:
--------------------
WHEREAS, the Executive is a key employee of Tosco; and
WHEREAS, Tosco deems it important and appropriate to assure to itself
the continued availability of certain services and assistance of Executive; and
WHEREAS, Executive is willing to perform certain services for, and to
make certain information available to, Tosco as Tosco may request, provided
Executive is appropriately compensated in the event his employment by Tosco
terminates.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, Tosco and the Executive agree as follows:
1. If during the term of this Agreement:
(a) Executive's employment with Tosco terminates, the Executive
shall be entitled to the benefits provided in Section 3(a) hereof, unless such
termination is (i) due to Executive's death or Disability (as hereinafter
defined), (ii) by Tosco for Cause (as hereinafter defined) or (iii) by the
Executive other than for Good Reason (as hereinafter defined);
(b) a Change of Control takes place, the provisions of Section
3(b) shall control in lieu of the provisions of Section l(a) above.
2. When used in this Agreement:
(a) "Cause" shall mean the material and intentional failure by
the Executive to substantially perform his duties as an employee of Tosco (other
than by reason of Disability or for Good Reason) after a written demand for
substantial performance is delivered to the Executive by the Board of Directors,
which demand specifically identifies such failure and provides a reasonable time
in which to perform; actual (as distinguished from statutory) fraud; intentional
misappropriation of material property of Tosco to the Executive's own use;
embezzlement of material property from Tosco; or substantial damage to property
of Tosco which property is material to Tosco's operations and which damage
results from an action by the Executive which intentionally causes such damage.
The burden of proving Cause shall be on Tosco. It is specifically agreed that
Cause shall not include any act of commission or omission by the Executive in
the exercise of the Executive's business judgment as an employee of Tosco or as
a member of the Board of Directors of Tosco.
(b) "Disability" shall mean Executive's incapacity due to
physical or mental illness resulting in his absence from full-time performance
of his functions for a period in excess of six (6) consecutive months.
(c) "Good Reason" shall mean, without Executive's express written
consent, any of the following:
(i) the assignment of Executive of duties inconsistent with
or of a lesser nature than his present position or a significant
reduction in the nature of Executive's responsibility;
(ii) a reduction in the fixed elements, or change in the
method of calculation of the variable elements that would reduce
the amount receivable, of the Executive's annual compensation;
(iii) the relocation of Executive's office to a location
more than 50 miles from the area where such offices are presently
located; or
(iv) Tosco shall have given notice pursuant to Section 6
hereof that it does not wish to extend the term of this
Agreement.
In the event Executive has attained the age of 55 years and terminates his
employment with Tosco, such voluntary termination of employment by Employee
shall be deemed, for purposes of this Agreement, to be termination for "Good
Reason", provided Executive agrees in writing to provide to Tosco at no further
expense to Tosco (except for payment of reasonable expenses), as Tosco may
reasonably request from time-to-time, information with respect to, or of a
similar nature to, Executive's duties at Tosco.
3. (a) Following the termination of the Executive's employment as
provided in Section 1(a) hereof, Tosco shall pay to the Executive a lump sum
severance payment (the "Lump Sum Severance Payment"), no later than five (5)
days after such termination, in an amount equal to thirty-six (36) months
multiplied by his monthly base salary then in effect [but not reduced by any
amount that could have constituted "Good Cause" under Sec. 2(c)ii], exclusive
of any bonuses.
(b) In the event Executive's employment with Tosco terminates in
conjunction with or following a change of control, Tosco shall pay to the
Executive a lump sum severance payment (the "Lump Sum Severance Payment"), no
later than five (5) days after such termination, in an amount equal the amount
set forth in 3(a) above plus three (3.0) times the annual average of Executive's
bonuses attributable to the two calendar years preceding termination.
(c) In the event that the employment of the Executive by Tosco is
terminated by reason of the provisions of paragraph 1(a) hereof, or if there has
been a Change of Control, all options or shares of stock which have been granted
or issued to the Executive by Tosco which are not vested or are subject to
restrictions at the time of termination shall vest immediately upon such
termination in the event of a termination pursuant to paragraph l(a) hereof, or
upon the date of Change of Control in the event of a Change in Control, and such
restrictions shall lapse. The amounts to be received by the Executive pursuant
to clauses (a) or (b) of this Section 3 and options and shares which become
vested pursuant to the provisions of this Section 3(c) are collectively referred
to herein as the "Total Severance Payments".
(d) If the Executive shall resort to any action or proceeding to
recover any amount from Tosco which Tosco has failed to pay as provided in this
Section 3 and the Executive shall be awarded any amounts in any such action or
proceeding, Tosco shall promptly pay and reimburse to the Executive all of the
costs and expenses (including attorneys' fees) incurred by the Executive in and
with respect to such action or proceeding.
(e) For the purposes of this Agreement, "Change of Control" shall
be deemed to have occurred if:
(i) any "person" or "group" (as defined in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than fifty percent (50%) of Common Stock of
Tosco. Common Stock of Tosco shall be computed on a fully diluted
basis and shall include the outstanding common stock par value of
$.75 per share of Tosco and all shares of common stock of Tosco
underlying outstanding convertible securities and warrants of
Tosco; or
(ii) the stockholders of Tosco approve (A) a merger or
consolidation of Tosco with any other corporation except a merger
or consolidation (an "Acquisition Transaction") which would
result in the voting securities of Tosco publicly outstanding
immediately prior thereto continuing to represent fifty percent
(50%) or more of the combined publicly traded voting power of the
voting securities of Tosco or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a plan of
complete liquidation of Tosco or (C) the sale or disposition by
Tosco, directly or indirectly, of the Avon Refinery or a
substantial portion of its assets; or
(iii) there is a change in the composition of the Board of
Directors of Tosco by other than the individuals who constitute
the Board of Directors on the date hereof (the "Incumbent Board")
and individuals elected or nominated by a vote of the Board
constituting at least one person more than one-half of the
Incumbent Board (which individuals shall then be considered the
Incumbent Board) so that the Incumbent Board shall not constitute
a majority of the Board of Directors of Tosco after such
transaction.
4. Notwithstanding anything to the contrary, in the event that any
payment or benefit received or to be received by the Executive in connection
with the termination of his employment whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with Tosco (collectively
with his Total Severance Payments herein called ("Total Payments"), would not be
deductible, in whole or part, as a result of Section 280G of the Internal
Revenue Code of 1986, as hereafter amended (the "Code"), by Tosco, the Total
Severance Payments or Total Payments shall not be reduced. In the event
Executive is subject to an excise tax or penalty tax as a result of the receipt
of Total Severance Payments or Total Payments ("Excise Tax"), Tosco shall pay an
additional amount to Executive such that the net amount realized by Executive
after payment of any Excise Tax shall be equal to the amount Executive would
have realized, after tax, in the absence of such Excise Tax.
5. The Executive shall not be required to mitigate the amount of any
payment provided for in Section 3 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in Section 3 be reduced
by any compensation earned by the Executive as the result of the employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by Executive to Tosco or otherwise.
6. This Agreement shall commence on the date hereof and shall continue
in effect for one (1) year from the date hereof; provided, however, that
commencing on the anniversary of this Agreement and each anniversary thereafter,
this Agreement shall automatically be extended for one additional year, unless
not later than six months prior to any anniversary, Tosco shall have given
notice to the Executive that it does not wish to extend this Agreement.
7. The terms of this Agreement shall supersede and replace any
employment or severance agreement which the Executive may have with Tosco or
and upon execution of this Agreement any such other employment agreement shall
be terminated and of no further force or effect. Nothing in this Agreement shall
be construed to be a commitment or guarantee of future employment with Tosco.
8. (i) Tosco will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Tosco to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that Tosco would be
required to perform it if no such succession had taken place. Failure of Tosco
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation from Tosco in the same amount and on the same terms to which the
Executive would be entitled hereunder if the Executive terminates his employment
for Good Reason upon a Change of Control.
(ii) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would still be payable to him hereunder if he had continued
to live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee
or other designee or, if there is no such designee, to his estate.
9. 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 personally delivered or when mailed by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, 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:
To the Corporation: Tosco Corporation
72 Cummings Point Road
Stamford, CT 06902
To the Executive: Thomas D. O'Malley
Horse Island
Mead Point
Greenwich, CT 06830
10. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Connecticut without
regard to its conflicts of law principles. All references to sections of the
code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of Tosco
under Section 3 shall survive the expiration of the term of this Agreement.
11. Subject to the last sentence of this Section 11, after the date
hereof the Executive shall not become a member of the board of directors of or
perform a similar function with any other entity without the prior approval of
the Tosco Committee on Audit, Ethics, and Conflicts of Interest, which approval
shall not be unreasonably withheld. In the event that such approval is given,
the Executive confirms that the performance of his duties and obligations as an
employee of Tosco shall not be interfered with by his obligations to such other
board of directors or entity. In no case shall the Executive assume any position
with any entity which-shall violate the Conflicts of Interest policy of Tosco (a
copy of which has been received) or cause the Executive to divulge any
confidential information relating to Tosco or any affiliated entity. Approval of
the Committee on Audit, Ethics, and Conflicts of Interest shall not be required
for the Executive to become a member of the board of directors of, or perform a
similar function with, family, small private, non-profit, civic, or charitable
entities.
12. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
14. This Agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and supersedes all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officers,
employee or representative of any party hereof; and any prior agreement of the
parties hereto in respect of the subject matter contained herein is hereby
terminated and canceled.
15. Any controversy or claim arising out of or relating to this
Agreement, the interpretation thereof, or the breach therefor, shall be
submitted to arbitration and such arbitration shall follow the provisions of
Connecticut law governing arbitration.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
TOSCO CORPORATION
By:
-------------------------------- -------------------
Chairman, Compensation Committee President
- -----------------------------------
Thomas D. O'Malley
Executive
SCHEDULE OF SIMILAR AGREEMENTS
Jefferson F. Allen
Wilkes McClave
Exhibit 10(h)
SUPPLEMENTAL AGREEMENT TO AGREEMENT OF PURCHASE, SALE AND
ASSIGNMENT OF MARKETING ASSETS
THIS SUPPLEMENTAL AGREEMENT TO AGREEMENT OF PURCHASE, SALE AND ASSIGNMENT OF
MARKETING ASSETS (this "Supplemental Agreement") is made and entered into as of
this of 1st of December, 1999, (the "Effective Date") between EXXON MOBIL
CORPORATION, a New Jersey corporation, f/k/a Exxon Corporation ("Seller"), and
TOSCO CORPORATION, a Nevada corporation ("Purchaser") upon the terms and
conditions set forth herein. When provisions herein apply to both or either
Seller and Purchaser, they sometimes are referred to as "Parties" or "Party."
RECITALS
Purchaser has executed an Agreement of Purchase, Sale and Assignment of
Marketing Assets (the "Agreement of Purchase and Sale"), wherein Purchaser
agreed to purchase certain assets of Seller in connection with Seller's retail
marketing operations in the States of Maine, New Hampshire, Vermont,
Massachusetts, Connecticut, Rhode Island and New York (the " Identified Areas").
The Agreement of Purchase and Sale contemplated that Seller and Purchaser would
agree at a later date as to the form and content of certain Exhibits attached to
the Agreement of Purchase and Sale. Seller has preliminarily prepared the
Exhibits to be attached to the Agreement of Purchase and Sale and desires to
have Purchaser acknowledge the Exhibits prepared by Seller.
In addition, Exxon Corporation and Mobil Corporation have further negotiated the
Consent Decree and consequently certain provisions of the Agreement of Purchase
and Sale need to be supplemented in order to comply with the terms of the
Consent Decree.
NOW THEREFORE, in consideration of the Recitals and for other good and valuable
consideration, the receipt and sufficiency of which hereby are mutually
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
TERMS AND CONDITIONS
1. DEFINITIONS. All capitalized terms used in this Supplemental Agreement
without definition shall have the same meaning as set forth in the Agreement of
Purchase and Sale. From and after the date of this Supplemental Agreement, any
reference in the Agreement of Purchase and Sale to "this Agreement" shall refer
to the Agreement of Purchase and Sale, as supplemented by this Supplemental
Agreement.
2. EXHIBITS.
A. EXHIBITS TO AGREEMENT OF PURCHASE AND SALE. Attached to this
Supplemental Agreement are the following Exhibits to the Agreement of Purchase
and Sale: Exhibit "A" - Properties; Exhibit "B" - Fee & Lease Dealers; Exhibit
"C" - Contract Dealers, Loan Balances and Value of Seller-owned Equipment;
Exhibit "D" - Distributors Subject to Distributor Sales Agreements; Exhibit "E"
- - Distributors' Loan Balances; Exhibit "F" -Independent Contractor Agreements;
and Ground Leases; and Exhibit "0" - Pending and Threatened Litigation. The
Parties agree that the foregoing Exhibits shall be deemed attached to the
Agreement of Purchase and Sale as if the same were set forth in such agreement
when executed.
B. CHANGES IN THE EXHIBITS. The Parties agree and acknowledge that the
Exhibits currently prepared by Seller represents Seller's best knowledge. The
Parties further acknowledge and agree that between the date of this Supplemental
Agreement and the Closing Date some of the Exhibits attached to the Agreement of
Purchase and Sale as described in Section 2(A) of this Supplemental Agreement
may change. The Parties agree that in the event the Exhibits are changed, then
the Purchase Price will be further adjusted pursuant to Subsection 4(B) of this
Supplemental Agreement.
3. TRANSFER, SALE AND ASSIGNMENT BY SELLER. In addition to the transfers
contemplated by Article I of the Agreement of Purchase and Sale, on the Closing
Date, Seller will assign to Purchaser, and Purchaser shall assume the assignment
of and accept Seller's obligations under the "Veeder Root Agreements" described
in Section 6.
4. PURCHASE PRICE.
A. SUPPLEMENT TO PURCHASE PRICE. The Parties agree that the "Purchase
Price" as defined under the Agreement of Purchase and Sale shall be TWO HUNDRED
AND TWENTY-FIVE MILLION DOLLARS ($225,000,000) from and after the date of this
Supplemental Agreement and for all purposes under the Agreement of Purchase and
Sale, as supplemented by this Supplemental Agreement, the Purchase Price shall
be as set forth in this Section 4.
B. ADJUSTMENTS TO PURCHASE PRICE. In the event that at any time prior
to the Closing, Seller and/or Purchaser discover that there is a change in the
Exhibits due to identification supplemental properties which were operating
service station properties in the Identified Areas on the Effective Date and
which were intended to be sold to Purchaser under the Agreement of Purchase and
Sale or properties listed on the Exhibits were not operating service station
properties in the Identified Areas on the Effective Date, then such supplemental
properties shall be included or excluded, as the case may be, in the
transactions contemplated by the Agreement of Purchase and Sale, as supplemented
by this Supplemental Agreement and the Purchase Price shall be adjusted by
agreement of the Parties based on the fair market value of the properties being
included or excluded, as determined by negotiations in good faith between the
Parties or, failing agreement, as determined by an impartial appraisal.
5. BRANDED MARKETER AGREEMENT. The first paragraph and the table immediately
following the first paragraph of sub-section 3(b) of the Motor Fuel Product
Schedule to the Branded Marketer Agreement, Exhibit H of the Agreement of
Purchase and Sale, are amended to read as follows:
"(b) Beginning on the fifth anniversary of the effective date of the
Agreement and thereafter, the price to be paid by Buyer shall be (i) the same
price paid to Buyer by Seller for the motor fuel pursuant to the Purchase
Agreement, plus (ii) subject to adjustment as provided in section 3(c) below,
the Supplemental Charge, plus (iii) an additional fee shown in the table below
(hereinafter the "Additional Fee"). The Additional Fee for sales made during any
contract year is shown to the right of the corresponding contract year in the
table below.
"CONTRACT YEAR ADDITIONAL FEE PER GALLON
"6th *
"7th *
"8th *
"9th *
"10th *
The following sentence is added as a new final paragraph to
sub-section 3(c) of the Motor Fuel Product Schedule to the Branded Marketer
Agreement, Exhibit H of the Agreement:
"Notwithstanding anything in this Agreement to the contrary, if the
annual adjustment to the Supplemental Charge would raise the sum of
the Supplemental Charge plus the Additional Fee, if any, to more than
*________________, then the sum of the adjusted Supplemental Charge
plus the Additional Fee, if any, shall be deemed to be *____________."
* This information is confidential and has been omitted and separately filed
with the Securities and Exchange Commission.
6. SUPPLEMENTAL CLOSING CONDITIONS.
A. SUPPLEMENTAL CLOSING DOCUMENTS. At the Closing, Seller shall
deliver the following supplemental documents:
(1) Assignment of the "Veeder Root Agreements" (as defined in
Section 7), all in form and substance satisfactory to
Purchaser and Seller.
7. EQUIPMENT LEASES. Certain leak detection equipment located on the Properties
listed on Exhibit "I-A" has been leased by Seller from Veeder Root or its
affiliates. Seller has entered into a monitoring services agreement with Veeder
Root or its affiliates for such equipment, whereby Seller will own the equipment
at the end of ten years if Seller continues to use the monitoring services of
Veeder Root or its affiliates. Seller shall assign all agreements (the "Veeder
Root Agreements") related to the equipment to the Purchaser at the Closing and
Purchaser shall assume all obligations of Seller under those agreements as of
the Closing.
8. CONDITIONS PRECEDENT. THE first sentence of Section 11.1 of the Agreement of
Purchase and Sale is hereby deleted and the following is inserted in lieu
thereof: "Purchaser understands and acknowledges that this Agreement and the
consummation of the transactions contemplated by this Agreement are subject to
and conditioned upon Seller obtaining approval from the FTC of this Agreement,
the transactions contemplated by this Agreement and the Purchaser pursuant to:
the Consent Decree and the favorable exercise of the approval rights of the
Attorney Generals of the States of Pennsylvania, New Jersey, Maryland, Delaware,
Virginia and the District of Columbia pursuant to the consent decree executed on
behalf of each of those States and the District of Columbia". In addition, as a
supplement to the conditions precedent set forth in Article XI of the Agreement
of Purchase and Sale, Purchaser acknowledges and understands that the Agreement
of Purchase and Sale, as supplemented by this Supplemental Agreement, and the
consummation of the transactions contemplated by the Agreement of Purchase and
Sale, as supplemented by this Supplemental Agreement, are subject to (i) the
final acceptance of the Consent Decree and (ii) no injunction having been issued
by a court of competent jurisdiction and remaining in effect at the time of the
Closing prohibiting the transactions contemplated by the Agreement of Purchase
and Sale, as supplemented by this Supplemental Agreement.
9. TANK TESTING. As a supplemental to Section 7.2 of the Agreement of Purchase
and Sale, Purchaser acknowledges that Seller has installed at certain Properties
Veeder Root systems or other equivalent systems to monitor the underground tanks
and lines at such Properties and that Seller desires to deliver to Purchaser the
results of such monitoring systems in lieu of the tank testing described in
Section 7.2 of the Agreement of Purchase and Sale. Purchaser and Seller agree to
discuss in good faith whether the monitoring systems described above are
sufficient for determining the tightness of the tanks and lines and whether the
tightness tests described in such Section 7.2 are necessary.
10. RIGHT OF FIRST REFUSAL. The Parties acknowledge that one of the Supplemental
Properties is currently subject to a right of first refusal granted to the
tenant at said property. Unless such right is waived by the tenant, the Parties
shall execute a separate purchase agreement for such Supplemental Property
within ten days after the date of this Supplemental Agreement and thereafter,
Seller shall offer the tenant a right of first refusal to purchase the
Supplemental Property. In the event the tenant exercises the right of first
refusal, the Purchase Price shall be adjusted accordingly.
11. ROLLING STOCK. Seller shall offer to sell to Purchaser the rolling stock
used to serve the retail stations in the Identified Areas as set forth in
information previously provided to Purchaser and in the event Purchaser elects
to purchase the rolling stock and Seller accepts Purchaser's offer, the Purchase
Price shall be adjusted accordingly.
12. MISCELLANEOUS.
A. CONSTRUCTION. Words of any gender used in this Supplemental
Agreement shall be construed to include any other gender, and words in the
singular number shall include the plural, and vice versa, unless the context
requires otherwise.
B. CAPTIONS. The captions used in connection with the Articles and
Sections of this Supplemental Agreement are for convenience only and shall not
be deemed to enlarge, limit or otherwise modify the meaning or interpretation of
the language of this Supplemental Agreement. Any references to "Sections",
"Subsections" and "Exhibits" are to Sections, Subsections, Exhibits, Riders and
Addenda of this Supplemental Agreement.
C. SURVIVAL. The provisions of Sections 3,4,5 and 9 shall survive the
Closing of the transaction under this Supplemental Agreement and shall not be
deemed to have merged therewith. All other provisions hereof not included or
incorporated in any document to be executed and delivered on the Closing Date
shall not survive the Closing.
D. COUNTERPARTS. This Supplemental Agreement may be executed by the
Parties in counterparts, each of which shall be deemed an original, but such
counterparts together shall constitute one and the same instrument.
E. GOVERNING LAW. This Supplemental Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to its rules on the conflicts of law. The Parties hereto irrevocably
submit to the exclusive Jurisdiction of the United States District for the
Southern District of New York for all purposes under this Agreement, except for
those matters over which said court does not have subject matter jurisdiction,
in which case the Parties irrevocably submit to the exclusive jurisdiction of
the Supreme Court of New York County, New York.
F. AGREEMENT OF PURCHASE AND SALE. Notwithstanding the duplication in
this Supplemental Agreement of any of the terms and provisions of Article XXII
of the Agreement of Purchase and Sale, all of the terms and provisions of
Article XXII of the Agreement and Sale shall be deemed incorporated into this
Supplemental Agreement to the extent applicable as if the same were set forth in
this Supplemental Agreement in its entirety. Except as supplemented by the terms
and provisions of this Supplemental Agreement, the terms and provisions of the
Agreement of Purchase and Sale shall remain in full force and effect.
IN WITNESS WHEREOF, this Supplemental Agreement has been executed by Seller and
Purchaser on the dates set forth below.
EXXON MOBIL CORPORATION TOSCO CORPORATION
a New York corporation a Nevada corporation
By:_________________________ By:___________________
Name:_______________________ Name:_________________
Title:______________________ Title:________________
Date: ______________________ Date:_________________
AGREEMENT OF PURCHASE, SALE AND
ASSIGNMENT OF MARKETING ASSETS
THIS AGREEMENT OF PURCHASE, SALE AND ASSIGNMENT OF MARKETING ASSETS (this
"Agreement") is made and entered into as of this 1st of December, 1999, (the
"Effective Date") between EXXON CORPORATION, a New Jersey corporation
("Seller"), and TOSCO CORPORATION, a Nevada corporation ("Purchaser"), upon the
terms and conditions set forth herein. When provisions herein apply to both or
either Seller and Purchaser, they sometimes are referred to as "Parties" or
"PARTY."
RECITALS
Seller currently markets its branded fuel products in New York, Connecticut,
Rhode Island, Massachusetts, Vermont, New Hampshire and Maine (the " Identified
States").
In connection with Seller's retail marketing operations, Seller owns in fee
certain operating service stations and leases certain other operating service
station properties in the Identified States, all as more particularly described
in Exhibit "A" (the "Properties"). The Properties consist of fee properties (the
"Fee Properties") and leased properties (the "Leased Properties"). Each of the
Properties is individually referred to in this Agreement as a "Property".
Some of the operating service stations on the Properties are subject to a
"franchise relationship," as that term is defined in the Petroleum Marketing
Practices Act, 15 U.S.C., Section 2801 et seq. ("PMPA"), pursuant to lease or
sublease agreements, franchise agreements, motor fuels sales agreements and
other agreements constituting the franchise relationship (collectively, the "Fee
& Lease Dealer Agreements") entered into between Seller and the dealers on the
Properties listed on Exhibit "B" (the "Fee & Lease Dealers"). Those Properties
subject to Fee & Lease Dealer Agreements are noted on Exhibit "A" (sometimes
referred to herein as the "Fee & Lease Dealer Properties"). The remainder of the
operating service stations on the Properties are company operated stations
(sometimes referred to as the "Company Operated Properties") and are similarly
noted on Exhibit "A".
In addition, as part of its marketing operations in the Identified States,
Seller has entered into various motor fuel supply, franchise and other
agreements constituting the franchise relationship (collectively, the "Contract
Dealer Agreements") with the contract dealers listed on Exhibit "C" ("Contract
Dealers"). Seller has also entered into various distributor agreements and other
agreements constituting the distributor franchise relationship (collectively,
the "Distributor Sales Agreements") between Seller and the distributors listed
on Exhibit "D" (the "Distributors"). The Fee & Lease Dealer Agreements, the
Contract Dealer Agreements and the Distributor Sales Agreements are sometimes
collectively referred to as the "PMPA Franchise Agreements").
Pursuant to a consent decree entered into or to be entered into with the U.S.
Federal Trade Commission ("FTC") in connection with the merger of Exxon
Corporation and Mobil Corporation, (the "Consent Decree"), Seller has agreed to
divest certain assets, including certain contract rights, associated with its
marketing operations in the Identified States and Purchaser is willing to
purchase the same from Seller in accordance with the terms of this Agreement.
This offer to purchase the Properties and other assets and the
assignments herein described may remain open and in full force and effect for a
period in excess of 60 days. The offer is initially binding and irrevocable and
able to be accepted until December 3, 1999 or until five business days after
Exxon Corporation and Mobil Corporation receive consent from the Federal Trade
Commission to their proposed merger, whichever is sooner. If Tosco is selected
as the proposed Purchaser, the offer shall remain open and in full force and
effect for as long as reasonably necessary to successfully complete the buyer
approval process.
NOW THEREFORE, in consideration of the Recitals and for other good and valuable
consideration, the receipt and sufficiency of which hereby are mutually
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
TERMS AND CONDITIONS
ARTICLE I
TRANSFER, SALE AND ASSIGNMENT BY SELLER
1.1 TRANSFER OF FEE PROPERTIES AND LEASED PROPERTIES; EQUIPMENT AND PERSONAL
PROPERTY.
(A). Subject to the provisions of this Agreement, (i) Seller agrees to
sell and convey the Fee Properties to Purchaser and Purchaser
agrees to purchase and pay for the Fee Properties, and (ii)
Seller also agrees to assign its leasehold interests in the
Leased Properties to Purchaser and Purchaser agrees to purchase
and pay for such leasehold interests.
(B). Seller's conveyance and assignment of its interests in the
Properties shall include Seller's interest in: (i) all easements
and rights appurtenant to the Properties, all buildings and
improvements located thereon, and to the extent assignable by
Seller and in effect on the Closing Date (as defined in Section
6.1), all associated licenses, permits, and other forms of
governmental consents, (ii) all of Seller's personal property
located on the Properties as of the Effective Date, except for
some proprietary equipment and software containing proprietary
information; and (iii) subject to the terms of the Distributor
Agreement, the right to use Seller's identification signs,
trademarks, and other trade indicia. The real and personal
property referred to in this Agreement shall not include any
accounts receivable, except those associated with the Contract
Dealer Agreements or the Distributor Sales Agreements referred to
in Sections 1.3 and 1.4 respectively, notes receivable, or cash
assets, all of which property, to the extent owned by Seller,
shall be removed by Seller from the Properties no later than the
Closing Date. Any environmental monitoring wells and remediation
equipment located on the Properties will remain Seller's property
and will not be transferred to Purchaser.
1.2 ASSIGNMENT OF FEE & LEASE DEALER AGREEMENTS. On the Closing Date, Seller
will assign to Purchaser, and Purchaser shall accept the assignment of and
assume Seller's obligations under the Fee & Lease Dealer Agreements with respect
to the Fee & Lease Dealer Properties.
1.3 ASSIGNMENT OF CONTRACT DEALER AGREEMENTS. On the Closing Date, Seller also
will (i) assign to Purchaser the Contract Dealer Agreements with the Contract
Dealers, and (ii) transfer to Purchaser any Seller owned equipment and tanks on
the Contract Dealers' properties and Purchaser shall accept the assignment of
and assume Seller's obligations under the Contract Dealer Agreements and shall
purchase and pay for any Seller owned equipment. On the Closing Date, Seller
will assign to Purchaser all loan agreements and/or reimbursement agreements
between Seller and the Contract Dealers, together with any mortgages and
security interests securing such loans. The current balances of the Contract
Dealers' loans and/or reimbursement agreements and the value of any Seller-owned
equipment and tanks on the Contract Dealer properties are set forth on Exhibit
"C". The Parties acknowledge and agree that the Purchase Price set forth in
Section 3.1 includes payment for certain unamortized balances due Seller by such
Contract Dealers. At least seven (7) days before the Closing Date, Seller will
notify Purchaser of the amounts of the unamortized balances owed by each
Contract Dealer.
1.4 ASSIGNMENT OF DISTRIBUTOR SALES AGREEMENTS. On the Closing Date, Seller will
assign to Purchaser, and Purchaser shall assume the assignment of and accept
Seller's obligations under, the Distributor Sales Agreements. On the Closing
Date, Seller will assign to Purchaser, and Purchaser shall assume the assignment
of and accept the obligations of Seller under, any loan agreements and/or
reimbursement agreements between Seller and the Distributors, together with any
mortgages and security interests securing such loans. The current balances of
the Distributors' loans and/or reimbursement agreements are set forth on Exhibit
"E". The Parties acknowledge and agree that the Purchase Price set forth in
Section 3.1 includes payment for certain unamortized balances due Seller by such
Distributors. At least seven (7) days before the Closing Date, Seller will
notify Purchaser of the amounts of the unamortized balances owed by each
Distributor.
1.5 SALE OF INVENTORY. Seller shall sell, deliver and transfer to Purchaser at
the Closing, and Purchaser shall purchase and pay for, all inventories of: (i)
refined petroleum products in bulk storage owned by Seller on any Property on
the Closing Date; and (ii) convenience store merchandise for resale (not to
include branded lubricants, tires, batteries and accessories) owned by Seller on
any Property on the Closing Date. Seller shall be responsible for determining
the quantities of refined petroleum products to be transferred by it as of the
Closing Date, and Seller shall determine the quantities of all inventories of
convenience store resale merchandise to be sold to Purchaser on the Closing
Date. The Parties acknowledge that the Purchase Price set forth in Section 3.1
includes payment for all inventories of refined petroleum products and
convenience store merchandise and at the Closing, the Parties shall agree on the
value of such inventory.
1.6 ASSIGNMENT OF PERMITS. On the Closing Date, to the extent assignable or
permitted by law, Seller will assign and Purchaser shall accept all operating
permits, including, beer and wine licenses, where applicable, at the Company
Operated Properties.
1.7 INTENTIONALLY OMITTED.
1.8 INDEPENDENT CONTRACTOR AGREEMENTS AND GROUND LEASES. On the Closing Date,
Seller will assign to Purchaser, and Purchaser shall assume the assignment of
and accept Seller's obligations under, Seller's Independent Contractor
Agreements and ground leases for motor fuel facilities at the properties listed
on Exhibit "F".
1.9 ASSIGNMENT OF OPTIONS TO PURCHASE AND RIGHTS OF FIRST REFUSAL. To the
extent that Seller is the holder of any preferential right to purchase any of
the Properties, all such rights will be assigned to Purchaser at the Closing.
1.10 INTENTIONALLY OMITTED.
1.11 ASSIGNMENT OF BRAND PROGRAM AND SERVICE AGREEMENTS. On the Closing Date,
Seller will assign to Purchaser, and Purchaser shall assume the assignment of
and accept Seller's obligations under, all rent abatement agreements, imaging
rebate agreements and other brand program and service agreements with the Fee &
Lease Dealers, the Contract Dealers and the Distributors, as applicable.
ARTICLE II
SUPPLY, DISTRIBUTION AND OTHER AGREEMENTS
2.1 SUPPLY AGREEMENT. At least forty-five (45) days prior to the Closing Date,
Purchaser and Seller will execute a supply agreement in the form of Exhibit "G"
(the "Supply Agreement"), whereby Seller will purchase from Purchaser certain
unbranded fuels products. Purchaser and Seller agree that Exhibit "G" contains
all of the material and significant terms of the Supply Agreement and that prior
to the execution of the Supply Agreement, Seller and Purchaser shall agree in
good faith on certain additional administrative provisions and/or addenda which
are necessary to activate the Supply Agreement and such provisions or addenda
shall become part of the Supply Agreement.
2.2 BRANDED MARKETER AGREEMENT. At least forty-five (45) days prior to the
Closing Date, Seller and Purchaser will execute a branded marketer agreement in
the form of Exhibit "H" (the "Branded Marketer Agreement"). Purchaser and
Seller agree that Exhibit "H" contains all of the material and significant
terms of the Supply Agreement and that prior to the execution of the Branded
Marketer Agreement, Seller and Purchaser shall agree in good faith on certain
additional administrative provisions and/or addenda which are necessary to
activate the Branded Marketer Agreement and such provisions or addenda shall
become part of the Branded Marketer Agreement.
2.3 SERVICES AGREEMENT. For a period of no more than six (6) months from the
Closing Date, Seller will cooperate with Purchaser in providing, if necessary
and upon request, services such as motor fuel order and dispatch services, in
order to allow Purchaser adequate time to implement its own order and dispatch
services. Such services shall consist of the same services, and shall be
performed by Seller in the same manner, as currently provided for Seller's own
use. The Parties shall agree as to the compensation and the manner of payment
for any such services pursuant to the terms of a service agreement to be
executed by Seller and Purchaser at Closing.
ARTICLE III
PURCHASE PRICE
3.1 AMOUNT. The purchase price to be paid by Purchaser for the transfer, sale
and assignment by Seller of the Properties, the Fee & Lease Dealer Agreements,
the Contract Dealer Agreements, the Distributor Sales Agreements and all other
assets, contract rights and personal property described in Article I is
*___________________ ("Purchase Price"). On the Closing Date, Purchaser shall
pay the Purchase Price by wire transfer of immediately available funds to the
account designated by Seller or its assignee. The Purchase Price includes the
inventory of refined petroleum products and convenience store merchandise
referred to in Section 1.5, any construction and zoning permit, the unamortized
balances of loans and/or reimbursement agreements due Seller by the Contract
Dealers referred to in Section 1.3, the unamortized balances of loans and
reimbursement agreements due Seller by the Distributors referred to in Section
1.4 and any Seller-owned equipment and tanks on the Contract Dealer properties.
3.2 EARNEST MONEY DEPOSIT. Within five (5) days after Seller provides Purchaser
notice that Seller desires to accept Purchaser's offer contained in this
Agreement, Purchaser will deliver to the Title Company (as defined in Section
5.2) an irrevocable letter of credit (or similar instrument acceptable to
Seller) drawn on a bank acceptable to Seller and in form and substance
satisfactory to Seller, payable to Seller, in the amount of *_____________
representing an earnest money deposit equal to five percent (5%) of the Purchase
Price (the "Earnest Money Deposit") as consideration for this Agreement. The
Earnest Money Deposit will be deposited with the Title Company pursuant to an
escrow agreement among the Title Company, Seller and Purchaser. The escrow
agreement will provide that the letter of credit may be drawn upon by Seller
upon certification to the Title Company of Purchaser's default under this
Agreement. Seller's notice of its desire to accept this Agreement shall not be
binding on Seller unless and until Purchaser delivers the Earnest Money Deposit
to Seller and Seller executes and delivers this Agreement.
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* Note: If bid is accepted for both packages of assets the aggregate price to
be paid is *___ million and individual packages must be increased to include
the premium of $40 million for both packages. This information is
confidential and has been omitted and separately filed with the Securities
and Exchange Commission.
3.3 VALUATION. The Parties agree that any property valuations established by the
Parties for the Properties are for purposes of (i) establishing an insured
amount for the title insurance commitments and policies; (ii) preparing the
Closing statements and escrow instructions; (iii) preparing affidavits of value
and transfer tax returns; and (iv) calculating recording fees and transfer
taxes, if applicable. Such property valuations are not established necessarily
for tax purposes or for financial or accounting ("book") purposes.
ARTICLE IV
PMPA COMPLIANCE
4.1 ASSIGNMENT AND ASSUMPTION BY PURCHASER. Seller will assign to Purchaser at
the Closing the PMPA Franchise Agreements with each of its existing Fee & Lease
Dealers, Contract Dealers and Distributors identified on Exhibits "B", "C" and
"D". Purchaser will assume all of Seller's rights and obligations under the PMPA
Franchise Agreements and under the PMPA and any other applicable law, as the
same relate to the PMPA Franchise Agreements.
4.2 SELLER'S PMPA INDEMNIFICATION. Seller shall indemnify and hold Purchaser,
its affiliates, agents and employees harmless from and against each and every
loss, cost, claim, obligation, damage, liability, payment, fine, penalty cause
of action, judgment (including expert witness fees and attorneys' fees awarded
to any franchisees as part of a judgment), lien or expense, including, but not
limited to, reasonable attorneys' fees and other litigation expense (a "Claim")
to the extent that any such Claim seeks to invalidate or claim the invalidity of
Seller's assignment of its franchise agreements to Purchaser, unless such Claim
is based on any act or, omission by Purchaser occurring after the Closing Date.
4.3 PURCHASER'S OBLIGATIONS AFTER CLOSING. At an appropriate time prior to the
stated expiration date of each of the PMPA Franchise Agreements assigned by
Seller to Purchaser, Purchaser will, in good faith and in the normal course of
business, offer to each of the franchisees agreements for the supply of branded
motor fuel, unless such franchisee previously has been properly terminated or
nonrenewed for any reason permitted by the PMPA or properly nonrenewed pursuant
to 15 USC 2802(b)(3)(A). Franchise agreements offered by Purchaser to the
franchisees referenced hereunder shall be offered in accordance with PMPA and
shall comply in all respects with all applicable provisions of the PMPA and any
applicable state law.
4.4 PURCHASER'S PMPA INDEMNIFICATION. Purchaser shall indemnify and hold Seller,
its affiliates, agents and employees harmless from and against each and every
Claim of any kind or character which result from, arise out of, or are in any
way related to (i) any termination or nonrenewal by Purchaser of any PMPA
Franchise Agreements assigned by Seller to Purchaser, (ii) Purchaser's offer of
franchise agreements as required in Section 4.3, (iii) Purchaser's failure to
offer franchise agreements as required in Section 4.3, (iv) any claims or causes
of action by any franchisee concerning the terms and conditions of franchise
agreements offered by Purchaser or any action taken by Purchaser, specifically
including any termination or nonrenewal action, under or pursuant to said
franchise agreements, (iv) Purchaser's failure to fulfill its obligations under
this Agreement or the PMPA, and (v) Purchaser's failure to fulfill any
obligations contained in the PMPA Franchise Agreements assigned to Purchaser by
Seller.
4.5 LEGAL FEES. In any lawsuit brought by any franchisee, each Party shall bear
its own attorneys' fees and other costs of defense incurred in such action,
except as otherwise provided herein.
ARTICLE V
SURVEY AND TITLE MATTERS
5.1 SURVEYS. Purchaser shall have the option, at Purchaser's expense, to cause
to be prepared before the Closing Date a current ALTA land title survey
("Survey") of each Property, prepared by a duly licensed land surveyor and
registered professional engineer satisfactory to the Title Company and to
Seller. Upon completion of any Survey, there shall be delivered to Purchaser and
Seller three (3) sets each of the Survey Plat and to the Title Company one (1)
set of the Survey plat. The Survey, if prepared for any Property, will be
delivered to Seller and the Title Company within thirty (30) days after the
Effective Date. The Survey for any Property will show the location of all
highways, streets, roads, railroads, rivers, creeks or other water courses,
fences, easements, rights-of-way and other encumbrances or encroachments on or
adjacent to the Property, including all of the title matters shown on the Title
Commitments provided for in Section 5.2, and will set forth the area of the
Property in square feet, together with a legal description thereof. In addition,
the surveyor shall certify the accuracy of said Survey to the Title Company in
such form as the Title Company requires for purposes of issuing the ALTA owner's
or leasehold policy of title insurance provided for in Section 5.3.
5.2. TITLE COMMITMENTS AND PERMITTED ENCUMBRANCES. Within thirty (30) days after
the Effective Date or within thirty (30) days after receipt of a Survey if a
Survey is required to obtain a current title commitment, Seller will, at
Seller's expense, cause to be obtained a current title commitment for an
American Land Title Association ("ALTA") Form B owner's or leasehold policy of
title insurance on each Property ("Title Commitment"), issued through First
American Title Insurance Company, (the "Title Company") setting forth the state
of title of each Property and all liens, encumbrances and matters of record
(and, if Purchaser obtains Surveys, all facts and conditions shown on the
Surveys of each Property), including easements, restrictions, rights-of-way,
covenants, conditions and reservations, if any, affecting such Property,
together with legible copies of the recorded instruments relating to such title
matters and exceptions. Purchaser will obtain at its expense any mortgagee title
commitments and policies required by it in connection with the transaction. Upon
completion of each Title Commitment, there shall be delivered to Purchaser two
(2) copies thereof. Purchaser shall have thirty (30) days after its receipt of
the Title Commitment and the Survey, if a Survey has been obtained by Purchaser,
for each Property (including copies of the recorded instruments affecting title
to such Property) within which to review such documents and to notify Seller in
writing of any title matters reflected in the Title Commitment (or in the
Survey, if a Survey has been obtained by Purchaser) which would materially
restrict or adversely affect the use of the Property by Purchaser for retail
motor fuel sales as it currently exists, including any other current use on the
Property ("Title and Survey Objections"). Purchaser shall not object to minor or
immaterial title and survey matters which do not or will not interfere with, or
affect to a material extent, the operation or use of the Property as described
in the preceding sentence.
Within thirty (30) days after receipt of Purchaser's notice of Title
and Survey Objections, Seller shall make every reasonable effort to cure such
Title and Survey Objections and to satisfy the requirements of the Title
Company. If, for any reason, Seller is unable or unwilling, within said time, to
cure such Title and Survey Objections to the satisfaction of Purchaser, Seller
shall so notify Purchaser in writing. Within five (5) days after receiving such
notice Purchaser may, at Purchaser's option, either waive such uncured Title and
Survey Objections and proceed with the transaction contemplated by this
Agreement in accordance with the remaining terms and provisions hereof, seek to
reach agreement with Seller concerning the resolution of the uncured Title and
Survey Objections or execute on the Closing Date the Hold Harmless and Indemnity
Agreement attached as Exhibit "I". All title matters in the Title Commitments
which are not Title and Survey Objections shall become "Permitted Encumbrances."
5.3. OWNER OR LEASEHOLD POLICIES OF TITLE INSURANCE. At Closing, Seller shall
obtain as to each Property being conveyed and transferred by Seller, at Seller's
expense, the usual form of ALTA Form B Owner or Leasehold Policy of Title
Insurance, issued by the Title Company in the amount of such Property's
valuation as agreed by the Parties, and insuring marketable fee simple or
leasehold title to such Property as being vested in Purchaser, subject only to
the Permitted Encumbrances and such policy's standard printed exceptions;
provided, however, that any such policy may provide, at Purchaser's option and
expense, "extended coverage" as follows:
a. the policy's exception as to restrictive covenants shall be
endorsed "None of Record";
b. the boundary and survey exception shall be limited to "shortages
in area";
c. the exception as to taxes shall be limited to the year of Closing
and shall be endorsed "Not Yet Due and Payable" and shall except
taxes resulting from subsequent assessments for years or portions
thereof prior to the Closing Date due to change in land usage or
ownership; and
d. the exception as to rights of parties in possession shall be
deleted.
5.4 CONVEYANCE OF TITLE; ASSIGNMENT OF LEASEHOLD INTERESTS. At Closing, Seller
shall (i) convey to Purchaser, by special warranty deed or the equivalent
statutory form of deed in the respective State in which the Property is located,
marketable fee simple title to each Fee Property and (ii) assign to Purchaser
its leasehold interest in each Leased Property, free and clear of all liens,
encumbrances, conditions, easements, assessments, and restrictions, except for
the following:
a. general real estate taxes for the year of Closing;
b. such rights-of-way, easements, restrictions, and reservations or
other encumbrances or conditions as are approved by Purchaser as
Permitted Encumbrances pursuant to Section 5.2;
c. building and zoning ordinances, laws and regulations applicable
to the Property;
d. mineral rights reserved by third parties;
e. matters that would be shown in a current survey of the Property;
and
f. rights of any franchisee, subtenant or licensee of Seller
occupying the Property at the Closing Date.
5.5 LEASED PROPERTIES. Prior to the Closing Date, Seller will exercise (i) any
purchase options in leases for Leased Properties, and (ii) any lease renewal
options applicable to the Leased Properties, that will be forfeited if not
exercised on or before the Closing Date. If the assignment of a lease for a
Leased Property requires the consent of the lessor, Seller shall promptly
request such consent.
ARTICLE VI
CLOSING
6.1 CLOSING; CLOSING DATE. Completion of the transactions contemplated by this
Agreement and Seller's delivery of the Deeds, the Assignments of Leases, the
Assignments of Franchise Agreement and the Bills of Sale and the execution and
delivery by the Parties of the other documents referred to herein ("Closing")
shall take place at the office of the Title Company, at or before 12:00 noon on
February 29, 2000, or at such other time, date and place as Seller and Purchaser
may mutually agree upon (the "Closing Date").
6.2 DELIVERY OF DOCUMENTS AT CLOSING. At the Closing, the following shall occur:
(A) Seller shall:
(1) deliver to the Title Company a duly executed and
acknowledged special warranty deed or equivalent statutory
form of deed for each Fee Property conveying marketable
title to such Property to Purchaser subject only to the
Permitted Encumbrances and as provided in Section 5.6
("Deed"). The Deed for each Fee Property shall be in the
form of Exhibit "J", and it shall contain the legal
description of such Property from the Survey, if a Survey
has been obtained by Purchaser, otherwise the legal
description shall be taken from the instruments of
conveyance of the Properties to Seller, as modified by any
subsequent partial conveyances or condemnations of portions
of any such Property, to the extent available to Seller;
(2) to the extent any required consents have been obtained,
deliver to the Title Company an executed and acknowledged
assignment of lease for each Leased Property subject only to
the Permitted Encumbrances ("Assignment of Lease"). The
Assignment of Lease for each Leased Property shall be in the
form of Exhibit "K" and shall contain the legal description
of such Property from the Survey, if a Survey has been
obtained by Purchaser, otherwise the legal description shall
be taken from the leases or instruments of conveyance of the
Properties to Seller, as modified by any subsequent partial
conveyances or condemnations of portions of any such
Property, to the extent available to Seller;
(3) deliver to Purchaser an executed bill of sale for all
personal property and equipment located on each Property
("Bill of Sale"), which shall be in the form of Exhibit "L"
(4) deliver to Purchaser assignments of the Contract Dealer
Agreements, the Fee & Lease Dealer Agreements and the
Distributor Sales Agreements, which shall be in the form of
Exhibit "M" (the "Assignment of Franchise Agreement");
(5) deliver to Purchaser the executed Supply Agreement, as
provided in Section 2.1, and the executed Branded Marketer
Agreement, as provided in Section 2.2;
(6) to the extent obtained by Seller prior to the Closing Date,
deliver to the Title Company the written consent of any
lessor or landlord, if the assignment of the lease relating
to a Leased Property requires such consent, such written
consent to be in form and substance satisfactory to the
Title Company and Purchaser; and
(7) deliver to the Title Company and to Purchaser such
certificates of incumbency and evidence of corporate
authority for the execution and delivery of this Agreement
and all documents required hereunder in such form and
content as the Title Company and Purchaser reasonably may
require.
(B) Purchaser shall:
(1) pay the Purchase Price as provided in Section 3.1;
(2) execute and deliver to Seller the Supply Agreement, as
provided in Section 2.1; and
(3) execute and deliver to Seller the Branded Marketer
Agreement, as provided in Section 2.2.
6.3 APPORTIONMENT OF TAXES. General real estate taxes for the then current year
relating to each Property and rents, if any, shall be prorated as of the Closing
Date and shall be adjusted at the Closing. If the Closing shall occur before
taxes are finally fixed for the then current year for any Property, the
apportionment of taxes at the Closing shall be upon the basis of the latest tax
rate applied to the latest assessed valuation for such Property. All special
taxes or assessments applicable to any Property prior to the Closing Date shall
be paid by Seller, including, without limitation, all taxes resulting from
subsequent assessments for years or portions thereof prior to the Closing due to
change in land usage or ownership pursuant to existing law. Seller shall collect
from Purchaser at Closing and shall pay all sales taxes applicable to the
personal property and equipment transferred to Purchaser. All other closing
costs, including, without limitation transfer taxes, recording and escrow fees,
shall be assessed to Purchaser, as of the Closing Date.
6.4 PAYMENTS FROM FRANCHISEES. All rents and other sums due or payable by Seller
under the Fee & Lease & Dealer Agreements, the Contract Dealer Agreements and
the Distributor Sales Agreements will be prorated as of the Closing Date. Unless
otherwise agreed by the Parties, payment of the prorated amounts will occur
within forty-five (45) days after the Closing.
ARTICLE VII
ENVIRONMENTAL MATTERS
7.1 DEFINITIONS. As used herein, "Covered Contamination" means recoverable free
liquid hydrocarbons, dissolved hydrocarbon components, absorbed and vapor phase
hydrocarbon contamination, soil contamination which (i) was caused by Seller's
operations on any prior to the Closing Date, or occurs prior to or after the
Closing Date and is the result of the migration off a Property of contamination
that was located on a Property prior to the Closing Date, (ii) either (A) is
shown in the Baseline Report, as defined in Section 7.3 if applicable, or (B) is
shown by Purchaser to have been located on the Property prior to the Closing
Date pursuant to Section 7.4(C) or Section 7.4(D), and (iii) is required to be
remediated under applicable federal, state or local laws and regulations.
7.2 TANK TESTING. Seller, at Seller's expense, shall cause tightness tests of
all underground tanks and lines at the Properties to be conducted within sixty
(60) days prior to the Closing Date, or, upon mutual agreement of the Parties,
thirty (30) days after the Closing Date, using a "precision" test such as the
Petro-Tite(RM), Tanknology Vacu Test(RM) or Leak Lokator(RM) tests, or an
equivalent test. Upon completion of such tests, Seller shall furnish copies of
the test results to Purchaser. Any untight fiberglass tanks or lines discovered
pursuant to such tests may be repaired by Seller rather than replaced if (i)
Seller would repair rather than replace such tanks or lines under Seller's
normal procedures if ownership of the Property were remaining with Seller, (ii)
such equipment was originally manufactured by either Owens-Corning or Xerxes,
(iii) the repair is effected by the manufacturer or its authorized contractors,
and (iv) the manufacturer certifies and warrants the condition of the tanks and
lines to be as tight as when new. In the event that Seller is unable to repair
any fiber glass tanks or lines in accordance with the standards set forth above,
Purchaser will receive at the Closing for such Property a credit toward the
Purchase Price in the amount of $70,000.00 per tankfield, and Purchaser will be
responsible for the installation of replacement tanks and lines on such
Property, at Purchaser's expense.
7.3 ENVIRONMENTAL ASSESSMENT.
(A) Seller may, but shall not be obligated to, undertake at Seller's
expense an environmental assessment of each Property to determine the presence
of Covered Contamination. If undertaken, Seller will use reasonable efforts to
complete such assessments before the Closing Date or such other date as the
parties may mutually agree. At any Property at which Seller has previously
conducted, or is currently conducting, or is planning to conduct, any
environmental assessment or remediation activities ("Existing Cases"), Seller
shall deliver all existing environmental assessment data ("Existing Case Data")
to Purchaser as soon as possible but not later than sixty (60) days after the
Effective Date. The report of such environmental assessment, if undertaken, or
the Existing Case Data, if applicable, shall be the "Baseline Report" for each
Property. A copy of each Property's Baseline Report shall be provided to
Purchaser promptly after Seller's receipt thereof. Seller also may undertake
additional environmental assessments on any Property after the Closing, and the
assessment reports will constitute amendments of the Baseline Reports for such
Properties, if applicable.
(B) Purchaser may conduct additional environmental assessments of
Properties at its expense before and after the Closing Date. Purchaser will
provide copies of the assessment reports promptly to Seller. Such assessment
reports will constitute amendments of the Baseline Reports for the Properties
affected thereby, if Baseline Reports have been prepared.
(C) To the extent required by applicable laws and regulations, Seller
shall report all Covered Contamination reflected in the Baseline Reports to the
relevant govemmental authorities ("Authorities") and provide appropriate
notification thereof to property owners. To the extent required by applicable
laws and regulations, Purchaser shall report all New Contamination (as defined
in Section 7.4(C)) to the Authorities and provide appropriate notification
thereof to property owners.
(D) Seller shall remediate the Covered Contamination on any Property
in accordance with all applicable laws and regulations, provided that the
Closing occurs and the Property is conveyed to Purchaser. Seller's obligations
to remediate Covered Contamination on any Property shall continue until Closure
is obtained pursuant to Section 7.4(B).
7.4 ENVIRONMENTAL RESPONSIBILITY.
(A) Seller shall conduct all negotiations with the Authorities with
respect to the remediation of the Properties, for which Seller is responsible
under Section 7.3(D); provided, however, that Purchaser may attend, but not
actively participate in, any such negotiations. The Parties acknowledge that
Seller shall have the lead responsibility for setting policy, establishing
direction and conducting negotiations with the Authorities relating to the
remediation of Covered Contamination, and Purchaser shall neither contact nor
negotiate with the Authorities independently of Seller in connection with the
remediation of Covered Contamination. Seller shall provide Purchaser with
copies of all correspondence or other documents it receives from the
Authorities, and shall furnish Purchaser copies of all correspondence and other
documents it supplies to the Authorities, relating to any remedial action plan
submitted by Seller with regard to the Properties. Purchaser shall provide
Seller with copies of all correspondence and documents it receives from or
provides to the Authorities during the period of Seller's remediation activities
on any Property.
(B) As to each Property transferred or conveyed to Purchaser, Seller
shall undertake after the Closing Date, at its expense, all reporting and
notification required by law and all remediation or further investigation of
Covered Contamination on, under or originating from such Property, in compliance
with the requirements of the Authorities and all applicable environmental laws
and regulations and until Closure is obtained pursuant to this Section 7.4(B).
Seller shall be entitled to the benefit of any government reimbursement funds
that may be available with respect to such remediation of Covered Contamination.
Seller shall coordinate administrative efforts to recover such reimbursement.
Seller shall remediate the Covered Contamination on or migrating (or migrated)
from any Property in accordance with all applicable laws and regulations, until:
(1) Receipt of written notice from the Authorities that either
no further remediation of the Covered Contamination
identified in the Baseline Report is required, or that the
approved remediation plan of the Covered Contamination
identified in the Baseline Report has been completed; or
(2) Seller has requested closure notice from the Authorities,
has not received any response of any kind to its request for
a closure notice for twelve (12) months and Seller has
determined that the soil and groundwater has been remediated
to satisfactory levels based on four (4) successive
quarterly monitoring tests by a recognized environmental
remediation contractor that show the level of petroleum
hydrocarbons on the Property as being below or equal to the
limit required by the Authorities and Seller so notifies
Purchaser in writing.
The satisfaction of either of the conditions set forth in
clauses (1) or (2) above shall be referred to as "Closure"
herein.
(C) Any environmental contamination which (i) is not disclosed in the
Baseline Report for a Property, if applicable, (ii) is discovered after the
Closing Date on any Property or (iii) is caused after the Closing Date by
Purchaser, Purchaser's tenants, franchisees, or contractors, or is caused by
third parties, in an area of the Property identified in the Baseline Report as
containing Covered Contamination and before Seller's remediation of such Covered
Contamination has been completed, is herein referred to as "New Contamination."
Purchaser shall bear the burden of proof to establish that such environmental
contamination is Covered Contamination. Similarly, if any environmental
contamination not disclosed in the Baseline Report for a Property is discovered
after the date Seller completes the remediation contemplated by Sections 7.3 and
7.4 ("Remediation Completion Date"), Purchaser shall bear the burden of proof to
establish that such environmental contamination is Covered Contamination. If any
environmental contamination is discovered after the Closing Date and Purchaser
meets its burden of proving that it is not New Contamination but Covered
Contamination, Seller shall remediate such Covered Contamination, in compliance
with applicable remediation standards in effect at such time.
(D) If environmental contamination is discovered on any Property after
the Closing Date, but prior to the Remediation Completion Date, Purchaser shall
promptly notify Seller and act promptly to minimize the effects of such
environmental contamination. If, pursuant to Section 7.4(C), Purchaser does not
establish that such environmental contamination is Covered Contamination, and if
Seller reasonably determines that such New Contamination will make Seller's
remediation at the applicable Property significantly more difficult, more
expensive, or will extend significantly the time required to complete such
remediation work, Purchaser shall hire at Purchaser's sole expense a consultant
mutually acceptable to Purchaser and Seller to assess the effect of such New
Contamination on the environmental condition of the Property. This assessment
shall include a review of the remediation work that had been done to date and
the remaining cost to complete the remediation absent the New Contamination. In
addition, the consultant will estimate the cost of the additional work that will
be required due to the New Contamination. Purchaser will begin paying that
fractional cost percentage of all further remediation work performed by Seller
at the Property, determined by the following formula:
(1) Purchaser's fractional cost = I - (Estimated cost to
complete remediation prior to New Contamination divided by
estimated cost to complete remediation after the New
Contamination).
EXAMPLE:
A. Estimated cost to complete remediation prior to New
Contamination equals $100,000. (As calculated at the
time the New Contamination occurs.)
B. Estimated cost to complete remediation after New
Contamination equals $150,000. (Includes the
$100,000 in A plus $50,000 in estimated costs
related to the New Contamination.)
C. Purchaser's fractional cost equals: I - (A divided
by B), or I - .667, which results in Purchaser
paying one-third (.333) of subject remediation costs
incurred after the New Contamination occurs.
(2) Purchaser will promptly pay its share of costs and expenses
to Seller as remediation work is performed and as invoices
for such work, with supporting documentation, are presented
to Purchaser.
(3) The above notwithstanding, if Purchaser's fractional cost as
so calculated should exceed eleven-twentieths (11/20ths),
Purchaser shall, upon request by Seller, take over the
ongoing remediation efforts at the Property with the costs
of such remediation continuing to be shared between Seller
and Purchaser as set forth in this Section. In such event,
Purchaser and Seller shall attempt to negotiate a buyout to
transfer the remediation responsibility for known Covered
Contamination at the Property from Seller to Purchaser. If
the Parties are unable to agree upon the present value of
the expected costs of completing the remediation of known
Covered Contamination ("Remediation Cost") at a Property,
the Parties shall select a consultant satisfactory to both
Parties who shall attempt to mediate between the Parties to
resolve such differences in a mutually satisfactory manner.
The fees and expenses of such consultant shall be borne
equally by the Parties. If the Parties agree upon the
Remediation Cost for any Property, Seller shall pay to
Purchaser an amount equal to the Remediation Cost and
Purchaser shall assume responsibility for the completion of
the remediation of Covered Contamination at the Property.
Purchaser shall also execute and deliver to Seller a release
of remediation liability for known Covered Contamination in
the form of Exhibit "N". Such release shall include an
assignment to Purchaser of Seller's rights, with respect to
the Property, to reimbursement from the relevant state
reimbursement fund, if any.
7.5 ACCESS. After the Closing Date, Purchaser shall provide for and permit such
access, at no cost to Seller, as Seller and its employees, agents, and
contractors may require to each Property, for such time as is required for
Seller to meet all environmental obligations contemplated by this Agreement.
Such access shall include the right to conduct such tests, take such groundwater
or soil samples, excavate, remove, dispose of, and treat the soil and
groundwater, and undertake such other actions as are necessary in the sole
judgment of Seller. Seller shall expeditiously remove from the Property (or
Properties) as soon as reasonably practicable all drums containing drill
cuttings, soil, debris or liquids generated from Seller's remediation or
investigation activities. Seller shall restore the surface and existing
structures, if any, on each Property to a condition substantially similar to
that at the time immediately prior to the action taken by Seller and shall
replace or repair damage to Purchaser's equipment and personal property on the
Property caused by Seller or its contractors. Seller shall, to the extent
practical, undertake the actions necessary to complete its remediation of
Covered Contamination in a manner that will not unreasonably disrupt the
operations of Purchaser on the Property. In no event, however, shall Seller have
liability to anyone, including Purchaser, for business disruption, lost profits,
or consequential damages arising from such actions or access. Seller or its
contractors shall provide Purchaser as much advance notice as possible (but at
least five (5) business days' notice) of all potentially disruptive or intrusive
activities to be taken on the Properties; such notice may be in the form of a
periodic schedule of activities. No advance notice shall be required for
nondisruptive activities such as periodic monitoring of wells on a Property.
Seller and Purchaser agree to cooperate on the placement and the location of
Seller's remediation equipment. Any cost or expense to repair or replace
monitoring and remediation equipment resulting from the acts or omissions of
Purchaser or Purchaser's contractors shall be the responsibility of Purchaser.
Purchaser and Seller shall cooperate in determining the order in which Seller
implements its remediation operations on the Properties, but the final
determination shall be Seller's.
7.6 MAINTENANCE OF RECORDS. During the course of Seller's remediation of any
Property, Purchaser shall maintain inventory and tank and line maintenance
records for such Property as required to comply with all applicable laws and
regulations. Seller shall have the right to review these records as Seller deems
necessary so as to be assured of the integrity of Purchaser's tank and line
system at the Property.
7.7 TRANSFER OF RESPONSIBILITY. Purchaser and Seller may from time to time
attempt to agree upon the Remediation Cost at a Property and the transfer of the
responsibility for the remediation of known Covered Contamination from Seller to
Purchaser. If the Parties agree upon such Remediation Cost and transfer,
Seller shall pay to Purchaser an amount equal to the Remediation Cost and
Purchaser shall assume responsibility for the completion of the remediation of
known Covered Contamination. Purchaser shall also execute and deliver to Seller
a release of remediation liability for known Covered Contamination in the form
of Exhibit "N". Such release shall include an assignment to Purchaser of
Seller's rights to reimbursement from the relevant state reimbursement fund, if
any with respect to the Property.
7.8 SELLER'S INDEMNIFICATION. For a period of five (5) years from the Closing
Date, Seller shall defend, indemnify and hold Purchaser and its affiliates
harmless from and against all claims, expenses (including reasonable attorneys'
fees), loss or liability arising from or related to Covered Contamination on the
Properties. This indemnity also will apply to any claim by a third party or the
Authorities that relates to the migration of Covered Contamination off any
Property. This indemnity shall not be assignable by Purchaser. This indemnity
will not apply to, and Seller will have no liability for, claims by Purchaser or
third parties for diminution in value, lost profits, business disruption or
consequential damages relating to Covered Contamination on any Property.
7.9 PURCHASER'S INDEMNIFICATION. Purchaser shall defend, indemnify and hold
Seller and its affiliates harmless from and against all claims, expenses
(including reasonable attorneys' fees), loss or liability arising from or
related to any New Contamination.
7.10 PURCHASER'S RELEASE. In consideration of the making of this Agreement, the
conveyance of the Properties to Purchaser, and the covenants of Seller to
remediate and to indemnify Purchaser as provided in Paragraph 7.4 and 7.8
("Seller's Obligations"), Purchaser agrees to accept the conveyance of the
Properties in their present condition and, if Seller fulfills Seller's
Obligations, to make no claim regarding the environmental condition of the
Properties. Purchaser hereby releases Seller from all Claims (including Claims
under the Comprehensive Environmental Response Compensation and Liability Act of
1980 as amended, (CERCLA) and the Resource Conservation and Recovery Act of
1976, as amended (RCRA) and other environmental laws) for injury, death,
destruction, loss or damage to the person or property of Purchaser and its
employees arising out (i) the environmental condition of the Properties and the
improvements and the equipment on the Properties, and (ii) the existence of
Covered Contamination on the Properties. This release does not include: (a)
Seller's Obligations; and (b) Claims by third parties and Governmental
Authorities relating to Covered Contamination on the Properties.
7.11 LIMITATIONS ON LIABILITY. Seller shall not be responsible for remediation
of any Covered Contamination at any Property after the Remediation Completion
Date if such remediation would be required only as a result of changes in
applicable remediation standards or environmental laws and regulations enacted
or promulgated after the Remediation Completion Date. In addition, the parties
acknowledge and agree that Seller shall have no responsibility for any
environmental matters at any real property on which any Contract Dealer or
Distributor operates a service station.
7.12 BURDEN OF PROOF If any environmental contamination is discovered in
connection with any Property subsequent to the Remediation Completion Date,
Purchaser shall bear the burden of proof to establish that such contamination is
Covered Contamination.
7.13 LEASED PROPERTIES. In the event that, after the Closing Date and before the
Remediation Completion Date, the lease for any Leased Property expires or is
terminated, Seller shall be responsible for arranging access to the Property, at
Seller's expense, for the purpose of undertaking and completing its remediation
activities, including payment by Seller to the landowner of any rental or access
fee charged by the landowner in respect to such access to and use of the
Property; provided, however, that if such lease expiration is the result of
Purchaser's decision not to exercise any extension or renewal option provided
for in such lease, Purchaser shall give Seller at least six (6) months notice of
such election to not extend or renew the lease.
7.14 ELECTIVE WORK. If Purchaser encounters and excavates or removes
contaminated soil or groundwater on any Property while conducting construction,
remodeling, or demolish-and-rebuild work on any Property not required by
Seller ("Elective Work"), Purchaser will solely bear the costs of removing,
recycling or disposing of the contaminated soil and groundwater, regardless of
whether the soil or groundwater on any Property contains Covered Contamination.
Purchaser will be deemed to be the generator of all hazardous waste caused by or
originating from the tanks and lines used in Purchaser's operations on the
Properties. Purchaser will report any such hazardous waste and environmental
contamination, including Covered Contamination and contaminated soil and
groundwater excavated, removed, recycled or disposed of by Purchaser in
connection with Elective Work on any Property, to the Governmental Authorities
if required to do so by applicable laws and regulations. Purchaser also will
sign all manifests for transportation and disposal of any such hazardous waste
and contaminated soil or groundwater. Purchaser will pay the cost of clean fill
required for any excavation caused by Elective Work on any Property.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES; COVENANTS
8.1. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby represents and
warrants to Purchaser as follows, which representations and warranties shall be
deemed made by Seller also as of the Closing Date:
a. Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the State of its incorporation
and is duly qualified to do business as a foreign corporation or
partnership in each State where the Properties are located.
Seller has full power and authority to enter into this Agreement
and to perform its obligations hereunder.
b. To Seller's knowledge, Seller is in compliance with all
applicable laws, ordinances, regulations, statutes, rules and
restrictions relating to the Properties and Seller has received
no notice of any failure to comply therewith.
c. No provision of (i) Seller's certificate of incorporation or
by-laws or, (ii) to Seller's knowledge, any agreement, instrument
or understanding to which it is a party or by which it is bound,
or, (iii) to Seller's knowledge, any order, writ, injunction,
decree, statute, rule or regulation applicable to Seller, has
been or will be violated by the execution by it of this Agreement
or the performance or satisfaction of any agreement or condition
herein contained upon its part to be performed or satisfied.
d. All requisite corporate and other authorizations for the
execution, delivery, and performance of this Agreement have been
duly obtained by Seller.
e. To Seller's knowledge, no consent or approval of any governmental
or regulatory authority is required for the due authorization,
execution, or delivery by Seller of this Agreement other than the
consent of the FTC pursuant to the Consent Decree relating to the
Exxon Mobil merger and the approval of the Attorney Generals of
the States in which the Properties are located.
f. Seller has all approvals, permits, governmental authorizations
and consents required to operate each of the Company Operated
Properties as a retail service station and any other current use
thereon.
g. Except as disclosed in this Agreement the Exhibits and
operational contracts required in connection with Company
Operated Properties, which contracts will be disclosed to
Purchaser prior to the Closing Date, there are presently
outstanding no other contracts or agreements (whether written or
oral) to which Seller is a party with respect to the ownership,
development or operation of the Properties and no other parties
have any interest in any of the Properties, except as set forth
herein.
h. Except as set forth on Exhibit "0", there is no litigation
pending or threatened affecting Seller or the Properties which
would constitute a lien, claim or obligation of any kind against
the Properties or which would materially and adversely affect any
of the Properties.
i. Seller has notified Purchaser of all condemnation actions or
similar proceedings affecting any of the Properties as to which
Seller has received written notice by the condemning authority.
j. All taxes or other assessments on or concerning the Properties
for which Seller is liable and all taxes, fees, or other levies
measured by transactions or business activity conducted by Seller
on or with respect to the Properties for the year of transfer and
earlier, other than installments or assessments not yet due, have
been paid in full and there are no penalties or delinquency
charges; provided, however, that there may be charges which
Seller may be challenging in good faith and which Seller shall
pay if Seller is unsuccessful in its challenge.
k. There are no mortgages, security interests or liens affecting the
equipment and personalty owned by Seller on any of the
Properties.
1. To Seller's knowledge, the present zoning of each of the
Properties will permit the use of such Property for its current
use.
m. There are no matters known to Seller that would materially and
adversely affect Purchaser's ability to operate the business at
any of the Properties after the Closing Date as a retail service
station with such ancillary businesses as are currently being
conducted thereon.
8.2. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser hereby represents and
warrants to, and covenants and agrees with Seller that as of the date hereof and
as of the Closing Date:
a. Purchaser is a corporation duly organized, validly existing, and
in good standing under the laws of the State of its incorporation
and is duly qualified to do business as a foreign corporation in
each State where the Properties are located. Purchaser has full
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.
b. No provision of (i) Purchaser's certificate of incorporation or
by-laws, or, (ii) to Purchaser's knowledge, any agreement,
instrument or understanding to which it is a party or by which it
is bound, or, to (iii) Purchaser's knowledge, any order, writ,
injunction, decree, statute, rule or regulation applicable to
Purchaser has been or will be violated by the execution by
Purchaser of this Agreement or by Purchaser's performance or
satisfaction of any agreement or condition herein contained upon
its part to be performed or satisfied.
c. All requisite corporate and other authorizations for the
execution, delivery and performance of this Agreement have been
duly obtained by Purchaser.
d. To Purchaser's knowledge, no consent or approval of any
governmental or regulatory authority is required, except as noted
herein, for the due authorization, execution, or delivery by
Purchaser of this Agreement.
8.3 OPERATION PENDING CLOSING. Between the Effective Date and the Closing Date,
Seller shall not permanently close any of the service stations on the
Properties, without the approval of Purchaser, except for any termination or
nonrenewal of any Fee & Lease Dealer Agreement for any reason permitted by the
PMPA. Notwithstanding the foregoing, Seller may close any service station
temporarily to change the franchisee at the Property, and to repair or rebuild
the improvements therein. Seller will use reasonable commercial efforts to
maintain the current operations on, and the repair and maintenance of, the
Properties between the Effective Date and the Closing Date.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. ALL indemnifications,
representations, warranties, covenants and agreements of the Parties contained
in this Agreement shall survive for a period of three (3) years following the
Closing Date, except that the environmental obligations of the Parties shall be
governed by the provisions of Article 7 and except further that the
indemnification set forth in Section 9.2(vi) shall survive for a period of five
(5) years after the consent order or other order of Authorities expires. It is
the Parties' intent that such surviving rights and obligations shall not merge
in the Closing or the conveyancing instruments delivered at the Closing.
9.2 INDEMNIFICATION OBLIGATIONS. Except for environmental matters and matters
with respect to Seller's franchise relationships which are covered by Article 7
and Article 4, respectively, Seller and Purchaser ("Indemnitors") each shall
defend, indemnify and hold harmless the other, its successors, assigns,
directors, employees, subsidiaries, affiliates and agents ("Indemnitees"), from
and against each and every Claim, which results from, arises out of or is
attributable in any way to any of the following:
(i) the Indemnitor's ownership, possession, operation, use or
maintenance of any Property;
(ii) claims with respect to brokers, finders and agents' fees and
commissions in connection with the transaction contemplated
in this Agreement asserted by any person on the basis of any
statement, instrument or agreement alleged to have been made
by the Indemnitor;
(iii) any failure or alleged failure by the Indemnitor to comply
with federal, state and local laws and regulations which
apply to this transaction, including, but not limited to,
PMPA and state franchise laws;
(iv) any representation or warranty made by the Indemnitor in
this Agreement or in documents delivered by the Indemnitor
at the Closing which are misleading or untrue in any
material respect;
(v) any breach of the obligations, covenants or agreements made
by the Indemnitor in this agreement; or
(vi) the non-compliance of the Indemnitor with any directive,
order or requirement of the Authorities, including but not
limited to environmental cleanup orders relating to any
Property.
9.3 ASSERTION OF RIGHT OF INDEMNIFICATION. The Indemnitee shall notify the
Indemnitor of the assertion of any Claim hereunder promptly after the Indemnitee
receives actual notice of said Claim. The Indemnitee shall have the right, but
not the duty, to participate with attorneys of its own choosing, at its own
expense, in the defense of any Claim for which the Indemnitor is obligated to
defend and indemnify it, and to approve any settlement that affects it, without
relieving the Indemnitor of any obligations hereunder.
ARTICLE X
BROKERAGE COMMISSIONS
10.1 COMMISSIONS. It is acknowledged and agreed that no brokers have been
involved in the negotiation and consummation of this Agreement and no broker's
commission is due or payable to any person. Each Party shall indemnify and hold
harmless the other Party from any and all Claims for any broker's commission
arising through its acts or dealings with any third party.
ARTICLE XI
CONDITIONS PRECEDENT
11.1 APPROVALS. Purchaser understands and acknowledges that this Agreement and
the consummation of the transactions contemplated by this Agreement are subject
to and conditioned upon Seller obtaining approval from the FTC pursuant to the
terms of the Consent Decree and approval from the Attorney Generals of the
States in which the Properties are located. Purchaser further acknowledges that
Purchaser is required to provide certain information to the FTC and the State
Attorney Generals in connection with Seller's application for approval from the
FTC and the State Attorney Generals and Purchaser agrees that Purchaser shall
supply all information required by the FTC and the State Attorney Generals and
to otherwise fully cooperate with Seller as expeditiously as possible in
connection with such approval.
ARTICLE XII
DEFAULTS; REMEDIES
12.1 PURCHASER'S DEFAULT. In the event this Agreement is not consummated because
of non-performance, default or breach (collectively herein called a "Default")
by Purchaser, then Seller may at its sole option take any of the following
courses of action:
(a) terminate this Agreement and draw upon the Earnest Money
Deposit upon which termination Seller and Purchaser shall
have no further obligation or liability one to the other
hereunder; or
(b) file suit against Purchaser for damages; or
(c) enforce specific performance of this Agreement and the
transaction provided for herein according to the terms
hereof by all means available at law or in equity.
In the event Seller elects first to enforce this Agreement by
specific performance and at any time during pursuit of
enforcement elects not to pursue specific performance, Seller
shall be entitled to pursue its remedies under Subparagraphs (a)
or (b) as if it had elected to do so as above set forth, and such
subsequent election to pursue its courses of action under
Subparagraph (a) or (b) above shall be deemed to be an election
of remedies at that time and not before.
Purchaser acknowledges and agrees that a Default by Purchaser
under this Agreement will constitute a default by Purchaser
pursuant to the Agreement of Purchase and Sale and Assignment of
Marketing Assets between Purchaser and Exxon Corporation be,
relating to the sale and purchase of retail marketing properties
and assets in other States. Purchaser acknowledges and agrees
that a default under the Agreement of Purchase and Sale and
Assignment of Marketing Assets between Purchaser and Exxon
Corporation relating to the sale and purchase of retail marketing
properties and assets in other States will constitute a Default
by Purchaser hereunder.
12.2 SELLER'S DEFAULT. In the event this Agreement is not consummated because of
non-performance, default or breach (collectively herein called "Default") by
Seller then Purchaser may at its sole option, as its exclusive remedies, take
any of the following courses of action:
(a) terminate this Agreement and recover the Earnest Money
Deposit from escrow, upon which termination Seller and
Purchaser shall have no further obligation or liability one
to the other hereunder; or
(b) file suit against Seller for damages; or
(c) enforce specific performance of this Agreement and the
transaction provided for herein according to the terms
hereof by all means available at law or in equity.
In the event Purchaser elects first to enforce this Agreement by
specific performance and at any time during pursuit of
enforcement elects not to pursue specific performance, Purchaser
shall be entitled to pursue its remedies under Subparagraphs (a)
or (b) as if it had elected to do so as above set forth, and such
subsequent election to pursue its courses of action under
Subparagraphs (a) and (b) shall be deemed to be an election of
remedies at that time and not before.
ARTICLE XIII
PERMITS
13.1 SELLER'S COOPERATION. From the Effective Date until the Closing Date,
Seller shall cooperate with Purchaser at Purchaser's expense in executing all
documents reasonably required in connection with Purchaser's obtaining any
governmental permits, or zoning variances, use permits or site plan approvals
relating to the Properties, desired by Purchaser. Purchaser shall indemnify and
hold Seller harmless from any and all claims, liabilities (direct or indirect),
costs and expenses (including attorneys' fees) related to or arising from
Seller's cooperation and execution of such documents.
13.2 POST-CLOSING OBLIGATION. After the Closing, Seller shall cooperate with
Purchaser, at no cost or risk to Seller, to obtain or to transfer any permits
and licenses held by Seller that Purchaser may require for the continued
operation of the Properties, with such ancillary businesses as are conducted
thereon on the Closing Date.
ARTICLE XIV
PROPERTY LOSS
14.1 Notice. Seller shall give Purchaser prompt notice of (i) any casualty
affecting any of the Properties between the Effective Date and the Closing Date,
and (ii) any actual taking or condemnation of all or any portion of any Property
or any planned or pending condemnation action as to which Seller has received
written notice from the condemning authority.
14.2 CASUALTY. In the event any Property suffers damage or destruction
subsequent to the Effective Date, but prior to the Closing Date, Seller shall
elect either (i) to repair or make adequate provision for the repair of such
Property prior to Closing or (ii) to reimburse Purchaser by an amount agreed
upon by Seller and Purchaser to represent the reduction in the real estate value
of the Property by reason of the casualty.
14.3 CONDEMNATION.
(A) If after the Effective Date and prior to the Closing Date, there
shall occur the transfer of title or possession of all or any part of a Property
by condemnation ("Taking"), the Closing shall take place as to such Property as
provided herein without abatement of the Purchase Price, and there shall be
assigned to Purchaser at the Closing all interest of Seller in any award which
may be payable to Seller on account of such Taking.
(B) If prior to the Closing Date, Seller shall receive written notice
of a planned or threatened Taking of all or part of any Property, the Closing
shall take place as to such Property as provided herein without abatement of the
Purchase Price, there shall be assigned to Purchaser at Closing all interest of
Seller in any award which may be payable to Seller on account of such Taking.
14.4 RISK OF LOSS. Seller shall retain the risk of loss or damage with respect
to the Properties until title passes, which shall occur on the Closing Date.
ARTICLE XV
REAL ESTATE AND ENGINEERING DOCUMENTS AND OTHER INFORMATION
15.1 DELIVERY OF INFORMATION. Seller shall cooperate with Purchaser, before and
after the Closing Date, to provide Purchaser copies of material and relevant
real estate documents from Seller's files relating to the Properties, if
available, including title reports, base leases, unrecorded easements,
engineering plans and drawings, surveys, and receipted ad valorem tax bills for
the most recent filing year relative to the Properties.
15.2 ACCURACY OF INFORMATION. Seller shall exercise reasonable efforts to cause
the Copies of documents listed in Section 15.1 to be accurate; however, the
Parties acknowledge that such documents are, for the most part, unaudited and
therefore Seller makes no warranty as to the, accuracy or completeness of the
copies provided, nor shall Seller be liable to Purchaser in the event of any
inadvertent omission or error.
ARTICLE XVI
RIGHT OF ENTRY AND INSPECTION; EQUIPMENT
16.1 ENTRY AND INSPECTION. After the Effective Date and at a time mutually
agreed by the Parties, Purchaser may inspect each of the Properties, personally
or through agents, employees, contractors, or subcontractors, at Purchaser's
expense, to ensure that the equipment necessary for the operation of the
Properties as contemplated hereunder (defined as product dispensers, pumps, air
compressors, lifts, convenience store coolers, and air conditioners) ("Major
Equipment") is present and in proper working order. Seller's representatives may
attend all such inspections. Purchaser (a) shall assume all risks, except those
resulting from intentional torts by or negligence of Seller's employees and/or
franchisees, involved in entering the Properties pursuant to this Paragraph and
(b) shall indemnify Seller and hold it and its employees and franchisees
harmless from and against all loss, cost, liability, and expense (including, but
not limited to, reasonable attorneys' fees and other litigation expense)
incurred by Seller and Seller's employees and franchisees by reason of bodily
injury to or death of persons or damage to property sustained by any party which
is caused by Purchaser's negligence or intentional torts in connection with its
entry upon the Properties; provided that such indemnity shall not cover any
portion of such loss or expense arising out of or caused by Seller's or its
employees' and franchisees' negligence or intentional torts. If Purchaser
determines from its inspections that any of the Major Equipment is missing or in
need of repair, Purchaser shall notify Seller and Seller shall either replace or
repair such items prior to the Closing Date with items of equivalent utility,
value and quality which reasonably are acceptable to Purchaser, at Seller's
expense.
16.2 POST CLOSING INSPECTION. Within forty-eight (48) hours after the Closing,
Purchaser shall have the right to inspect each Property to determine whether the
Major Equipment is missing or in need of repair; and whether any previously
identified repairs or replacements were made pursuant to Section 16.1. Seller's
representatives shall be afforded the opportunity to attend such inspection. To
the extent that Purchaser reasonably determines from such inspections that any
Major Equipment is still missing or is in need of repair, and so notifies
Seller, Seller shall either replace or repair such items at its expense. If
Purchaser does not conduct such inspection of any Property within forty-eight
(48) hours after the Closing, Seller shall not be obligated to replace or repair
any Major Equipment.
16.3 MAINTENANCE OF EQUIPMENT. None of the Major Equipment and personal property
shall be disposed of or otherwise removed from a Property on or after the
Effective Date, except as may be agreed in advance by the Parties. Seller
agrees to maintain all Major Equipment on the Properties to be transferred to
Purchaser in accordance with Seller's usual maintenance practices and to
transfer such equipment to Purchaser at the Closing in proper working condition,
subject to reasonable wear and tear. All fixtures, improvements, and equipment
other than the Major Equipment shall be maintained in accordance with Seller's
usual maintenance practices and shall be transferred to Purchaser at the Closing
in an "as is, where is" condition, with no representations or warranties
whatsoever, express or implied, of merchantability, fitness, condition or
otherwise.
16.4 PURCHASER'S RIGHT TO INSTALL EQUIPMENT. Subject to the legal rights of
Seller's franchisees, Purchaser shall have the right, after the Effective Date,
personally or through agents, employees, contractors, or subcontractors, to
enter the Properties, at Purchaser's expense and at such reasonable times as
Purchaser may elect, to install point of sale equipment, telephone lines and
other equipment as needed to effect an orderly transition of operations after
the Closing Date. Purchaser (a) shall make reasonable efforts not to disrupt
existing operations on the Properties; (b) shall assume all risks, except those
resulting from intentional torts by or negligence of Seller's employees and/or
franchisees, involved in entering the Properties pursuant to this Paragraph and
(c) shall indemnify Seller and hold it and its employees and franchisees
harmless from and against all loss, cost, liability, and expense (including, but
not limited to, reasonable attorneys' fees and other litigation expense)
incurred by Seller and its employees or franchisees by reason of bodily injury
to or death of persons or damage to property sustained by any party which is
caused by Purchaser's negligence or intentional torts; provided that such
indemnity shall not cover any portion of any such loss or expense arising out of
or caused by Seller or its employees' or franchisees' negligence or intentional
torts.
16.5 PURCHASER'S RIGHTS. If the transaction contemplated by this Agreement is
not consummated for any reason and Purchaser has installed equipment on any
Property in accordance with Section 16.4, Purchaser shall, at Seller's option:
(1) remove the equipment installed by Purchaser and restore the Property to its
original condition; or (2) transfer to Seller, without warranty, express or
implied, title to any equipment installed by Purchaser, after which Seller shall
be solely responsible therefor.
ARTICLE XVII
EXCUSED DELAY IN PERFORMANCE
17.1 EXCUSED PERFORMANCE. The performance by either Party of any of its
obligations set forth in this Agreement shall not be deemed untimely to the
extent any late performance is due to acts of God, acts of war, civil
disturbance, acts of government (including, but not limited to, governmental or
court orders), strikes or other labor disputes (the settlement of which shall be
totally within the discretion of the Party having the difficulty) or any other
act or event beyond the reasonable control of the affected Party; provided,
however, that the affected Party is taking all reasonable steps to perform and
promptly notifies the other Party of the details of such occurrence; and
provided further that the time for the performance of any undertaking shall not
be extended or any failure to perform excused for more than sixty (60) days
pursuant to this Paragraph without the mutual consent of the Parties.
ARTICLE XVIII
EMPLOYEES
18.1 EMPLOYEES. After the Effective Date, and at a time mutually agreed by the
Parties, Purchaser will have the right to interview and offer employment to any
of Seller's exempt and non-exempt employees engaged in the management or
operation of any Property conveyed or transferred hereunder (not to include
Seller's salary-operated store employees) ("Eligible Employees"), concerning
possible employment opportunities with Purchaser. Seller will provide Purchaser
a list of all Eligible Employees within ten (10) days after the Effective Date.
If Purchaser determines to offer employment to any Eligible Employee, Purchaser
agrees to comply with the guidelines set forth in Seller's standard conditions
set forth in Exhibit "P" ("Conditions of Employment").
18.2 SALARY-OPERATED STORE EMPLOYEES. After the Effective Date, and at a time
mutually agreed by the Parties, Purchaser will have the right to interview and
offer employment to any of Seller's exempt and non-exempt employees engaged in
the management or operation of any salary-operated or company-operated store on
any Company Operated Property conveyed or transferred hereunder concerning
possible employment opportunities with Purchaser.
ARTICLE XIX
JOINT PUBLICITY
19.1 PRESS RELEASE AND RELEASE OF OTHER INFORMATION. Publicity and other
releases concerning the transaction contemplated by this Agreement shall, where
possible, be jointly planned and coordinated between Purchaser and Seller.
Neither Party shall act unilaterally in this regard without the prior approval
of the other Party provided, however, that such approval shall not be
unreasonably withheld. Nothing herein contained shall prevent either Party from.
furnishing information to any governmental agency or from furnishing information
to comply with applicable laws or regulations.
ARTICLE XX
ASSIGNMENT
20.1 ASSIGNMENT. Except as may hereafter be provided, this Agreement may not be
assigned by either Party without the prior written consent of the other Party,
which consent may be withheld for any reason. Notwithstanding the preceding
sentence, Purchaser may designate, upon notice to Seller at least thirty (30)
days before the Closing Date, an entity or entities to accept Seller's title to
the Properties on the Closing Date and to pay the Purchase Price to Seller,
provided, however, that such designation shall not affect Purchaser's duties and
obligations hereunder and Purchaser will remain primarily bound by all of its
covenants, warranties, representations and indemnifications. Furthermore,
notwithstanding the foregoing, Seller may assign this Agreement or any of its
rights or obligations under this Agreement to any entity that owns or controls,
is owned or controlled by or is under common control with Seller.
ARTICLE XXI
INTENTIONALLY OMITTED
ARTICLE XXII
MISCELLANEOUS
22.1 ENTIRE AGREEMENT. This Agreement embodies the entire agreement between the
Parties relating to the transactions contemplated by this Agreement and cannot
be varied except by the written agreement of the Parties. This Agreement
supersedes any other agreement of the Parties relating to the transactions
contemplated by this Agreement.
22.2 NOTICES. Any notice, demand, request, consent, approval, or other
communication which a Party hereto is required or desires to give, make or
communicate to the other shall be effective and valid only when in writing and
shall be deemed duly given when received if such notice is mailed by registered
or certified mail, return receipt requested, or sent by personal delivery or
sent by a nationally recognized overnight carrier, return receipt requested, or
sent by telecopier (fax), all charges prepaid, addressed in the case of Seller
to:
Divestment Team
c/o Mobil Oil Corporation
3225 Gallows Road
Fairfax, Virginia 22037
Attention: James S. Carter
Divestment Team Manager
Telecopier: 703-846-5440
and in the case of Purchaser to:
Tosco Corporation
72 Cummings Point Road
Stamford, CT 06902
Attention: Wilkes McClave
Senior Vice President
Telecopier: 203-964-3187
, or in either case at such other address as may have last been
specified by notice given as provided by the Party addressed.
22.3 CONSTRUCTION. Words of any gender used in this Agreement shall be construed
to include any other gender, and words in the singular number shall include the
plural, and vice versa, unless the context requires otherwise.
22.4 CAPTIONS. The captions used in connection with the Articles and Sections of
this Agreement are for convenience only and shall not be deemed to enlarge,
limit or otherwise modify the meaning or interpretation of the language of this
Agreement. Any references to "Articles", "Sections", "Subsections" and
"Exhibits" are to Articles, Sections, Subsections, Exhibits, Riders and Addenda
of this Agreement.
22.5 SURVIVAL. The provisions of Article 1, Section 2.3, Article IV, Sections
5.2 and 5.3, Articles VI and VII, Sections 8.1 and 8.2, Articles IX X and XIII,
Section 13.2 and Articles XV, XVI, XVII, XVIII XIX and XXII shall survive the
Closing of the transaction under this Agreement and shall not be deemed to have
merged therewith. All other provisions hereof not included or incorporated in
any document to be executed and delivered on the Closing Date shall not survive
the Closing.
22.6 EFFECTIVE DATE. All time limits provided for herein which are measured by
the number of days "from the date hereof' (rather than being designated by
specific date) shall run from the Effective Date, rather than the date or dates
of execution by the Parties.
22.7 FURTHER ASSURANCES. Following the Closing Date, for no further
consideration, Seller and Purchaser shall perform such other acts and shall
execute, acknowledge and deliver such additional documents as the other Party
may reasonably request to vest in Purchaser all of Seller's right, title,
interest, and enjoyment of the Properties and other assets and rights conveyed
under this Agreement, to carry out the transactions contemplated by this
Agreement and to protect each Party's rights under this Agreement.
22.8 RELATIONSHIP BETWEEN SELLER AND PURCHASER. Purchaser shall not be
considered a successor of Seller for the purpose of any claims or charges for or
arising out of the ownership use or operation of the Properties prior to the
Closing Date including but not limited to unemployment compensation, worker's
compensation, Fair Labor Standards Act violations, Occupational Safety and
Health Act violations, Equal Employment Opportunity violations, or any similar
federal, state or local statutes or regulations.
22.9 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit
of the Parties hereto and their respective successors and assigns.
22.10 EXPENSES. Except as otherwise specifically provided for herein, each Party
hereto shall bear all expenses incurred by it in connection with this Agreement,
including, without limitation, the charges of its counsel, accountants,
consultants, and other experts.
22.11 TIME OF THE ESSENCE. Unless otherwise expressly provided, time is of the
essence in the performance of all obligations set forth herein.
22.12 AUTHORITY TO BIND. The persons executing this Agreement warrant that they
have authority to bind the respective Parties to this Agreement,
22.13 COUNTERPARTS. This Agreement may be executed by the Parties in
counterparts, each of which shall be deemed an original, but such counterparts
together shall constitute one and the same instrument.
22.14 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its
rules on the conflicts of law. The Parties hereto irrevocably submit to the
exclusive jurisdiction of the United States District for the Southern District
of New York for all purposes under this Agreement, except for those matters over
which said court does not have subject matter jurisdiction, in which case the
Parties irrevocably submit to the exclusive jurisdiction of the Supreme Court of
New York County, New York.
22.15 NO THIRD PARTY BENEFICIARY. Nothing herein shall be deemed to express any
intent to create third party beneficiary fights in favor of any person or
entity, as Seller and Purchaser specifically state and agree that no such intent
exists.
22.16 NO RECORDING OF THIS AGREEMENT. Prior to the Closing, neither Party shall
record this Agreement with any County Clerk or other governmental office. If
either Party records this Agreement, it shall, at the option of the other Party,
be ipso facto null and void and of no further force.
22.17 1031 EXCHANGE. Seller may require Purchaser, pursuant to Section 1031 of
the Internal Revenue Code of 1986, as amended, to pay the Purchase Price to a
trust or intermediary party designated by Seller, in order that Seller may
participate in a tax-deferred exchange of like-kind property. Such election
shall be made, if at all, by notice to Purchaser not later than ten (10) days
prior to the Closing Date. The Parties agree to execute such agreements and
other documents as may be necessary to complete and otherwise effectuate
Seller's tax-deferred exchange, provided that (a) Purchaser's obligations
hereunder shall not be increased; (b) such documents shall not modify
Purchaser's representations, warranties or obligations hereunder; (c) the
Purchase Price paid by Purchaser shall not be different from that which
Purchaser would have paid pursuant to Section 3.1, (d) Purchaser shall incur no
additional cost, expense or liability as a result of its cooperation in such
exchange; and (e) Seller shall indemnify and hold harmless Purchaser for
additional expenses, including, but not limited to, taxes and closing costs, and
any cost or expense (including reasonable counsel fees) which Purchaser may
suffer, sustain or become subject to as a result of the Purchase Price being
paid to a trust or intermediary party rather than to Seller and the trust's or
intermediary's subsequent use of the Purchase Price.
22.18 SEVERABILITY. If any provision in this Agreement shall for any reason be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement, but shall be confined in its operation to the provision of this
Agreement directly involved in the controversy in which such judgment shall have
been rendered.
22.19 WAIVER. Any of the terms and conditions of this Agreement may be waived at
any time and from time to time, in writing, by such Parties as are entitled to
the benefit of such terms and conditions; provided, however, that except as
otherwise specifically provided in this Agreement, no failure or delay on the
part of either Party in exercising any of its respective rights under this
Agreement upon any failure by the other Party to perform or observe any
condition, covenant or provision of this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such rights preclude
any other or further exercise thereof or the exercise of any other rights under
this Agreement. No waiver or release of any of the terms, conditions, or
provisions of this Agreement shall be valid or asserted or relied upon by either
Party or offered in any judicial proceeding or otherwise, unless the same is in
writing, and duly executed by the waiving or releasing Party.
IN WITNESS WHEREOF, this Agreement has been executed by Seller and Purchaser on
the dates set forth below but effective as of the Effective Date.
EXXON CORPORATION TOSCO CORPORATION
a New York corporation a Nevada corporation
By:_______________________ By:_________________________
Name:_____________________ Name: Wilkes McClave
Title:____________________ Title: Senior Vice President
Date:_____________________ Date:_______________________
Exhibit 10(i)
SUPPLEMENTAL AGREEMENT TO AGREEMENT OF PURCHASE, SALE AND
ASSIGNMENT OF MARKETING ASSETS
THIS SUPPLEMENTAL AGREEMENT TO AGREEMENT OF PURCHASE, SALE AND ASSIGNMENT OF
MARKETING ASSETS (this "Supplemental Agreement") is made and entered into as of
this 1st of December, 1999, (the "Effective Date") between MOBIL OIL
CORPORATION, a New York corporation ("Seller"), and TOSCO CORPORATION, a Nevada
corporation ("Purchaser") upon the terms and conditions set forth herein. When
provisions herein apply to both or either Seller and Purchaser, they sometimes
are referred to as "Parties" or "Party."
RECITALS
Purchaser has executed an Agreement of Purchase, Sale and Assignment of
Marketing Assets (the "Agreement of Purchase and Sale"), wherein Purchaser
agreed to purchase certain assets of Seller in connection with Seller's retail
marketing operations in the District of Columbia, Virginia, Maryland, Delaware,
New Jersey and Pennsylvania (the "Identified Areas").
The Agreement of Purchase and Sale contemplated that Seller and Purchaser would
agree at a later date as to the form and content of certain Exhibits attached to
the Agreement of Purchase and Sale. Seller has preliminarily prepared the
Exhibits to be attached to the Agreement of Purchase and Sale and desires to
have Purchaser acknowledge the Exhibits prepared by Seller.
In addition, Exxon Corporation and Mobil Corporation have further negotiated the
Consent Decree and consequently certain provisions of the Agreement of Purchase
and Sale need to be supplemented in order to comply with the terms of the
Consent Decree.
NOW THEREFORE, in consideration of the Recitals and for other good and valuable
consideration, the receipt and sufficiency of which hereby are mutually
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
TERMS AND CONDITIONS
1. DEFINITIONS. All capitalized terms used in this Supplemental Agreement
without definition shall have the same meaning as set forth in the Agreement of
Purchase and Sale. From and after the date of this Supplemental Agreement, any
reference in the Agreement of Purchase and Sale to "this Agreement" shall refer
to the Agreement of Purchase and Sale, as supplemented by this Supplemental
Agreement.
2. EXHIBITS.
A. EXHIBITS TO AGREEMENT OF PURCHASE AND SALE. Attached to this
Supplemental Agreement are the following Exhibits to the Agreement of Purchase
and Sale: Exhibit "A" - Properties; Exhibit "B" - Fee & Lease Dealers; Exhibit
"C" - Contract Dealers, Loan Balances and Value of Seller-owned Equipment;
Exhibit "D" - Distributors Subject to Distributor Sales Agreements; Exhibit "E"
- - Distributors' Loan Balances; Exhibit "F" -Independent Contractor Agreements
and Ground Leases; Exhibit "O" - Pending and Threatened Litigation; and Exhibit
"Q" - OTR Franchises. The Parties agree that the foregoing Exhibits shall be
deemed attached to the Agreement of Purchase and Sale as if the same were set
forth in such agreement when executed.
B. CHANGES IN THE EXHIBITS. The Parties agree and acknowledge that the
Exhibits currently prepared by Seller represents Seller's best knowledge. The
Parties further acknowledge and agree that between the date of this Supplemental
Agreement and the Closing Date some of the Exhibits attached to the Agreement of
Purchase and Sale as described in Section 2(A) of this Supplemental Agreement
may change. The Parties agree that in the event the Exhibits are changed, then
the Purchase Price will be further adjusted pursuant to Subsection 5(B) of this
Supplemental Agreement.
3. NON-OPERATING PROPERTIES.
A. SUPPLEMENTAL PROPERTIES. The Parties acknowledge that there are
certain fee properties (the "Supplemental Fee Properties") and certain lease
properties (the "Supplemental Leased Properties") identified on Exhibit "I-A",
which are currently owned or leased by Seller and which are not operating
service stations, but which are intended to be used by Seller as a service
station property. The Supplemental Fee Properties and the Supplemental Leased
Properties are sometimes collectively referred in this Supplemental Agreement as
the "Supplemental Properties". The Parties agree that the definition of
Properties as used in the Agreement of Purchase and Sale shall be deemed to
include the Supplemental Properties from and after the date of this Supplemental
Agreement for all purposes under the Agreement of Purchase and Sale, as
supplemented by this Supplemental Agreement, except as set forth below. As of
the date of this Supplemental Agreement, all of the terms and provisions of the
Agreement of Purchase and Sale, including the representations and warranties, as
they relate to the Properties shall include the Supplemental Properties, except
that the following provisions of the Agreement of Purchase and Sale shall not
apply to the Supplemental Properties: Subsections 8.1.f., 8.1.1. and, except as
disclosed to Purchaser, 8.1.m. and Article XVIII.
B. CONTRACTS OF PURCHASE. The Parties acknowledge that Seller has
entered into certain contracts (the "Contracts of Purchase") identified on
Exhibit "I-B", pursuant to which Seller has the right to purchase fee title to
certain properties which Seller intends to use as service station properties in
accordance with the terms and conditions contained in the Contracts of Purchase.
The Parties agree that Seller's interests in the properties subject to the
Contracts of Purchase shall be sold, assigned, transferred or conveyed to
Purchaser under the terms and conditions of the Agreement of Purchase and Sale,
as supplemented by this Supplemental Agreement. The $20,000,000 of the Purchase
Price allocated to the Supplemental Properties, the Contracts of Purchase and
the Preliminary Term Leases as set forth in Section 5(A) does not include the
purchase price provided in each Contract of Purchase. In the event a Contract of
Purchase transaction has closed by the Closing Date, the amount paid by Seller
under such Contract of Purchase shall be credited to Seller at the Closing.
C. PRELIMINARY TERM LEASES. The Parties acknowledge that Seller has
entered into certain preliminary term leases (the "Preliminary Term Leases")
identified on Exhibit "I-C", pursuant to which Seller has preliminarily leased
certain properties which Seller intends to use as service station properties in
accordance with the terms and conditions contained in the Preliminary Term
Leases. The Parties agree that Seller's interests in the properties subject to
the Preliminary Term Leases shall be sold, transferred, assigned or conveyed to
Purchaser under the terms and conditions of the Agreement of Purchase and Sale,
as supplemented by this Supplemental Agreement.
D. PURCHASE OF SUPPLEMENTAL PROPERTIES AND TERMINAL PROPERTIES.
Purchaser desires to purchase the Supplemental Properties and Seller's interests
in the Contracts of Purchase and the Preliminary Term Leases, and all of
Seller's interests in the terminal located in Manassas, Virginia (the "Manassas
Terminal"). Seller has provided to Purchaser information with respect to the
Supplemental Properties, the Contracts of Purchaser and the Preliminary Term
Contracts. Purchaser agrees to review all such information no later than seven
days from the date of this Supplemental Agreement. Upon satisfactory review by
Purchaser of all information relating to the Manassas Terminal and Purchaser's
election to purchase same, Purchaser and Seller shall execute and deliver a
separate terminal sales agreement to be agreed upon in good faith by Purchaser
and Seller with respect to the Manassas Terminal within seven days of the date
Purchaser executes this Supplemental Agreement. In the event Purchaser, after
review of reasonably complete information provided to Purchaser by Seller,
determines it does not wish to acquire the Manassas Terminal, Purchaser shall so
inform Seller within seven days of the date of this Supplemental Agreement and
the Manassas Terminal will be deleted from the transaction and the Purchase
Price will be adjusted in accordance with Section 5(A). In the event Purchaser,
after review of reasonably complete information provided to Purchaser by Seller,
determines it does not wish to acquire the Supplemental Properties, the
Contracts of Purchase and the Preliminary Term Leases, it shall so inform Seller
within seven days of the date of this Supplemental Agreement. Upon receipt of
such notice, Seller may, in its sole discretion, elect either (i) to delete the
Supplemental Properties, the Contracts of Purchase and the Preliminary Term
Leases from the transaction in which case the Purchase Price will be adjusted
in accordance with Section 5(A), or (ii) to require Purchaser to acquire the
Supplemental Properties, the Contracts of Purchase and the Preliminary Term
Leases at fair market value, as determined by negotiations in good faith between
the parties or, failing agreement, as determined by an impartial appraisal, with
the Purchase Price being adjusted accordingly.
E. OTHER PROPERTIES. The Parties agree that only those non-operating
properties set forth in Exhibits "I-A", "I-B" and "I-C" shall be included in the
purchase and sale contemplated by the Agreement of Purchase and Sale, as
supplemented by this Supplemental Agreement and no other non-operating
properties shall be included unless Seller is required to divest any such
additional property pursuant to the Consent Decree, in which event the property
shall be included as part of the Agreement of Purchase and Sale, as supplemented
by this Supplemental Agreement and the Exhibits shall be changed in accordance
with Section 2(B).
4. TRANSFER, SALE AND ASSIGNMENT BY SELLER. In addition to the transfers
contemplated by Article I of the Agreement of Purchase and Sale, on the Closing
Date, Seller will assign to Purchaser, and Purchaser shall assume the assignment
of and accept Seller's obligations under (i) the Contracts of Purchase, (ii) the
Preliminary Term Leases, (iii) to the extent assignable and permitted by law,
all permits and permit applications for the construction of the service station
facilities at the properties which are the subject of the Contracts of Purchase
or the Preliminary Term Leases existing as of the date of this Supplemental
Agreement; (iv) the "Non-Petroleum Leases" described in Section 8 of this
Supplemental Agreement, together with any security deposits being held by Seller
under any such leases; and (v) the "Veeder Root Agreements" described in Section
9.
5. PURCHASE PRICE.
A. SUPPLEMENT TO PURCHASE PRICE. The Parties agree that the "Purchase
Price" as defined under the Agreement of Purchase and Sale shall be SIX HUNDRED
AND SIXTY MILLION DOLLARS ($660,000,000) from and after the date of this
Supplemental Agreement and for all purposes under the Agreement of Purchase and
Sale, as supplemented by this Supplemental Agreement, the Purchase Price shall
be as set forth in this Section 5. The Parties acknowledge and agree that Twenty
Million Dollars ($20,000,000) of the Purchase Price has been allocated to the
purchase by Purchaser of the Supplemental Properties, the Contracts of Purchase
and the Preliminary Term Leases, subject to further review by Purchaser of the
information supplied by Seller and that Five Million Dollars ($5,000,000) has
been allocated to the purchase by Purchaser of the Manassas Terminal, subject to
further review by Purchaser of the information supplied by Seller. In the event
that Purchaser elects not to purchase the Manassas Terminal, the Purchase Price
will be reduced by Five Million Dollars ($5,000,000). In the event that Seller,
after being notified by Purchaser that Purchaser desires not to purchase the
Supplemental Properties, the Contracts of Purchase and the Preliminary Term
Leases, elects to delete same from the transaction, then the Purchase Price will
be reduced by Twenty Million Dollars ($20,000,000).
B. ADJUSTMENTS TO PURCHASE PRICE. In the event that at any time prior
to the Closing, Seller and/or Purchaser discover that there is a change in the
Exhibits due to (i) identification of additional supplemental properties which
were operating service station properties in the Identified Areas on the
Effective Date and which were intended to be sold to Purchaser under the
Agreement of Purchase and Sale or (ii) discovery that certain properties listed
on the Exhibits were not operating service station properties in the Identified
Areas on the Effective Date, then such additional supplemental properties shall
be included or excluded, as the case may be, in the transactions contemplated by
the Agreement of Purchase and Sale, as supplemented by this Supplemental
Agreement and the Purchase Price shall be adjusted by agreement of the Parties
based on the fair market value of the properties being included or excluded, as
determined by negotiations in good faith between the Parties or, failing
agreement, as determined by an impartial appraisal.
6. BRANDED MARKETER AGREEMENT. The first paragraph and the table immediately
following the first paragraph of sub-section 3(b) of the Motor Fuel Product
Schedule to the Branded Marketer Agreement, Exhibit H of the Agreement of
Purchase and Sale, are amended to read as follows:
"(b) Beginning on the fifth anniversary of the effective date of the
Agreement and thereafter, the price to be paid by Buyer shall be (i) the same
price paid to Buyer by Seller for the motor fuel pursuant to the Purchase
Agreement, plus (ii) subject to adjustment as provided in section 3(c) below,
the Supplemental Charge, plus (iii) an additional fee shown in the table below
(hereinafter the "Additional Fee"). The Additional Fee for sales made during any
contract year is shown to the right of the corresponding contract year in the
table below.
"CONTRACT YEAR ADDITIONAL FEE PER GALLON
"6th *
"7th *
"8th *
"9th *
"10th *
The following sentence is added as a new final paragraph to
sub-section 3(c) of the Motor Fuel Product Schedule to the Branded Marketer
Agreement, Exhibit H of the Agreement:
"Notwithstanding anything in this Agreement to the contrary, if the
annual adjustment to the Supplemental Charge would raise the sum of
the Supplemental Charge plus the Additional Fee, if any, to more than
*_____________, then the sum of the adjusted
Supplemental Charge plus the Additional Fee, if any, shall be deemed
to be * _________________."
______
* This information is confidential and has been omitted and separately filed
with the Securities and Exchange Commission
7. SUPPLEMENTAL CLOSING CONDITIONS.
A. SUPPLEMENTAL CLOSING DOCUMENTS. At the Closing, Seller shall
deliver the following supplemental documents:
(1) Assignments of the Contracts of Purchase, Assignments of the
Non-Petroleum Leases, Assignments of the Preliminary Term Leases
and Assignment of the "Veeder Root Agreements" (as defined in
Section 9), all in form and substance satisfactory to Purchaser
and Seller; and
(2) To the extent obtained by Seller prior to the closing Date,
deliver to the Title Company the written consent of any owner or
lessor, if the assignment of any Contract of Purchase or
Preliminary Term Lease, as the case may be requires such consent,
such written consent to be in form and substance satisfactory to
the Title Company and Purchaser.
B. SUPPLEMENTAL APPORTIONMENTS. All rents and other charges due or
payable by Seller under the leases covering the Leased Properties or under the
Preliminary Term Leases and all rents and other charges due and payable to
Seller from any tenant under any Non-Petroleum Lease will be prorated as of the
Closing Date.
12. CONDITIONS PRECEDENT. The first sentence of Section 11.1 of the Agreement
of Purchase and Sale is hereby deleted and the following is inserted in lieu
thereof: "Purchaser understands and acknowledges that this Agreement and the
consummation of the transactions contemplated by this Agreement are subject to
and conditioned upon Seller obtaining approval from the FTC of this Agreement,
the transactions contemplated by this Agreement and the Purchaser pursuant to
the Consent Decree and the favorable exercise of the approval rights of the
Attorney Generals of the States of Pennsylvania, New Jersey, Maryland, Delaware,
Virginia and the District of Columbia pursuant to the consent decree executed on
behalf of each of those States and the District of Columbia". In addition, as a
supplement to the conditions precedent set forth in Article XI of the Agreement
of Purchase and Sale, Purchaser acknowledges and understands that the Agreement
of Purchase and Sale, as supplemented by this Supplemental Agreement, and the
consummation of the transactions contemplated by the Agreement of Purchase and
Sale, as supplemented by this Supplemental Agreement, are subject to (i) the
final acceptance of the Consent Decree and (ii) no injunction having been issued
by a court of competent jurisdiction and remaining in effect at the time of the
Closing prohibiting the transactions contemplated by the Agreement of Purchase
and Sale, as supplemented by this Supplemental Agreement.
13. TANK TESTING. As a supplemental to Section 7.2 of the Agreement of Purchase
and Sale, Purchaser acknowledges that Seller has installed at certain Properties
Veeder Root systems or other equivalent systems to monitor the underground tanks
and lines at such Properties and that Seller desires to deliver to Purchaser the
results of such monitoring systems in lieu of the tank testing described in
Section 7.2 of the Agreement of Purchase and Sale. Purchaser and Seller agree to
discuss in good faith whether the monitoring systems described above are
sufficient for determining the tightness of the tanks and lines and whether the
tightness tests described in such Section 7.2 are necessary.
14. RIGHT OF FIRST REFUSAL. The Parties acknowledge that one of the Supplemental
Properties is currently subject to a right of first refusal granted to the
tenant at said property. Unless such right is waived by the tenant, the Parties
shall execute a separate purchase agreement for such Supplemental Property
within ten days after the date of this Supplemental Agreement and thereafter,
Seller shall offer the tenant a right of first refusal to purchase the
Supplemental Property. In the event the tenant exercises the right of first
refusal, the Purchase Price shall be adjusted accordingly.
15. ROLLING STOCK. Seller shall offer to sell to Purchaser the rolling stock
used to serve the retail stations in the Identified Areas as set forth in
information previously provided to Purchaser and in the event Purchaser elects
to purchase the rolling stock and Seller accepts Purchaser's offer, the Purchase
Price shall be adjusted accordingly.
16. MISCELLANEOUS.
A. CONSTRUCTION. Words of any gender used in this Supplemental
Agreement shall be construed to include any other gender, and words in the
singular number shall include the plural, and vice versa, unless the context
requires otherwise.
B. CAPTIONS. The captions used in connection with the Articles and
Sections of this Supplemental Agreement are for convenience only and shall not
be deemed to enlarge, limit or otherwise modify the meaning or interpretation of
the language of this Supplemental Agreement. Any references to "Sections",
"Subsections" and "Exhibits" are to Sections, Subsections, Exhibits, Riders and
Addenda of this Supplemental Agreement.
C. SURVIVAL. The provisions of Sections 3,4,5 and 9 shall survive the
Closing of the transaction under this Supplemental Agreement and shall not be
deemed to have merged therewith. All other provisions hereof not included or
incorporated in any document to be executed and delivered on the Closing Date
shall not survive the Closing.
D. COUNTERPARTS. This Supplemental Agreement may be executed by the
Parties in counterparts, each of which shall be deemed an original, but such
counterparts together shall constitute one and the same instrument.
E. GOVERNING LAW. This Supplemental Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to its rules on the conflicts of law. The Parties hereto irrevocably
submit to the exclusive jurisdiction of the United States District for the
Southern District of New York for all purposes under this Agreement, except for
those matters over which said court does not have subject matter jurisdiction,
in which case the Parties irrevocably submit to the exclusive jurisdiction of
the Supreme Court of New York County, New York.
F. AGREEMENT OF PURCHASE AND SALE. Notwithstanding the duplication in
this Supplemental Agreement of any of the terms and provisions of Article XXII
of the Agreement of Purchase and Sale, all of the terms and provisions of
Article XXII of the Agreement and Sale shall be deemed incorporated into this
Supplemental Agreement to the extent applicable as if the same were set forth in
this Supplemental Agreement in its entirety. Except as supplemented by the terms
and provisions of this Supplemental Agreement, the terms and provisions of the
Agreement of Purchase and Sale shall remain in full force and effect.
IN WITNESS WHEREOF, this Supplemental Agreement has been executed by Seller and
Purchaser on the dates set forth below.
MOBIL OIL CORPORATION TOSCO CORPORATION
a New York corporation a Nevada corporation
By:_______________________ By:___________________
Name:_____________________ Name:_________________
Title:____________________ Title:________________
Date:_____________________ Date:_________________
<PAGE>
AGREEMENT OF PURCHASE, SALE AND ASSIGNMENT OF MARKETING ASSETS
THIS AGREEMENT OF PURCHASE, SALE AND ASSIGNMENT OF MARKETING ASSETS (this
"Agreement") is made and entered into as of this 1st of December, 1999, (the
"Effective Date") between MOBIL OIL CORPORATION, a New York corporation
("Seller"), and TOSCO CORPORATION, a Nevada corporation ("Purchaser") upon the
terms and conditions set forth herein. When provisions herein apply to both or
either Seller and Purchaser, they sometimes are referred to as "Parties" or
"Party."
RECITALS
Seller currently markets its branded fuel products in the District of Columbia,
Virginia, Maryland, Delaware, New Jersey and Pennsylvania (the "Identified
States").
In connection with Seller's retail marketing operations, Seller owns in fee
certain operating service stations and leases certain other operating service
station properties in the Identified States, all as more particularly described
in Exhibit "A" (the "Properties"). The Properties consist of fee properties (the
"Fee Properties") and leased properties (the "Leased Properties"). Each of the
Properties is individually referred to in this Agreement as a "Property".
Some of the operating service stations on the Properties are subject to a
"franchise relationship," as that term is defined in the Petroleum Marketing
Practices Act, 15 U.S.C., Section 2801 et seq. ("PMPA"), pursuant to lease or
sublease agreements, franchise agreements, motor fuels sales agreements and
other agreements constituting the franchise relationship (collectively, the "Fee
& Lease Dealer Agreements") entered into between Seller and the dealers on the
Properties listed on Exhibit "B" (the "Fee & Lease Dealers"). Those Properties
subject to Fee & Lease Dealer Agreements are noted on Exhibit "A" (sometimes
referred to herein as the "Fee & Lease Dealer Properties"). The remainder of the
operating service stations on the Properties are company operated stations
(sometimes referred to as the "Company Operated Properties") and are similarly
noted on Exhibit "A".
In addition, as part of is marketing operations in the Identified States, Seller
has entered into various motor fuel supply, franchise and other agreements
constituting the franchise relationship (collectively, the "Contract Dealer
Agreements") with the contract dealers listed on Exhibit "C" ("Contract
Dealers"). Seller has also entered into various distributor agreements and other
agreements constituting the distributor franchise relationship (collectively,
the "Distributor Sales Agreements") between Seller and the distributors listed
on Exhibit "D" (the "Distributors"). The Fee & Lease Dealer Agreements, the
Contract Dealer Agreements and the Distributor Sales Agreements are sometimes
collectively referred to as the "PMPA Franchise Agreements").
Pursuant to a consent decree entered into or to be entered into with the U.S.
Federal Trade Commission ("FTC") in connection with the merger of Exxon
Corporation and Mobil Corporation, (the "Consent Decree"), Seller has agreed to
divest certain assets, including certain contract rights, associated with its
marketing operations in the Identified States and Purchaser is willing to
purchase the same from Seller in accordance with the terms of this Agreement.
This offer to purchase the Properties and other assets and the
assignments herein described may remain open and in full force and effect for a
period in excess of 60 days. The offer is initially binding and irrevocable and
able to be accepted until December 3, 1999 or until five business days after
Exxon Corporation and Mobil Corporation receive consent from the Federal Trade
Commission to their proposed merger, whichever is sooner. If Tosco is selected
as the proposed Purchaser, the offer shall remain open and in full force and
effect for as long as reasonably necessary to successfully complete the buyer
approval process.
NOW THEREFORE, in consideration of the Recitals and for other good and valuable
consideration, the receipt and sufficiency of which hereby are mutually
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
TERMS AND CONDITIONS
ARTICLE I
TRANSFER, SALE AND ASSIGNMENT BY SELLER
1.1 TRANSFER OF FEE PROPERTIES AND LEASED PROPERTIES; EQUIPMENT AND PERSONAL
PROPERTY.
(A). Subject to the provisions of this Agreement, (i) Seller agrees to
sell and convey the Fee Properties to Purchaser and Purchaser
agrees to purchase and pay for the Fee Properties, and (ii)
Seller also agrees to assign its leasehold interests in the
Leased Properties to Purchaser and Purchaser agrees to purchase
and pay for such leasehold interests.
(B). Seller's conveyance and assignment of its interests in the
Properties shall include Seller's interest in: (i) all easements
and rights appurtenant to the Properties, all buildings and
improvements located thereon, and to the extent assignable by
Seller and in effect on the Closing Date (as defined in Section
6.1), all associated licenses, permits, and other forms of
governmental consents, (ii) all of Seller's personal property
located on the Properties as of the Effective Date, except for
some proprietary equipment and software containing proprietary
information; and (iii) subject to the terms of the Distributor
Agreement, the right to use Seller's identification signs,
trademarks, and other trade indicia. The real and personal
property referred to in this Agreement shall not include any
accounts receivable, except those associated with the Contract
Dealer Agreements or the Distributor Sales Agreements referred to
in Sections 1.3 and 1.4 respectively, notes receivable, or cash
assets, all of which property, to the extent owned by Seller,
shall be removed by Seller from the Properties no later than the
Closing Date. Any environmental monitoring wells and remediation
equipment located on the Properties will remain Seller's property
and will not be transferred to Purchaser.
1.2 ASSIGNMENT OF FEE & LEASE DEALER AGREEMENTS. On the Closing Date, Seller
will assign to Purchaser, and Purchaser shall accept the assignment of and
assume Seller's obligations under the Fee & Lease Dealer agreements with respect
to the Fee & Lease Dealers Properties.
1.3 ASSIGNMENT OF CONTRACT DEALER AGREEMENTS. On the Closing Date, Seller also
will (i) assign to Purchaser the Contract Dealer Agreements with the Contract
Dealers, and (ii) transfer to Purchaser any Seller owned equipment and tanks on
the Contract Dealers' properties and Purchaser shall accept the assignment of
and assume Seller's obligations under the Contract Dealer Agreements and shall
purchase and pay for any Seller owned equipment. On the Closing Date, Seller
will assign to Purchaser all loan agreements and/or reimbursement agreements
between Seller and the Contract Dealers, together with any mortgages and
security interests securing such loans. The current balances of the Contract
Dealers' loans and/or reimbursement agreements and the value of any Seller-owned
equipment and tanks on the Contract Dealer properties are set forth on Exhibit
"C". The Parties acknowledge and agree that the Purchase Price set forth in
Section 3.1 includes payment for certain unamortized balances due Seller by such
Contract Dealers. At least seven (7) days before the Closing Date, Seller will
notify Purchaser of the amounts of the unamortized balances owed by each
Contract Dealer.
1.4 ASSIGNMENT OF DISTRIBUTOR SALES AGREEMENTS. On the Closing Date, Seller will
assign to Purchaser, and Purchaser shall assume the assignment of and accept
Seller's obligations under, the Distributor Sales Agreements. On the Closing
Date, Seller will assign to Purchaser, and Purchaser shall assume the assignment
of and accept the obligations of Seller under, any loan agreements and/or
reimbursement agreements between Seller and the Distributors, together with any
mortgages and security interests securing such loans. The current balances of
the Distributors' loans and/or reimbursement agreements are set forth on Exhibit
"E". The Parties acknowledge and agree that the Purchase Price set forth in
Section 3.1 includes payment for certain unamortized balances due Seller by such
Distributors. At least seven (7) days before the Closing Date, Seller will
notify Purchaser of the amounts of the unamortized balances owed by each
Distributor.
1.5 SALE OF INVENTORY. Seller shall sell, deliver and transfer to Purchaser at
the Closing, and Purchaser shall purchase and pay for, all inventories: of (i)
refined petroleum products in bulk storage owned by Seller on any Property on
the Closing Date; and (ii) convenience store merchandise for resale (not to
include branded lubricants, tires, batteries and accessories) owned by Seller on
any Property on the Closing Date. Seller shall be responsible for determining
the quantities of refined petroleum products to be transferred by it as of the
Closing Date, and Seller shall determine the quantities of all inventories of
convenience store resale merchandise to be sold to Purchaser on the Closing
Date. The Parties acknowledge that the Purchase Price set forth in Section 3.1
includes payment for all inventories of refined petroleum products and
convenience store merchandise and at the Closing, the Parties shall agree on the
value of such inventory.
1.6 ASSIGNMENT OF PERMITS. On the Closing Date, to the extent assignable or
permitted by law, Seller will assign and Purchaser shall accept all operating
permits, including beer and wine licenses, where applicable, at the Company
Operated Properties.
1.7 CONTRACT DEALER FINANCINGS. Purchaser acknowledges that certain Contract
Dealers identified as Class of Trade (the "COT Dealers") accounts on Exhibit "B"
have obtained secured loans (the "COT Loans") through Citicorp, North America,
Inc. ("Citicorp") pursuant to certain line of credit and security agreements
with the between Citicorp and the COT Dealers, together with all other related
agreements and supplements thereto (collectively referred to as the "Credit
Agreements"). Seller has, to a limited extent, guaranteed certain obligations of
the COT Dealers under the Credit Agreements. Notwithstanding the assignment of
the Contract Dealer Agreements to Purchaser, Seller will retain its indemnity
and guaranty obligations in connection with the Credit Agreements. If any COT
Dealer fails to make payment on any COT Loan which is secured by real property
(service station) collateral, Seller may choose to make such COT Dealer's
payment to Citicorp to avoid or cure a default. If Citicorp demands that Seller,
as guarantor, satisfy any outstanding loan balance, Seller will pay the
outstanding balance. If Seller makes any payment to Citicorp, either upon
default by any COT Dealer or after demand by Citicorp, Purchaser will reimburse
Seller for any payments made by Seller to Citicorp within thirty (30) days of
demand. Upon reimbursement by Purchaser, Seller will request the mortgage
encumbering the COT Dealer's real property and all other security documents be
assigned by Citicorp to Purchaser, and Purchaser shall assume all of Seller's
rights pursuant to the Credit Agreement relating to the respective COT Dealer
and as the mortgage holder. Thereafter, Purchaser may elect, at its sole
discretion, to foreclose on the mortgage, terminate the Borrower's dealer
contract, and force the sale of the service station, among other options.
1.8 INDEPENDENT CONTRACTOR AGREEMENTS AND GROUND LEASES. On the Closing Date,
Seller will assign to Purchaser, and Purchaser shall assume the assignment of
and accept Seller's obligations under, Seller's Independent Contractor
Agreements and ground leases for motor fuel facilities at the properties listed
on Exhibit "F".
1.9 ASSIGNMENT OF OPTIONS TO PURCHASE AND RIGHTS OF FIRST REFUSAL. To the
extent that Seller is the holder of any preferential right to purchase any of
the Properties, all such rights will be assigned to Purchaser at the Closing.
1.10 DISTRIBUTOR FINANCINGS. Purchaser acknowledges that certain Distributors
identified on Exhibit "D" (the "Peg Mac Distributors") have obtained secured
loans (the "Distributor Loans") through Peg Managers Acceptance Corp. ("Peg
Mac") pursuant to certain loan and security agreements with the between Peg Mac
and the Peg Mac Distributors, together with all other related agreements and
supplements thereto (collectively referred to as the "Loan Agreements"). Seller
has, to a limited extent, guaranteed certain obligations of the Peg Mac
Distributors under the Loan Agreements. Notwithstanding the assignment of the
Distributor Sales Agreements to Purchaser, Seller will retain its indemnity and
guaranty obligations in connection with the Loan Agreements. If any Peg Mac
Distributor fails to make payment on any Distributor Loan which is secured by
real property collateral, Seller may choose to make such Peg Mac Distributors'
payment to Peg Mac to avoid or cure a default. If Peg Mac demands that Seller,
as guarantor, satisfy any outstanding loan balance, Seller will pay the
outstanding balance. If Seller makes any payment to Peg Mac, either upon default
by any Peg Mac Distributor or after demand by Peg Mac, Purchaser will reimburse
Seller for any payments made by Seller to Peg Mac within thirty (30) days of
demand. Upon reimbursement by Purchaser, Seller will request the mortgage
encumbering the Peg Mac Distributor's real property and all other security
documents be assigned by Peg Mac to Purchaser, and Purchaser shall assume all of
Seller's rights pursuant to the Loan Agreement relating to the respective Peg
Mac Distributor and as the mortgage holder. Thereafter, Purchaser may elect, at
its sole discretion, to foreclose on the mortgage, terminate the Distributor's
Distributor Sales Agreement, and force the sale of the service station, among
other options.
1.11 ASSIGNMENT OF BRAND PROGRAM AND SERVICE AGREEMENTS. On the Closing Date,
Seller will assign to Purchaser, and Purchaser shall assume the assignment of
and accept Seller's obligations under, all rent abatement agreements, imaging
rebate agreements and other brand program and service agreements with the Fee &
Lease Dealers, the Contract Dealers and the Distributors, as applicable.
ARTICLE II
SUPPLY, DISTRIBUTION AND OTHER AGREEMENTS
2.1 SUPPLY AGREEMENT. At least forty-five (45) days prior to the Closing Date,
Purchaser and Seller will execute a supply agreement in the form of Exhibit "G"
(the "Supply Agreement"), whereby Seller will purchase from Purchaser certain
unbranded fuels products. Purchaser and Seller agree that Exhibit "G" contains
all of the material and significant terms of the Supply Agreement and that prior
to the execution of the Supply Agreement, Seller and Purchaser shall agree in
good faith on certain additional administrative provisions and/or addenda which
are necessary to activate the Supply Agreement and such provisions or addenda
shall become part of the Supply Agreement.
2.2 BRANDED MARKETER AMENDMENT. At least forty-five (45) days prior to the
Closing Date, Seller and Purchaser will execute a branded marketer agreement in
the form of Exhibit "H" (the "Branded Marketer Agreement"). Purchaser and Seller
agree that Exhibit "H" contains all of the material and significant terms of the
Supply Agreement and that prior to the execution of the Branded Marketer
Agreement, Seller and Purchaser shall agree in good faith on certain additional
administrative provisions and/or addenda which are necessary to activate the
Branded Marketer Agreement and such provisions or addenda shall become part of
the Branded Marketer Agreement.
2.3 SERVICES AGREEMENT. For a period of no more than six (6) months from the
Closing Date, Seller will cooperate with Purchaser in providing, if necessary
and upon request, services such as motor fuel order and dispatch services, in
order to allow Purchaser adequate time to implement its own order and dispatch
services. Such services shall consist of the same services, and shall be
performed by Seller in the same manner, as currently provided for Seller's own
use. The Parties shall agree as to the compensation and the manner of payment
for any such services pursuant to the terms of a service agreement to be
executed by Seller and Purchaser at Closing.
ARTICLE III
PURCHASE PRICE
3.1 Amount. The purchase price to be paid by Purchaser for the transfer, sale
and assignment by Seller of the Properties, the Fee & Lease Dealer Agreements,
the Contract Dealer Agreements, the Distributor Sales Agreements and all other
assets, contract rights and personal property described in Article I is
_______________* ("Purchase Price"). On the Closing Date, Purchaser shall pay
the Purchase Price by wire transfer of immediately available funds to the
account designated by Seller or its assignee. The Purchase Price includes the
inventory of refined petroleum products and convenience store merchandise
referred to in Section 1.5, any construction and zoning permit, the unamortized
balances of loans and/or reimbursement agreements due Seller by the Contract
Dealers referred to in Section 1.3, the unamortized balances of loans and
reimbursement agreements due Seller by the Distributors referred to in Section
1.4 and any Seller-owned equipment and tanks on the Contract Dealer properties.
3.2 EARNEST MONEY DEPOSIT. Within five (5) days after Seller provides Purchaser
notice that Seller desires to accept Purchaser's offer contained in this
Agreement, Purchaser will deliver to the Title Company (as defined in Section
5.2) an irrevocable letter of credit (or similar instrument acceptable to
Seller) drawn on a bank acceptable to Seller and in form and substance
satisfactory to Seller, payable to Seller, in the amount of _____________*,
representing an earnest money deposit equal to five percent (5%) of the Purchase
Price (the "Earnest Money Deposit") as consideration for this Agreement. The
Earnest Money Deposit will be deposited with the Title Company pursuant to an
escrow agreement among the Title Company, Seller and Purchaser. The escrow
agreement will provide that the letter of credit may be drawn upon by Seller
upon certification to the Title Company of Purchaser's default under this
Agreement. Seller's notice of its desire to accept this Agreement shall not be
binding on Seller unless and until Purchaser delivers the Earnest Money Deposit
to Seller and Seller executes and delivers this Agreement.
--------------------------
* Note: If bid is accepted for both packages of assets, the aggregate price to
be paid is ___* million and individual packages must be increased to include
the premium of $40 million for both packages. This information is
confidential and has been omitted and separately filed with the Securities
and Exchange Commission.
3.3 VALUATION. The Parties agree that any property valuations established by the
Parties for the Properties are for purposes of (i) establishing an insured
amount for the title insurance commitments and policies; (ii) preparing the
Closing statements and escrow instructions; (iii) preparing affidavits of value
and transfer tax returns; and (iv) calculating recording fees and transfer
taxes, if applicable. Such property valuations are not established necessarily
for tax purposes or for financial or accounting ("book") purposes.
ARTICLE IV
PMPA COMPLIANCE
4.1 ASSIGNMENT AND ASSUMPTION BY PURCHASER. Seller will assign to
Purchaser at the Closing the PMPA Franchise Agreements with each of its existing
Fee & Lease Dealers, Contract Dealers and Distributors identified on Exhibits
"B", "C" and "D". Purchaser will assume all of Seller's rights and obligations
under the PMPA Franchise Agreements and under the PMPA and any other applicable
law, as the same relate to the PMPA Franchise Agreements.
4.2 SELLER'S PMPA INDEMNIFICATION. Seller shall indemnify and hold Purchaser,
its affiliates, agents and employees harmless from and against each and every
loss, cost, claim, obligation, damage, liability, payment, fine, penalty cause
of action, judgment (including expert witness fees and attorneys' fees awarded
to any franchisees as part of a judgment), lien or expense, including, but not
limited to, reasonable attorneys' fees and other litigation expense (a "Claim")
to the extent that any such Claim seeks to invalidate or claim the invalidity of
Seller's assignment of its franchise agreements to Purchaser, unless such Claim
is based on any act or omission by Purchaser occurring after the Closing Date.
4.3 PURCHASER'S OBLIGATIONS AFTER CLOSING. At an appropriate time prior to the
stated expiration date of each of the PMPA Franchise Agreements assigned by
Seller to Purchaser, Purchaser will, in good faith and in the normal course of
business, offer to each of the franchisees agreements for the supply of branded
motor fuel, unless such franchisee previously has been properly terminated or
nonrenewed for any reason permitted by the PMPA or properly nonrenewed pursuant
to 15 USC 2802(b)(3)(A). Franchise agreements offered by Purchaser to the
franchisees referenced hereunder shall be offered in accordance with PMPA and
shall comply in all respects with all applicable provisions of the PMPA and any
applicable state law.
4.4 PURCHASER'S PMPA INDEMNIFICATION. Purchaser shall indemnify and hold Seller,
its affiliates, agents and employees harmless from and against each and every
Claim of any kind or character which result front, arise out of, or are in any
way related to (i) any termination or nonrenewal by Purchaser of any PMPA
Franchise Agreements assigned by Seller to Purchaser, (ii) Purchaser's offer of
franchise agreements as required in Section 4.3, (iii) Purchaser's failure to
offer franchise agreements as required in Section 4.3, (iv) any claims or causes
of action by any franchisee concerning the terms and conditions of franchise
agreements offered by Purchaser or any action taken by Purchaser, specifically
including any termination or nonrenewal action, under or pursuant to said
franchise agreements, (iv) Purchaser's failure to fulfill its obligations under
this Agreement or the PMPA, and (v) Purchaser's failure to fullfill any
obligations contained in the PMPA Franchise Agreements assigned to Purchaser by
Seller.
4.5 LEGAL FEES. In any lawsuit brought by any franchisee, each Party shall bear
its own attorneys' fees and other costs of defense incurred in such action,
except as otherwise provided herein.
ARTICLE V
SURVEY AND TITLE MATTERS
5.1 SURVEYS. Purchaser shall have the option, at Purchaser's expense, to cause
to be prepared before the Closing Date a current ALTA land title survey
("Survey") of each Property, prepared by a duly licensed land surveyor and
registered professional engineer satisfactory to the Title Company and to
Seller. Upon completion of any Survey, there shall be delivered to Purchaser and
Seller three (3) sets each of the Survey Plat and to the Title Company one (1)
set of the Survey plat. The Survey, if prepared for any Property, will be
delivered to Seller and the Title Company within thirty (30) days after the
Effective Date. The Survey for any Property will show fences, easements,
rights-of-way and other encumbrances or encroachments on or adjacent to the
Property, including all of the title matters shown on the Title Commitments
provided for in Section 5.2, and will set forth the area of the Property in
square feet, together with a legal description thereof. In addition, the
surveyor shall certify the accuracy of said Survey to the Title Company in such
form as the Title Company requires for purposes of issuing the ALTA owner's or
leasehold policy of title insurance Provided for in Section 5.3.
5.2. TITLE COMMITMENTS AND PERMITTED ENCUMBRANCES. Within thirty (30) days after
the Effective Date or within thirty (30) days after receipt of a Survey if a
Survey is required to obtain a current title commitment, Seller will, at
Seller's expense, cause to be obtained a current title commitment for an
American Land Title Association ("ALTA") Form B owner's or leasehold policy of
title insurance on each Property ("Title Commitment"), issued through First
American Title Insurance Company, (the "Title Company") setting forth the state
of title of each Property and all liens, encumbrances and matters of record
(and, if Purchaser obtains Surveys, all facts and conditions shown on the
Surveys of each Property), including easements, restrictions, rights-of-way,
covenants, conditions and reservations, if any, affecting such Property,
together with legible copies of the recorded instruments relating to such title
matters and exceptions. Purchaser will obtain at its expense any mortgagee title
commitments and policies required by it in connection with the transaction. Upon
completion of each Title Commitment, there shall be delivered to Purchaser two
(2) copies thereof. Purchaser shall have thirty (30) days after its receipt of
the Title Commitment and the Survey, if a Survey has been obtained by Purchaser,
for each Property (including copies of the recorded instruments affecting title
to such Property) within which to review such documents and to notify Seller in
writing of any title matters reflected in the Title Commitment (or in the
Survey, if a Survey has been obtained by Purchaser) which would materially
restrict or adversely affect the use of the Property by Purchaser for retail
motor fuel sales as it currently exists, including any other current use on the
Property ("Title and Survey Objections"). Purchaser shall not object to minor or
immaterial title and survey matters which do not or will not interfere with, or
affect to a material extent, the operation or use of the Property as described
in the preceding sentence.
Within thirty (30) days after receipt of Purchaser's notice of Title
and Survey Objections, Seller shall make every reasonable effort to cure such
Title and Survey Objections and to satisfy the requirements of the Title
Company. If, for any reason, Seller is unable or unwilling, within said time, to
cure such Title and Survey Objections to the satisfaction of Purchaser, Seller
shall so notify Purchaser in writing. Within five (5) days after receiving such
notice Purchaser may, at Purchaser's option, either waive such uncured Title and
Survey Objections and proceed with the transaction contemplated by this
Agreement in accordance with the remaining terms and provisions hereof, seek to
reach agreement with Seller concerning the resolution of the uncured Title and
Survey Objections or execute on the Closing Date the Hold Harmless and Indemnity
Agreement attached as Exhibit "I". All title matters in the Title Commitments
which are not Title and Survey Objections shall become "Permitted Encumbrances."
5.3. OWNER OR LEASEHOLD POLICIES OF TITLE INSURANCE. At Closing, Seller shall
obtain as to each Property being conveyed and transferred by Seller, at Seller's
expense, the usual form of ALTA Form B Owner or Leasehold Policy of Title
Insurance, issued by the Title company in the amount of such Property's
valuation as agreed by the Parties, and insuring marketable fee simple or
leasehold title to such Property as being vested in Purchaser, subject only to
the Permitted Encumbrances and such policy's standard printed exceptions;
provided, however, that any such policy may provide, at Purchaser's option and
expense, "extended coverage" as follows:
a. the policy's exception as to restrictive covenants shall be
endorsed "None of Record";
b. the boundary and survey exception shall be limited to "shortages
in area";
c. the exception as to taxes shall be limited to the year of Closing
and shall be endorsed "Not Yet Due and Payable" and shall except
taxes resulting from subsequent assessments for years or portions
thereof prior to the Closing Date due to change in land usage or
ownership; and
d. the exception as to rights of parties in possession shall be
deleted.
5.4 CONVEYANCE OF TITLE; ASSIGNMENT OF LEASEHOLD INTERESTS. At Closing, Seller
shall (i) convey to Purchaser, by special warranty deed or the equivalent
statutory form of deed in the respective State in which the Property is located,
marketable fee simple title to each Fee Property and (ii) assign to Purchaser
its leasehold interest in each Leased Property, free and clear of all liens,
encumbrances, conditions, easements, assessments, and restrictions, except for
the following:
a. general real estate taxes for the year of Closing;
b. such rights-of-way, easements, restrictions, and reservations or
other encumbrances or conditions as are approved by Purchaser as
Permitted Encumbrances pursuant to Section 5.2;
c. building and zoning ordinances, laws and regulations applicable
to the Property;
d. mineral rights reserved by third parties;
e. matters that would be shown in a current survey of the Property;
and
f. rights of any franchisee, subtenant or licensee of Seller
occupying the Property at the Closing Date.
5.5 LEASED PROPERTIES. Prior to the Closing Date, Seller will exercise (i) any
purchase options in leases for Leased Properties, and (ii) any lease renewal
options applicable to the Leased Properties, that will be forfeited if not
exercised on or before the Closing Date. If the assignment of a lease for a
Leased Property requires the consent of the lessor, Seller shall promptly
request such consent.
ARTICLE VI
CLOSING
6.1 CLOSING; CLOSING DATE. Completion of the transactions contemplated by this
Agreement and Seller's delivery of the Deeds, the Assignments of Leases, the
Assignments of Franchise Agreement and the Bills of Sale and the execution and
delivery by the Parties of the other documents referred to herein ("Closing")
shall take place at the office of the Title Company, at or before 12:00 noon on
February 29, 2000, or at such other time, date and place as Seller and Purchaser
may mutually agree upon (the "Closing Date").
6.2 DELIVERY OF DOCUMENTS AT CLOSING. At the Closing, the following shall occur:
(A) Seller shall:
(1) deliver to the Title Company a duly executed and
acknowledged special warranty deed or equivalent statutory
form of deed for each Fee Property conveying marketable
title to such Property to Purchaser subject only to the
Permitted Encumbrances and as provided in Section 5.6
("Deed"). The Deed for each Fee Property shall be in the
form of Exhibit "J", and it shall contain the legal
description of such Property from the Survey, if a Survey
has been obtained by Purchaser, otherwise the legal
description shall be taken from the instruments of
conveyance of the Properties to Seller, as modified by any
subsequent partial conveyances or condemnations of portions
of any such Property, to the extent available to Seller;
(2) to the extent any required consents have been obtained,
deliver to the Title Company an executed and acknowledged
assignment of lease for each Leased Property subject only to
the Permitted Encumbrances ("Assignment of Lease"). The
Assignment of Lease for each Leased Property shall be in the
form of Exhibit "K" and shall contain the legal description
of such Property from the Survey, if a Survey has been
obtained by Purchaser, otherwise the legal description shall
be taken from the leases or instruments of conveyance of the
Properties to Seller, as modified by any subsequent partial
conveyances or condemnations of portions of any such
Property, to the extent available to Seller;
(3) deliver to Purchaser an executed bill of sale for all
personal property and equipment located on each Property
("Bill of Sale"), which shall be in the form of Exhibit "L";
(4) deliver to Purchaser assignments of the Contract Dealer
Agreements, the Fee & Lease Dealer Agreements and the
Distributor Sales Agreements, which shall be in the form of
Exhibit "M" (the Assignment of Franchise Agreement");
(5) deliver to Purchaser the executed Supply Agreement, as
provided in Section 2. 1, and the executed Branded Marketer
Agreement, as provided in Section 2.2;
(6) to the extent obtained by Seller prior to the Closing Date,
deliver to the Title Company the written consent of any
lessor or landlord, if the assignment of the lease relating
to a Leased Property requires such consent, such written
consent to be in form and substance satisfactory to the
Title Company and Purchaser; and
(7) deliver to the Title Company and to Purchaser such
certificates of incumbency and evidence of corporate
authority for the execution and delivery of this Agreement
and all documents required hereunder in such form and
content as the Title Company and Purchaser reasonably may
require.
(B) Purchaser shall:
(1) pay the Purchase Price as provided in Section 3.1;
(2) execute and deliver to Seller the Supply Agreement, as
provided in Section 2.1; and
(3) execute and deliver to Seller the Branded Marketer
Agreement, as provided in Section 2.2.
6.3 APPORTIONMENT OF TAXES. General real estate taxes for the then current year
relating to each Property and rents, if any, shall be prorated as of the Closing
Date and shall be adjusted at the Closing. If the Closing shall occur before
taxes are finally fixed for the then current year for any Property, the
apportionment of taxes at the Closing shall be upon the basis of the latest tax
rate applied to the latest assessed valuation for such Property. All special
taxes or assessments applicable to any Property prior to the Closing Date shall
be paid by Seller, including, without limitation, all taxes resulting from
subsequent assessments for years or portions thereof prior to the Closing due to
change in land usage or ownership pursuant to existing law. Seller shall collect
from Purchaser at Closing and shall pay all sales taxes applicable to the
personal property and equipment transferred to Purchaser. All other closing
costs, including, without limitation, transfer taxes, recording and escrow fees,
shall be assessed to Purchaser, as of the Closing Date.
6.4 PAYMENTS FROM FRANCHISEES. All rents and other sums due or payable by Seller
under the Fee & Lease & Dealer Agreements, the Contract Dealer Agreements and
the Distributor Sales Agreements will be prorated as of the Closing Date. Unless
otherwise agreed by the Parties, payment of the prorated amounts will occur
within forty-five (45) days after the Closing.
ARTICLE VII
ENVIRONMENTAL MATTERS
7.1 DEFINITIONS. As used herein, "Covered Contamination" means recoverable free
liquid hydrocarbons, dissolved hydrocarbon components, absorbed and vapor phase
hydrocarbon contamination, soil contamination which (i) was caused by Seller's
operations on any prior to the Closing Date, or occurs prior to or after the
Closing Date and is the result of the migration off a Property of contamination
that was located on a Property prior to the Closing Date, (ii) either (A) is
shown in the Baseline Report, as defined in Section 7.3 if applicable, or (B) is
shown by Purchaser to have been located on the Property prior to the Closing
Date pursuant to Section 7.4(C) or Section 7.4(D), and (iii) is required to be
remediated under applicable federal, state or local laws and regulations.
7.2 TANK TESTING. Seller, at Seller's expense, shall cause tightness tests of
all underground tanks and lines at the Properties to be conducted within sixty
(60) days prior to the Closing Date, or, upon mutual agreement of the Parties,
thirty (30) days after the Closing Date, using a "precision" test, such as the
Petro-Tite(RM), Tanknology Vacu Test(RM) or Leak Lokator(RM) tests, or an
equivalent test. Upon completion of such tests, Seller shall furnish copies of
the test results to Purchaser. Any untight fiberglass tanks or lines discovered
pursuant to such tests may be repaired by Seller rather than replaced if (i)
Seller would repair rather than replace such tanks or lines under Seller's
normal procedures if ownership of the Property were remaining with Seller, (ii)
such equipment was originally manufactured by either Owens-Corning or Xerxes,
(iii) the repair is effected by the manufacturer or its authorized contractors,
and (iv) the manufacturer certifies and warrants the condition of the tanks and
lines to be as tight as when new. In the event that Seller is unable to repair
any fiber glass tanks or lines in accordance with the standards set forth above,
Purchaser will receive at the Closing for such Property a credit toward the
Purchase Price in the amount of $70,000.00 per tankfield, and Purchaser will be
responsible for the installation of replacement tanks and lines on such
Property, at Purchaser's expense.
7.3 ENVIRONMENTAL ASSESSMENT
(A) Seller may, but shall not be obligated to, undertake at Seller's
expense an environmental assessment of each Property to determine the presence
of Covered Contamination. If undertaken, Seller will use reasonable efforts to
complete such assessments before the Closing Date or such other date as the
parties may mutually agree. At any Property at which Seller has previously
conducted, or is currently conducting, or is planning to conduct, any
environmental assessment or remediation activities ("Existing Cases"), Seller
shall deliver all existing environmental assessment data ("Existing Case Data")
to Purchaser as soon as possible but not later than sixty (60) days after the
Effective Date. The report of such environmental assessment, if undertaken, or
the Existing Case Data, if applicable, shall be the "Baseline Report" for each
Property. A copy of each Property's Baseline Report shall be provided to
Purchaser promptly after Seller's receipt thereof Seller also may undertake
additional environmental assessments on any Property after the Closing, and the
assessment reports will constitute amendments of the Baseline Reports for such
Properties, if applicable.
(B) Purchaser may conduct additional environmental assessments of
Properties at its expense before and after the Closing Date. Purchaser will
provide copies of the assessment reports promptly to Seller. Such assessment
reports will constitute amendments of the Baseline Reports for the Properties
affected thereby, if Baseline Reports have been prepared.
(C) To the extent required by applicable laws and regulations, Seller
shall report all Covered Contamination reflected in the Baseline Reports to the
relevant governmental authorities ("Authorities") and provide appropriate
notification thereof to property owners. To the extent required by applicable
laws and regulations, Purchaser shall report all New Contamination (as defined
in Section 7.4(C)) to the Authorities and provide appropriate notification
thereof to property owners.
(D) Seller shall remediate the Covered Contamination on any Property
in accordance with all applicable laws and regulations, provided that the
Closing occurs and the Property is conveyed to Purchaser. Seller's obligations
to remediate Covered Contamination on any Property shall continue until Closure
is obtained pursuant to Section 7.4(B).
7.4 ENVIRONMENTAL RESPONSIBILITY.
(A) Seller shall conduct all negotiations with the Authorities with
respect to the remediation of the Properties, for which Seller is responsible
under Section 7.3(D); provided, however, that Purchaser may attend, but not
actively participate in, any such negotiations. The Parties acknowledge that
Seller shall have the lead responsibility for setting policy, establishing
direction and conducting negotiations with the Authorities relating to the
remediation of Covered Contamination, and Purchaser shall neither contact nor
negotiate with the Authorities independently of Seller in connection with the
remediation of Covered Contamination. Seller shall provide Purchaser with copies
of all correspondence or other documents it receives from the Authorities, and
shall furnish Purchaser copies of all correspondence and other documents it
supplies to the Authorities, relating to any remedial action plan submitted by
Seller with regard to the Properties. Purchaser shall provide Seller with copies
of all correspondence and documents it receives from or provides to the
Authorities during the period of Seller's remediation activities on any
Property.
(B) As to each Property transferred or conveyed to Purchaser, Seller
shall undertake after the Closing Date, at its expense, all reporting and
notification required by law and all remediation or further investigation of
Covered Contamination on, under or originating from such Property, in compliance
with the requirements of the Authorities and all applicable environmental laws
and regulations and until Closure is obtained pursuant to this Section 7.4(B).
Seller shall be entitled to the benefit of any government reimbursement funds
that may be available with respect to such remediation of Covered Contamination.
Seller shall coordinate administrative efforts to recover such reimbursement.
Seller shall remediate the Covered Contamination on or migrating (or migrated)
from any Property in accordance with all applicable laws and regulations, until:
(1) Receipt of written notice from the Authorities that either
no further remediation of the Covered Contamination
identified in the Baseline Report is required, or that the
approved remediation plan of the Covered Contamination
identified in the Baseline Report has been completed; or
(2) Seller has requested closure notice from the Authorities,
has not received any response of any kind to its request for
a closure notice for twelve (12) months and Seller has
determined that the soil and groundwater has been remediated
to satisfactory levels based on four (4) successive
quarterly monitoring tests by a recognized environmental
remediation contractor that show the level of petroleum
hydrocarbons on the Property as being below or equal to the
limit required by the Authorities and Seller so notifies
Purchaser in writing.
The satisfaction of either of the conditions set forth in
clauses (1) or (2) above shall be referred to as "Closure"
herein.
(C) Any environmental contamination which (i) is not disclosed in the
Baseline Report for a Property, if applicable, (ii) is discovered after the
Closing Date on any Property or (iii) is caused after the Closing Date by
Purchaser, Purchaser's tenants, franchisees, or contractors, or is caused by
third parties, in an area of the Property identified in the Baseline Report as
containing Covered Contamination and before Seller's remediation of such Covered
Contamination has been completed, is herein referred to as "New Contamination."
Purchaser shall bear the burden of proof to establish that such environmental
contamination is Covered Contamination. Similarly, if any environmental
contamination not disclosed in the Baseline Report for a Property is discovered
after the date Seller completes the remediation contemplated by Sections 7.3 and
7.4 ("Remediation Completion Date"), Purchaser shall bear the burden of proof to
establish that such environmental contamination is Covered Contamination. If any
environmental contamination is discovered after the Closing Date and Purchaser
meets its burden of proving that it is not New Contamination but Covered
Contamination, Seller shall remediate such Covered Contamination, in compliance
with applicable remediation standards in effect at such time.
(D) If environmental contamination is discovered on any Property after
the Closing Date, but prior to the Remediation Completion Date, Purchaser shall
promptly notify Seller and act promptly to minimize the effects of such
environmental contamination. If, pursuant to Section 7.4(C), Purchaser does not
establish that such environmental contamination is Covered Contamination, and if
Seller reasonably determines that such New Contamination will make Seller's
remediation at the applicable Property significantly more difficult, more
expensive, or will extend significantly the time required to complete such
remediation work, Purchaser shall hire at Purchaser's sole expense a consultant
mutually acceptable to Purchaser and Seller to assess the effect of such New
Contamination on the environmental condition of the Property. This assessment
shall include a review of the remediation work that had been done to date and
the remaining cost to complete the remediation absent the New Contamination. In
addition, the consultant will estimate the cost of the additional work that will
be required due to the New Contamination. Purchaser will begin paying that
fractional cost percentage of all further remediation work performed by Seller
at the Property, determined by the following formula:
(1) Purchaser's fractional cost = I - (Estimated cost to complete
remediation prior to New Contamination divided by estimated cost
to complete remediation after the New Contamination).
EXAMPLE:
A. Estimated cost to complete remediation prior to New
Contamination equals $100,000. (As calculated at the time
the New Contamination occurs.)
B. Estimated cost to complete remediation. after New
Contamination equals $150,000. (Includes the $100,000 in
A plus $50,000 in estimated costs related to the New
Contamination.)
C. Purchaser's fractional cost equals: 1 - (A divided by B),
or 1 - .667, which results in Purchaser paying one-third
(333) of subject remediation costs incurred after the New
Contamination occurs.
(2) Purchaser will promptly pay its share of costs and expenses to
Seller as remediation work is performed and as invoices for such
work, with supporting documentation, are presented to Purchaser.
(3) The above notwithstanding, if Purchaser's fractional cost as so
calculated should exceed eleven-twentieths (11/20ths), Purchaser
shall, upon request by Seller, take over the ongoing remediation
efforts at the Property with the costs of such remediation
continuing to be shared between Seller and Purchaser as set forth
in this Section. In such event, Purchaser and Seller shall
attempt to negotiate a buyout to transfer the remediation
responsibility for known Covered Contamination at the Property
from Seller to Purchaser. If the Parties are unable to agree upon
the present value of the expected costs of completing the
remediation of known Covered Contamination ("Remediation Cost")
at a Property, the Parties shall select a consultant satisfactory
to both Parties who shall attempt to mediate between the Parties
to resolve such differences in a mutually satisfactory manner.
The fees and expenses of such consultant shall be borne equally
by the Parties. If the Parties agree upon the Remediation Cost
for any Property, Seller shall pay to Purchaser an amount equal
to the Remediation Cost and purchaser shall assume responsibility
for the completion of the remediation of Covered Contamination at
the Property. Purchaser shall also execute and deliver to Seller
a release of remediation liability for known Covered
Contamination in the form of Exhibit "N". Such release shall
include an assignment to Purchaser of Seller's rights, with
respect to the Property, to reimbursement from the relevant state
reimbursement fund, if any.
7.5 ACCESS. After the Closing Date, Purchaser shall provide for and permit such
access, at no cost to Seller, as Seller and its employees, agents, and
contractors may require to each Property, for such time as is required for
Seller to meet all environmental obligations contemplated by this Agreement.
Such access shall include the right to conduct such tests, take such
groundwater or soil samples, excavate, remove, dispose of, and treat the soil
and groundwater, and undertake such other actions as are necessary in the sole
judgment of Seller. Seller shall expeditiously remove from the Property (or
Properties) as soon as reasonably practicable all drums containing drill
cuttings, soil, debris or liquids generated from Seller's remediation or
investigation activities. Seller shall restore the surface and existing
structures, if any, on each Property to a condition substantially similar to
that at the time immediately prior to the action taken by Seller and shall
replace or repair damage to Purchaser's equipment and personal property on the
Property caused by Seller or its contractors. Seller shall, to the extent
practical, undertake the actions necessary to complete its remediation of
Covered Contamination in a manner that will not unreasonably disrupt the
operations of Purchaser on the Property. In no event, however, shall Seller have
liability to anyone, including Purchaser, for business disruption, lost profits,
or consequential damages arising from such actions or access. Seller or its
contractors shall provide Purchaser as much advance notice as possible (but at
least five (5) business days' notice) of all potentially disruptive or intrusive
activities to be taken on the Properties; such notice may be in the form of a
periodic schedule of activities. No advance notice shall be required for
nondisruptive activities such as periodic monitoring of wells on a Property.
Seller and Purchaser agree to cooperate on the placement and the location of
Seller's remediation equipment. Any cost or expense to repair or replace
monitoring and remediation equipment resulting from the acts or omissions of
Purchaser or Purchaser's contractors shall be the responsibility of Purchaser.
Purchaser and Seller shall cooperate in determining the order in which Seller
implements its remediation operations on the Properties, but the final
determination shall be Seller's.
7.6 MAINTENANCE OF RECORDS. During the course of Seller's remediation of any
Property, Purchaser shall maintain inventory and tank and line maintenance
records for such Property as required to comply with all applicable laws and
regulations. Seller shall have the right to review these records as Seller deems
necessary so as to be assured of the integrity of Purchaser's tank and line
system at the Property.
7.7 TRANSFER OF RESPONSIBILITY. Purchaser and Seller may from time to time
attempt to agree upon the Remediation Cost at a Property and the transfer of the
responsibility for the remediation of known Covered Contamination from Seller to
Purchaser. If the Parties agree upon such Remediation Cost and transfer, Seller
shall pay to Purchaser an amount equal to the Remediation Cost and Purchaser
shall assume responsibility for the completion of the remediation of known
Covered Contamination. Purchaser shall also execute and deliver to Seller a
release of remediation liability for known Covered Contamination in the form of
Exhibit "N". Such release shall include an assignment to Purchaser of Seller's
fights to reimbursement from the relevant state reimbursement fund, if any with
respect to the Property.
7.8 SELLER'S INDEMNIFICATION. For a period of five (5) years from the Closing
Date, Seller shall defend, indemnify and hold Purchaser and its affiliates
harmless from and against all claims, expenses (including reasonable attorneys'
fees), loss or liability arising from or related to Covered Contamination on the
Properties. This indemnity also will apply to any claim by a third party or the
Authorities that relates to the migration of Covered Contamination off any
Property. This indemnity shall not be assignable by Purchaser. This indemnity
will not apply to, and Seller will have no liability for, claims by Purchaser or
third parties for diminution in value, lost profits, business disruption or
consequential damages relating to Covered Contamination on any Property.
7.9 PURCHASER'S INDEMNIFICATION. Purchaser shall defend, indemnify and hold
Seller and its affiliates harmless from and against all claims, expenses
(including reasonable attorneys' fees), loss or liability arising from or
related to any New Contamination.
7.10 PURCHASER'S RELEASE. In consideration of the making of this Agreement, the
conveyance of the Properties to Purchaser, and the covenants of Seller to
remediate and to indemnify Purchaser as provided in Paragraph 7.4 and 7.8
("Seller's Obligations"), Purchaser agrees to accept the conveyance of the
Properties in their present condition and, if Seller fulfills Seller's
Obligations, to make no claim regarding the environmental condition of the
Properties. Purchaser hereby releases Seller from all Claims (including Claims
under the Comprehensive Environmental Response Compensation and Liability Act of
1980 as amended, (CERCLA) and the Resource Conservation and Recovery Act of
1976, as amended (RCRA) and other environmental laws) for injury, death,
destruction, loss or damage to the person or property of Purchaser and its
employees arising out (i) the environmental condition of the Properties and the
improvements and the equipment on the Properties, and (ii) the existence of
Covered Contamination on the Properties. This release does not include: (a)
Seller's Obligations; and (b) Claims by third parties and Governmental
Authorities relating to Covered Contamination on the Properties.
7.11 LIMITATIONS ON LIABILITY. Seller shall not be responsible for remediation
of any Covered Contamination at any Property after the Remediation Completion
Date if such remediation would be required only as a result of changes in
applicable remediation standards or environmental laws and regulations enacted
or promulgated after the Remediation Completion Date. In addition, the parties
acknowledge and agree that Seller shall have no responsibility for any
environmental matters at any real property on which any Contract Dealer or
Distributor operates a service station.
7.12 BURDEN OF PROOF. If any environmental contamination is discovered in
connection with any Property subsequent to the Remediation Completion Date,
Purchaser shall bear the burden of proof to establish that such contamination
is Covered Contamination.
7.13 LEASED PROPERTIES. In the event that, after the Closing Date and before the
Remediation Completion Date, the lease for any Leased Property expires or is
terminated, Seller shall be responsible for arranging access to the Property, at
Seller's expense, for the purpose of undertaking and completing its remediation
activities, including payment by Seller to the landowner of any rental or access
fee charged by the landowner in respect to such access to and use of the
Property; provided, however, that if such lease expiration is the result of
Purchaser's decision not to exercise any extension or renewal option provided
for in such lease, Purchaser shall give Seller at least six (6) months notice of
such election to not extend or renew the lease.
7.14 ELECTIVE WORK. If Purchaser encounters and excavates or removes
contaminated soil or groundwater on any Property while conducting construction,
remodeling, or demolish and rebuild work on any Property not required by Seller
("Elective Work"), Purchaser will solely bear the costs of removing, recycling
or disposing of the contaminated soil and groundwater, regardless of whether the
soil or groundwater on any Property contains Covered Contamination. Purchaser
will be deemed to be the generator of all hazardous waste caused by or
originating from the tanks and lines used in Purchaser's operations on the
Properties. Purchaser will report any such hazardous waste and environmental
contamination, including Covered Contamination and contaminated soil and
groundwater excavated, removed, recycled or disposed of by Purchaser in
connection with Elective Work on any Property, to the Governmental Authorities
if required to do so by applicable laws and regulations. Purchaser also will
sign all manifests for transportation and disposal of any such hazardous waste
and contaminated soil or groundwater. Purchaser will pay the cost of clean fill
required for any excavation caused by Elective Work on any Property.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES; COVENANTS
8.1. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby represents and
warrants to Purchaser as follows, which representations and warranties shall be
deemed made by Seller also as of the Closing Date:
a. Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the State of its incorporation
and is duly qualified to do business as a foreign corporation or
partnership in each State where the Properties are located.
Seller has full power and authority to enter into this Agreement
and to perform its obligations hereunder.
b. To Seller's knowledge, Seller is in compliance with all
applicable laws, ordinances, regulations, statutes, rules and
restrictions relating to the Properties and Seller has received
no notice of any failure to comply therewith.
c. No provision of (i) Seller's certificate of incorporation or
by-laws or, (ii) to Seller's knowledge, any agreement, instrument
or understanding to which it is a party or by which it is bound,
or, (iii) to Seller's knowledge, any order, writ, injunction,
decree, statute, rule or regulation applicable to Seller, has
been or will be violated by the execution by it of this Agreement
or the performance or satisfaction of any agreement or condition
herein contained upon its part to be performed or satisfied.
d. All requisite corporate and other authorizations for the
execution, delivery, and performance of this Agreement have been
duly obtained by Seller.
e. To Seller's knowledge, no consent or approval of any governmental
or regulatory authority is required for the due authorization,
execution, or delivery by Seller of this Agreement other than the
consent of the FTC pursuant to the Consent Decree relating to the
Exxon Mobil merger and the approval of the Attorney Generals of
the States in which the Properties are located.
f. Seller has all approvals, permits, governmental authorizations
and consents required to operate each of the Company Operated
Properties as a retail service station and any other current use
thereon.
g. Except as disclosed in this Agreement the Exhibits and
operational contracts required in connection with Company
Operated Properties, which contracts will be disclosed to
Purchaser prior to the Closing Date, there are presently
outstanding no other contracts or agreements (whether written or
oral) to which Seller is a party with respect to the ownership,
development or operation of the Properties and no other parties
have any interest in any of the Properties, except as set forth
herein.
h. Except as set forth on Exhibit "O", there is no litigation
pending or threatened affecting Seller or the Properties which
would constitute a lien, claim or obligation of any kind against
the Properties or which would materially and adversely affect any
of the Properties.
i. Seller has notified Purchaser of all condemnation actions or
similar proceedings affecting any of the Properties as to which
Seller has received written notice by the condemning authority.
j. All taxes or other assessments on or concerning the Properties
for which Seller is liable and all taxes, fees, or other levies
measured by transactions or business activity conducted by Seller
on or with respect to the Properties for the year of transfer and
earlier, other than installments or assessments not yet due, have
been paid in full and there are no penalties or delinquency
charges; provided, however, that there may be charges which
Seller may be challenging in good faith and which Seller shall
pay if Seller is unsuccessful in its challenge.
k. There are no mortgages, security interests or liens affecting the
equipment and personalty owned by Seller on any of the
Properties.
1. To Seller's knowledge, the present zoning of each of the
Properties will permit the use of such Property for its current
use.
m. There are no matters known to Seller that would materially and
adversely affect Purchaser's ability to operate the business at
any of the Properties after the Closing Date as a retail service
station with such ancillary businesses as are currently being
conducted thereon.
8.2. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser hereby represents,
and warrants to, and covenants and agrees with Seller that as of the date hereof
and as of the Closing Date:
a. Purchaser is a corporation duly organized, validly existing, and
in good standing under the laws of the State of its incorporation
and is duly qualified to do business as a foreign corporation in
each State where the Properties are located. Purchaser has full
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.
b. No provision of (i) Purchaser's certificate of incorporation or
by-laws, or, (ii) to Purchaser's knowledge, any agreement,
instrument or understanding to which it is a party or by which it
is bound, or, to (iii) Purchaser's knowledge, any order, writ,
injunction, decree, statute, rule or regulation applicable to
Purchaser has been or will be violated by the execution by
Purchaser of this Agreement or by Purchaser's performance or
satisfaction of any agreement or condition herein contained upon
its part to be performed or satisfied.
c. All requisite corporate and other authorizations for the
execution, delivery and performance of this Agreement have been
duly obtained by Purchaser.
d. To Purchaser's knowledge, no consent or approval of any
governmental or regulatory authority is required, except as noted
herein, for the due authorization, execution, or delivery by
Purchaser of this Agreement.
8.3 OPERATION PENDING CLOSING. Between the Effective Date and the Closing Date,
Seller shall not permanently close any of the service stations on the
Properties, without the approval of Purchaser, except for any termination or
nonrenewal of any Fee & Lease Dealer Agreement for any reason permitted by the
PMPA. Notwithstanding the foregoing, Seller may close any service station
temporarily to change the franchisee at the Property, and to repair or rebuild
the improvements therein. Seller will use reasonable commercial efforts to
maintain the current operations on, and the repair and maintenance of, the
Properties between the Effective Date and the Closing Date.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All Indemnifications,
representations, warranties, covenants and agreements of the Parties contained
in this Agreement shall survive for a period of three (3) years following the
Closing Date, except that the environmental obligations of the Parties shall be
governed by the provisions of Article 7 and except further that the
indemnification set forth in Section 9.2(vi) shall survive for a period of five
(5) years after the consent order or other order of Authorities expires. It is
the Parties' intent that such surviving rights and obligations shall not merge
in the Closing or the conveyancing instruments delivered at the Closing.
9.2 INDEMNIFICATION OBLIGATIONS. Except for environmental matters and matters
with respect to Seller's franchise relationships which are covered by Article 7
and Article 4, respectively, Seller and Purchaser ("Indemnitors") each shall
defend, indemnify and hold harmless the other, its successors, assigns,
directors, employees, subsidiaries, affiliates and agents ("Indemnitees"), from
and against each and every Claim, which results from, arises out of or is
attributable in any way to any of the following:
(i) the Indemnitor's ownership, possession, operation, use or
maintenance of any Property;
(ii) claims with respect to brokers, finders and agents' fees and
commissions in connection with the transaction contemplated
in this Agreement asserted by any person on the basis of any
statement, instrument or agreement alleged to have been made
by the Indemnitor;
(iii) any failure or alleged failure by the Indemnitor to comply
with federal, state and local laws and regulations which
apply to this transaction, including, but not limited to,
PMPA and state franchise laws;
(iv) any representation or warranty made by the Indemnitor in
this Agreement or in documents delivered by the Indemnitor
at the Closing which are misleading or untrue in any
material respect;
(v) any breach of the obligations, covenants or agreements made
by the Indemnitor in this Agreement; or
(vi) the non-compliance of the Indemnitor with any directive,
order or requirement of the Authorities, including but not
limited to environmental cleanup orders relating to any
Property.
9.3 ASSERTION OF RIGHT OF INDEMNIFICATION. The Indernnitee shall notify the
Indemnitor of the assertion of any Claim hereunder promptly after the Indemnitee
receives actual notice of said Claim. The Indemnitee shall have the right, but
not the duty, to participate with attorneys of its own choosing, at its own
expense, in the defense of any Claim for which the Indemnitor is obligated to
defend and indemnify it, and to approve any settlement that affects it, without
relieving the Indemnitor of any obligations hereunder.
ARTICLE X
BROKERAGE COMMISSIONS
10.1 COMMISSIONS. It is acknowledged and agreed that no brokers have been
involved in the negotiation and consummation of this Agreement and no broker's
commission is due or payable to any person. Each Party shall indemnify and hold
harmless the other Party from any and all Claims for any broker's commission
arising through its acts or dealings with any third party.
ARTICLE XI
CONDITIONS PRECEDENT
11.1 APPROVALS. Purchaser understands and acknowledges that this Agreement and
the consummation of the transactions contemplated by this Agreement are subject
to and conditioned upon Seller obtaining approval from the FTC pursuant to the
terms of the Consent Decree and approval from the Attorney Generals of the
States in which the Properties are located. Purchaser further acknowledges that
Purchaser is required to provide certain information to the FTC and the State
Attorney Generals in connection with Seller's application for approval from the
FTC and the State Attorney Generals and Purchaser agrees that Purchaser shall
supply all information required by the FTC and the State Attorney Generals and
to otherwise fully cooperate with Seller as expeditiously as possible in
connection with such approval.
ARTICLE XII
DEFAULTS, REMEDIES
12.1 PURCHASER'S DEFAULT. In the event this Agreement is not consummated because
of non-performance, default or breach (collectively herein called a "Default")
by Purchaser, then Seller may at its sole option take any of the following
courses of action:
(a) terminate this Agreement and draw upon the Earnest Money
Deposit upon which termination Seller and Purchaser shall
have no further obligation or liability one to the other
hereunder; or
(b) file suit against Purchaser for damages; or
(c) enforce specific performance of this Agreement and the
transaction provided for herein according to the terms
hereof by all means available at law or in equity.
In the event Seller elects first to enforce this Agreement by
specific performance and at any time during pursuit of
enforcement elects not to pursue specific performance, Seller
shall be entitled to pursue its remedies under Subparagraphs (a)
or (b) as if it had elected to do so as above set forth, and such
subsequent election to pursue its courses of action under
Subparagraph (a) or (b) above shall be deemed to be an election
of remedies at that time and not before.
Purchaser acknowledges and agrees that a Default by Purchaser
under this Agreement will constitute a default by Purchaser
pursuant to the Agreement of Purchase and Sale and Assignment of
Marketing Assets between Purchaser and Exxon Corporation be,
relating to the sale and purchase of retail marketing properties
and assets in other States. Purchaser acknowledges and agrees
that a default under the Agreement of Purchase and Sale and
Assignment of Marketing Assets between Purchaser and Exxon
Corporation relating to the sale and purchase of retail marketing
properties and assets in other States will constitute a Default
by Purchaser hereunder.
12.2 SELLER'S DEFAULT. In the event this Agreement is not consummated because of
non-performance, default or breach (collectively herein called "Default") by
Seller then Purchaser may at its sole option, as its exclusive remedies, take
any of the following courses of action:
(a) terminate this Agreement and recover the Earnest Money
Deposit from escrow, upon which termination Seller and
Purchaser shall have no further obligation or liability one
to the other hereunder; or
(b) file suit against Seller for damages; or
(c) enforce specific performance of this Agreement and the
transaction provided for herein according to the terms
hereof by all means available at law or in equity.
In the event Purchaser elects first to enforce this Agreement by
specific performance and at any time during pursuit of
enforcement elects not to pursue specific performance, Purchaser
shall be entitled to pursue its remedies under Subparagraphs (a)
or (b) as if it had elected to do so as above set forth, and such
subsequent election to pursue its courses of action under
Subparagraphs (a) and (b) shall be deemed to be an election of
remedies at that time and not before.
ARTICLE XIII
PERMITS
13.1 SELLER'S COOPERATION. From the Effective Date until the Closing Date,
Seller shall cooperate with Purchaser at Purchaser's expense in executing all
documents reasonably required in connection with Purchaser's obtaining any
governmental permits, or zoning variances, use permits or site plan approvals
relating to the Properties, desired by Purchaser. Purchaser shall indemnify and
hold Seller harmless from any and all claims, liabilities (direct or indirect),
costs and expenses (including attorneys' fees) related to or arising from
Seller's cooperation and execution of such documents.
13.2 POST-CLOSING OBLIGATION. After the Closing, Seller shall cooperate with
Purchaser, at no cost or risk to Seller, to obtain or to transfer any permits
and licenses held by Seller that Purchaser may require for the continued
operation of the Properties, with such ancillary businesses as are conducted
thereon on the Closing Date.
ARTICLE XIV
PROPERTY- LOSS
14.1 NOTICE. Seller shall give Purchaser prompt notice of (i) any casualty
affecting any of the Properties between the Effective Date and the Closing Date,
and (ii) any actual taking or condemnation of all or any portion of any Property
or any planned or pending condemnation action as to which Seller has received
written notice from the condemning authority.
14.2 CASUALLY. In the event any Property suffers damage or destruction
subsequent to the Effective Date, but prior to the Closing Date, Seller shall
elect either (i) to repair or make adequate provision for the repair of such
Property prior to Closing or (ii) to reimburse Purchaser by an amount agreed
upon by Seller and Purchaser to represent the reduction in the real estate value
of the Property by reason of the casualty.
14.3 CONDEMNATION.
(A) If after the Effective Date and prior to the Closing Date, there
shall occur the transfer of title or possession of all or any part of a Property
by condemnation ("Taking"), the Closing shall take place as to such Property as
provided herein without abatement of the Purchase Price, and there shall be
assigned to Purchaser at the Closing all interest of Seller in any award which
may be payable to Seller on account of such Taking.
(B) If prior to the Closing Date, Seller shall receive written notice
of a planned or threatened Taking of all or part of any Property, the Closing
shall take place as to such Property as provided herein without abatement of the
Purchase Price, there shall be assigned to Purchaser at Closing all interest of
Seller in any award which may be payable to Seller on account of such Taking.
14.4 RISK OF LOSS. Seller shall retain the risk of loss or damage with respect
to the Properties until title passes, which shall occur on the Closing Date.
ARTICLE XV
REAL ESTATE AND ENGINEERING DOCUMENTS AND OTHER INFORMATION
15.1 DELIVERY OF INFORMATION. Seller shall cooperate with Purchaser, before
and after the Closing Date, to provide Purchaser copies of material and relevant
real estate documents from Seller's files relating to the Properties, if
available, including title reports, base leases, unrecorded easements,
engineering plans and drawings, surveys, and receipted ad valorem tax bills for
the most recent filing year relative to the Properties.
15.2 ACCURACY OF INFORMATION, Seller shall exercise reasonable efforts to cause
the copies of documents listed in Section 15.1 to be accurate; however, the
Parties acknowledge that, such documents are, for the most part, unaudited and
therefore Seller makes no warranty, as to the accuracy or completeness of the
copies provided, nor shall Seller be liable to Purchaser in the event of any
inadvertent omission or error.
ARTICLE XVI
RIGHT OF ENTRY AND INSPECTION; EQUIPMENT
16.1 ENTRY AND INSPECTION. After the Effective Date and at a time mutually
agreed by the Parties, Purchaser may inspect each of the Properties, personally
or through agents, employees, contractors, or subcontractors, at Purchaser's
expense, to ensure that the equipment necessary for the operation of the
Properties as contemplated hereunder (defined as product dispensers, pumps, air
compressors, lifts, convenience store coolers, and air conditioners) ("Major
Equipment") is present and in proper working order. Seller's representatives may
attend all such inspections. Purchaser (a) shall assume all risks, except those
resulting from intentional torts by or negligence of Seller's employees and/or
franchisees, involved in entering the Properties pursuant to this Paragraph and
(b) shall indemnify Seller and hold it and its employees and franchisees
harmless from and against all loss, cost, liability, and expense (including, but
not limited to, reasonable attorneys' fees and other litigation expense)
incurred by Seller and Seller's employees and franchisees by reason of bodily
injury to or death of persons or damage to property sustained by any party which
is caused by Purchaser's negligence or intentional torts in connection with its
entry upon the Properties; provided that such indemnity shall not cover any
portion of such loss or expense arising out of or caused by Seller's or its
employees' and franchisees' negligence or intentional torts. If Purchaser
determines from its inspections that any of the Major Equipment is missing or in
need of repair, Purchaser shall notify Seller and Seller shall either replace or
repair such items prior to the Closing Date with items of equivalent utility,
value and quality which reasonably are acceptable to Purchaser, at Seller's
expense.
16.2 POST CLOSING INSPECTION. Within forty-eight (48) hours after the Closing,
Purchaser shall have the right to inspect each Property to determine whether the
Major Equipment is missing or in need of repair; and whether any previously
identified repairs or replacements were made pursuant to Section 16.1. Seller's
representatives shall be afforded the opportunity to attend such inspection. To
the extent that Purchaser reasonably determines from such inspections that any
Major Equipment is still missing or is in need of repair, and so notifies
Seller, Seller shall either replace or repair such items at its expense. If
Purchaser does not conduct such inspection of any Property within forty-eight
(48) hours after the Closing, Seller shall not be obligated to replace or repair
any Major Equipment.
16.3 MAINTENANCE OF EQUIPMENT. None of the Major Equipment and personal property
shall be disposed of or otherwise removed from a Property on or after the
Effective Date, except as may be agreed in advance by the Parties. Seller agrees
to maintain all Major Equipment or, the Properties to be transferred to
Purchaser in accordance with Seller's usual maintenance practices and to
transfer such equipment to Purchaser at the Closing in proper working condition
subject to reasonable wear and tear. All fixtures, improvements, and equipment
other than the Major Equipment shall be maintained in accordance with Seller's
usual maintenance practices and shall be transferred to Purchaser at the Closing
in an "as is, where is" condition, with no representations or warranties
whatsoever, express or implied, of merchantability, fitness, condition or
otherwise.
16.4 PURCHASER'S RIGHT TO INSTALL EQUIPMENT. Subject to the legal rights of
Seller's franchisees, Purchaser shall have the right, after the Effective Date,
personally or through agents, employees, contractors, or subcontractors, to
enter the Properties, at Purchaser's expense and at such reasonable times as
Purchaser may elect, to install point of sale equipment, telephone lines and
other equipment as needed to effect an orderly transition of operations after
the Closing Date. Purchaser (a) shall make reasonable efforts not to disrupt
existing operations on the Properties; (b) shall assume all risks, except those
resulting from intentional torts by or negligence of Seller's employees and/or
franchisees, involved in entering the Properties pursuant to this Paragraph and
(c) shall indemnify Seller and hold it and its employees and franchisees
harmless from and against all loss, cost, liability, and expense (including, but
not limited to, reasonable attorneys' fees and other litigation expense)
incurred by Seller and its employees or franchisees by reason of bodily injury
to or death of persons or damage to property sustained by any party which is
caused by Purchaser's negligence or intentional torts; provided that such
indemnity shall not cover any portion of any such loss or expense arising out of
or caused by Seller or its employees' or franchisees' negligence or intentional
torts.
16.5 PURCHASER'S RIGHTS. If the transaction contemplated by this Agreement is
not consummated for any reason and Purchaser has installed equipment on any
Property in accordance with Section 16.4, Purchaser shall, at Seller's option:
(1) remove the equipment installed by Purchaser and restore the Property to its
original condition; or (2) transfer to Seller, without warranty, express or
implied, title to any equipment installed by Purchaser, after which Seller shall
be solely responsible therefor.
ARTICLE XVII
EXCUSED DELAY IN PERFORMANCE
17.1 EXCUSED PERFORMANCE. The performance by either Party of any of its
obligations set forth in this Agreement shall not be deemed untimely to the
extent any late performance is due to acts of God, acts of war, civil
disturbance, acts of government (including, but not limited to, governmental or
court orders), strikes or other labor disputes (the settlement of which shall be
totally within the discretion of the Party having the difficulty) or any other
act or event beyond the reasonable control of the affected Party; provided,
however, that the affected Party is taking all reasonable steps to perform and
promptly notifies the other Party of the details of such occurrence; and
provided further that the time for the performance of any undertaking shall not
be extended or any failure to perform excused for more than sixty (60) days
pursuant to this Paragraph without the mutual consent of the Parties.
ARTICLE XVIII
EMPLOYEES
18.1 EMPLOYEES. After the Effective Date, and at a time mutually agreed by the
Parties, Purchaser will have the right to interview and offer employment to any
of Seller's exempt and non-exempt employees engaged in the management or
operation of any Property conveyed or transferred hereunder (not to include
Seller's salary-operated store employees) ("Eligible Employees"), concerning
possible employment opportunities with Purchaser. Seller will provide Purchaser
a list of all Eligible Employees within ten (10) days after the Effective Date.
If Purchaser determines to offer employment to any Eligible Employee, Purchaser
agrees to comply with the guidelines set forth in Seller's standard conditions
set forth in Exhibit "P" ("Conditions of Employment").
18.2 SALARY-OPERATED STORE EMPLOYEE. After the Effective Date, and at a time
mutually agreed by the Parties, Purchaser will have the right to interview and
offer employment to any of Seller's exempt and non-exempt employees engaged in
the management or operation of any salary-operated or company-operated store on
any Company Operated Property conveyed or transferred hereunder concerning
possible employment opportunities with Purchaser.
ARTICLE XIX
JOINT PUBLICITY
19.1 PRESS RELEASE AND RELEASE OF OTHER INFORMATION. Publicity and other
releases concerning the transaction contemplated by this Agreement shall, where
possible, be jointly planned and coordinated between Purchaser and Seller.
Neither Party shall act unilaterally in this regard without the prior approval
of the other Party provided, however, that such approval shall not be
unreasonably withheld. Nothing herein contained shall prevent either Party from
furnishing information to any governmental agency or from furnishing information
to comply with applicable laws or regulations.
ARTICLE XX
ASSIGNMENT
20.1 ASSIGNMENT. Except as may hereafter be provided, this Agreement may not be
assigned by either Party without the prior written consent of the other Party,
which consent may be withheld for any reason. Notwithstanding the preceding
sentence, Purchaser may designate, upon notice to Seller at least thirty (30)
days before the Closing Date, an entity or entities to accept Seller's title to
the Properties on the Closing Date and to pay the Purchase Price to Seller;
provided, however, that such designation shall not affect Purchaser's duties and
obligations hereunder and Purchaser will remain primarily bound by all of its
covenants, warranties, representations and indemnifications. Furthermore,
notwithstanding the foregoing, Seller may assign this Agreement or any of its
rights or obligations under this Agreement to any entity that owns or controls,
is owned or controlled by or is under common control with Seller.
ARTICLE XXI
ON THE RUN(R) FRANCHISE AGREEMENTS
21.1 EXISTING FRANCHISE AGREEMENTS. Purchaser acknowledges that Seller is the
franchisor under business format franchise agreements with the Distributors, Fee
& Lease Dealers and Contract Dealers (the "OTR Franchisees") listed on Exhibit
"Q" for the operation by the OTR Franchisees of On The Rung(R) convenience
stores at the service station facilities listed on Exhibit "Q". Notwithstanding
any conveyance contemplated by this Agreement, Purchaser further acknowledges
and agrees the business format franchise agreements with the OTR Franchisees
relating to the On The Rung convenience stores are not being assigned to
Purchaser and that after the Closing, Seller shall continue to be the franchisor
under such agreements, until the termination or expiration of such agreements.
ARTICLE XXII
MISCELLANEOUS
22.1 ENTIRE AGREEMENT. This Agreement embodies the entire agreement between the
Parties relating to the transactions contemplated by this Agreement and cannot
be varied except by the written agreement of the Parties. This Agreement
supersedes any other agreement of the Parties relating to the transactions
contemplated by this Agreement.
22.2 Notices. Any notice, demand, request, consent, approval, or other
communication which a Party hereto is required or desires to give, make or
communicate to the other shall be effective and valid only when in writing and
shall be deemed duly given when received if such notice is mailed by registered
or certified mail, return receipt requested, or sent by personal delivery or
sent by a nationally recognized overnight carrier, return receipt requested, or
sent by telecopier (fax), all charges prepaid, addressed in the case of Seller
to:
Divestment Team
c/o Mobil Oil Corporation
3225 Gallows Road
Fairfax, Virginia 22037
Attention: James S. Carter
Divestment Team Manager
Telecopier: 703-846-5440
and in the case of Purchaser to:
Tosco Corporation
72 Cummings Road
Stamford, CT 06902
Attention: Wilkes McClave
Senior Vice President
Telecopier 203-964-3197
, or in either case at such other address as may have last been
specified by notice given as provided by the Party addressed.
22.3 CONSTRUCTION. Words of any gender used in this Agreement shall be construed
to include any other gender, and words in the singular number shall include the
plural, and vice versa, unless the context requires otherwise.
22.4 CAPTIONS. The captions used in connection with the Articles and Sections of
this Agreement are for convenience only and shall not be deemed to enlarge,
limit or otherwise modify the meaning or interpretation of the language of this
Agreement. Any references to "Articles", "Sections", "Subsections" and
"Exhibits" are to Articles, Sections, Subsections, Exhibits, Riders and Addenda
of this Agreement.
22.5 SURVIVAL. The provisions of Article 1, Section 2.3, Article IV, Sections
5.2 and 5.3, Articles VI and VII, Sections 8.1 and 8.2, Articles IX, X and XII,
Section 13.2 and Articles XV, XVI, XVII, XVIII XIX, XXI and XXII shall survive
the Closing of the transaction under this Agreement and shall not be deemed to
have merged therewith. All other provisions hereof not included or incorporated
in any document to be executed and delivered on the Closing Date shall not
survive the Closing.
22.6 EFFECTIVE DATE. All time limits provided for herein which are measured by
the number of days "from the date hereof" (rather than being designated by
specific date) shall run from the Effective Date, rather than the date or dates
of execution by the Parties.
22.7 FURTHER ASSURANCES. Following the Closing Date, for no further
consideration, Seller and Purchaser shall perform such other acts and shall
execute, acknowledge and deliver such additional documents as the other Party
may reasonably request to vest in Purchaser all of Seller's right, title,
interest, and enjoyment of the Properties and other assets and rights conveyed
under this Agreement, to carry out the transactions contemplated by this
Agreement and to protect each Party's rights under this Agreement.
22.8 RELATIONSHIP BETWEEN SELLER AND PURCHASER. Purchaser shall not be
considered a successor of Seller for the purpose of any claims or charges for or
arising out of the ownership, use or operation of the Properties prior to the
Closing Date including but not limited to unemployment compensation, worker's
compensation, Fair Labor Standards Act violations, Occupational Safety and
Health Act violations, Equal Employment Opportunity violations, or any similar
federal, state or local statutes or regulations.
22.9 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit
of the Parties hereto and their respective successors and assigns.
22.10 EXPENSES. Except as otherwise specifically provided for herein, each Party
hereto shall bear all expenses incurred by it in connection with this Agreement,
including, without limitation, the charges of its counsel, accountants,
consultants, and other experts.
22.11 TIME OF THE ESSENCE. Unless otherwise expressly provided, time is of the
essence in the performance of all obligations set forth herein.
22.12 AUTHORITY TO BIND. The persons executing this Agreement warrant that they
have authority to bind the respective Parties to this Agreement.
22.13 COUNTERPARTS. This Agreement may be executed by the Parties in
counterparts, each of which shall be deemed an original, but such counterparts
together shall constitute one and the same instrument.
22.14 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its
rules on the conflicts of law. The Parties hereto irrevocably submit to the
exclusive jurisdiction of the United States District for the Southern District
of New York for all purposes under this Agreement, except for those matters over
which said court does not have subject matter jurisdiction, in which case the
Parties irrevocably submit to the exclusive jurisdiction of the Supreme Court of
New York County, New York.
22.15 NO THIRD PARTY BENEFICIARY. Nothing herein shall be deemed to express any
intent to create third party beneficiary rights in favor of any person or
entity, as Seller and Purchaser specifically state and agree that no such intent
exists.
22.16 NO RECORDING OF THIS AGREEMENT. Prior to the Closing, neither Party shall
record this Agreement with any County Clerk or other governmental office. If
either Party records this Agreement, it shall, at the option of the other Party,
be ipso facto null and void and of no further force.
22.17 1031 EXCHANGE. Seller may require Purchaser, pursuant to Section 1031 of
the Internal Revenue Code of 1986, as amended, to pay the Purchase Price to a
trust or intermediary party designated by Seller, in order that Seller may
participate in a tax-deferred exchange of like-kind property. Such election
shall be made, if at all, by notice to Purchaser not later than ten (10) days
prior to the Closing Date. The Parties agree to execute such agreements and
other documents as may be necessary to complete and otherwise effectuate
Seller's tax-deferred exchange, provided that (a) Purchaser's obligations
hereunder shall not be increased; (b) such documents shall not modify
Purchaser's representations, warranties or obligations hereunder; (c) the
Purchase Price paid by Purchaser shall not be different from that which
Purchaser would have paid pursuant to Section 3.1, (d) Purchaser shall incur no
additional cost, expense or liability as a result of its cooperation in such
exchange; and (e) Seller shall indemnify and hold harmless Purchaser for
additional expenses, including, but not limited to, taxes and closing costs, and
any cost or expense (including reasonable counsel fees) which Purchaser may
suffer, sustain or become subject to as a result of the Purchase Price being
paid to a trust or intermediary party rather than to Seller and the trust's or
intermediary's subsequent use of the Purchase Price.
22.18 SEVERABILITY. If any provision in this Agreement shall for any reason be
adjudged by any court OF competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement, but shall be confined in its operation to the provision of this
Agreement directly involved in the controversy in which such judgment shall have
been rendered.
22.19 WAIVER. Any of the terms and conditions of this Agreement may be waived at
any time and from time to time, in writing, by such Parties as are entitled to
the benefit of such terms and conditions; provided, however, that except as
otherwise specifically provided in this Agreement, no failure or delay on the
part of either Party in exercising any of its respective rights under this
Agreement upon any failure by the other Party to perform or observe any
condition, covenant or provision of this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such rights preclude
any other or further exercise thereof or the exercise of any other rights under
this Agreement. No waiver or release of any of the terms, conditions, or
provisions of this Agreement shall be valid or asserted or relied upon by either
Party or offered in any judicial proceeding or otherwise, unless the same is in
writing, and duly executed by the waiving or releasing Party.
IN WITNESS WHEREOF, this Agreement has been executed by Seller and Purchaser on
the dates set forth below but effective as of the Effective Date.
MOBIL OIL, CORPORATION TOSCO CORPORATION
a New York corporation a Nevada corporation
By:__________________________ By:________________________
Name:________________________ Name: Wilkes McClave
Title:_______________________ Title: Senior Vice President
Date:________________________ Date:______________________
<PAGE>
Exhibit 21
SUBSIDIARIES AND AFFILIATES OF TOSCO CORPORATION
(A Nevada Corporation)
JURISDICTION OF INCORPORATION
AZL Resources, Inc. Arizona
Arizona-Florida Land & Cattle Company Florida
AZCO Properties, Inc. Colorado
AZL Engineering, Inc. Arizona
Breckenridge Nordic Village Corporation Colorado
C. S. Land, Inc. California
Davis Point Pipeline Company California
Diablo Service Corporation California
Emerald Shipping Corporation Delaware
Golden Valley Pipeline Company California
International Energy Insurance Limited Bermuda
Marcus Hook Refining Company Delaware
O. S. Land Services, Inc. Colorado
Pacific Northwest Energy Company Washington
Royal Triton Company Delaware
Seminole Fertilizer Corporation Delaware
Ridgewood Chemical Corporation Delaware
The Circle K Corporation Delaware
Circle K Stores Inc. Texas
Charter Marketing (Connecticut) Connecticut
Circle K Arizona Limited Partnership Arizona
Circle K Enterprises Inc. Delaware
TMC Franchise Corporation Arizona
Circle K International, Inc. (US) Texas
Circle K Money Orders Corp. Texas
CKC, Inc. Massachusetts
CKST Corporation Texas
Spirit Enterprises, Inc. Delaware
K-Cal Ventures Inc. Arizona LLC
Circle K Licensing Company, Inc. Texas
The Oil Shale Corporation Delaware
Tosco (C-TI), Inc. Delaware
Tosco (C-TLP), Inc. Delaware
Tosco (U.K.) Ltd. Delaware
Tosco Capital Corp. Delaware
Tosco Commercial Inc. Delaware
Tosco Europe Limited United Kingdom
Tosco Funding Corporation Delaware
Tosco Holdings Corp. Delaware
Tosco L. P. Delaware L.P.
Tosco Marketing, Inc. Delaware
Tosco Northwest Properties III, Inc. Delaware
Tosco Northwest, Inc. (formerly Western
Hemisphere Corporation) Delaware
Avon Marine Corp. Delaware
Riverhead Marine Corp. Delaware
Tosco Operating Company, Inc. (formerly T
Northwest Properties II, Inc.) Delaware
Tosco Power, Inc. Delaware
Tosco Processing & Marketing, Inc. Delaware
Bayway Refining Company Delaware
Tosco Pipeline Company Delaware
Tosco Refining Company, Inc. Delaware
Tosco Refining L. P. Delaware L.P.
Tosco Terminal Company Delaware
Tosco Trading, Transportation and Supply, Inc. Delaware
Toscopetro Corporation Delaware
TPC Pipe Line Company Delaware
Union Pipeline Company (California)
(formerly Unocal California Pipeline Company) California
Unocal 76 Mexico Mexico
Unocal Expresslube, Inc. Illinois
Unocal Pacific Blending PTE Ltd. Singapore
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
registration statements on Forms S-3 (File No. 333-20153 and File No.
333-23303) and Forms S-8 (File No. 333-41771, File No. 333-43357, File No.
33-51243, and File No. 33-39303) of Tosco Corporation of our report dated March
1, 2000 relating to the financial statements and financial statement schedule as
of December 31, 1999 and 1998, and for each of the three years in the period
ended December 31, 1999, which appears in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Phoenix, Arizona
March 29, 2000
EXHIBIT 99
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Tosco Corporation
Our report on the consolidated financial statements of Tosco
Corporation and its subsidiaries is included on page F-2 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
Exhibit 99 presented on pages F-30 through F-32 of this Form 10-K.
In our opinion, the Exhibit 99 referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included herein.
PricewaterhouseCoopers LLP
Phoenix, Arizona
March 1, 2000
<PAGE>
EXHIBIT 99
<TABLE>
<CAPTION>
TOSCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(In Millions)
Tosco Bayway Nonguaranteeing
(Issuer) (Guarantor) Subsidiaries Eliminations Consolidated
-------- ----------- --------------- ------------ ------------
BALANCE SHEET - DECEMBER 31, 1999
Assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $(28.4) $56.7 $28.3
Marketable securities and deposits 7.5 46.3 53.8
Other current assets (a) 1,122.9 439.5 1,562.4
--------- ----------- -------- --------- ---------
Total current assets 1,102.0 542.5 1,644.5
Other assets 2,704.0 325.0 1,543.3 (4.4) 4,567.9
Investment in Bayway and other subsidiaries 1,336.4 (1,336.4)
--------- ----------- --------- ---------- ---------
$5,142.4 $325.0 $2,085.8 $(1,340.8) $6,212.4
========= =========== ========= ========== =========
Liabilities and Shareholders' Equity:
Current liabilities $1,405.4 $201.7 $1,607.1
Revolving credit facility and long-term debt 1,420.9 38.0 1,458.9
Other liabilities 585.0 157.5 (4.4) 738.1
Intercompany liabilities (assets) (377.2) (53.0) 430.2
Trust Preferred Securities 300.0 300.0
Total shareholders' equity 2,108.3 378.0 958.4 (1,336.4) 2,108.3
--------- ----------- --------- ---------- ---------
$5,142.4 $325.0 $2,085.8 $(1,340.8) $6,212.4
========= =========== ========= ========== =========
STATEMENT OF INCOME - YEAR ENDED DECEMBER 31, 1999
Sales $10,805.2 $3,556.9 $14,362.1
Cost of sales (9,873.6) 15.2 (3,244.9) (13,103.3)
Depreciation and amortization (196.0) (15.2) (97.2) (308.4)
Special items:
Inventory recovery 240.0 240.0
Restructuring recovery 2.1 2.1
Avon Refinery start-up costs (43.1) (43.1)
Gain on sale of retail assets in non-core
markets 40.5 40.5
Selling, general, and administrative expenses (b) (179.4) (125.8) (305.2)
Interest expense, net (123.0) 4.2 (118.8)
--------- ----------- --------- ---------- ---------
Income before income taxes and distributions on
Trust Preferred Securities 632.2 133.7 765.9
Income taxes (259.2) (54.8) (314.0)
Distributions on Trust Preferred Securities, net
of income tax benefit - (10.2) (10.2)
--------- ----------- --------- ---------- ---------
Net income $373.0 $- $68.7 $- $441.7
========= =========== ========= ========== =========
STATEMENT OF CASH FLOWS - YEAR ENDED DECEMBER 31, 1999
Cash flows from operating activities:
Net income $373.0 $- $68.7 $- $441.7
Depreciation and amortization, provision
for bad debts, and deferred income taxes 360.6 15.2 97.2 473.0
Inventory recovery (240.0) (240.0)
Restructuring recovery (2.1) (2.1)
Gain on sale of retail assets in non-core markets (40.5) (40.5)
Changes in operating assets and liabilities, net 349.5 (174.0) 175.5
Other, net 8.1 8.1
Net cash provided by (used in) --------- ----------- --------- ---------- ---------
operating activities 849.1 15.2 (48.6) 815.7
--------- ----------- --------- ---------- ---------
Cash flows from investing activities:
Purchase of property, plant, equipment, net (211.3) (70.3) (13.2) (294.8)
Increase in deferred turnarounds, charges,
and other assets, net (65.5) 14.7 (50.8)
Acquisition of retail systems, net of cash acquired (22.8) (95.3) (118.1)
Intercompany transfers (225.8) 55.1 170.7
Intercompany dividend 15.7 (15.7)
Net change in marketable securities, deposits,
and other (2.1) (6.8) (8.9)
Net cash (used in) provided by --------- ----------- --------- ---------- ---------
investing activities (511.8) (15.2) 54.4 (472.6)
--------- ----------- --------- ---------- ---------
Cash flows from financing activities:
Net repayments under revolving credit facilities (90.0) (90.0)
Payments under long-term debt agreements (6.0) (6.0)
Repurchase of common stock (216.5) (216.5)
Dividends paid on common stock (40.0) (40.0)
Other, net 6.4 6.4
--------- ----------- --------- ---------- ---------
Net cash used in financing activities (340.1) (6.0) (346.1)
--------- ----------- --------- ---------- ---------
Net decrease in cash and cash equivalents (2.8) (0.2) (3.0)
Cash and cash equivalents at beginning of year (25.6) 56.9 31.3
--------- ----------- --------- ---------- ---------
Cash and cash equivalents at end of year $(28.4) $- $56.7 $- $28.3
========= =========== ========= ========== =========
(a) Inventories are valued at the lower of cost or market value, which is measured on a consolidated basis.
(b) The condensed consolidating statement of income reflects a partial allocation of corporate selling,
general, and administrative expenses to Bayway and the
Nonguarranteeing Subsidiaries. Tosco may revise its allocation method in the future.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tosco Bayway Nonguaranteeing
(Issuer) (Guarantor) Subsidiaries Eliminations Consolidated
---------- ----------- --------------- ------------ ------------
BALANCE SHEET - DECEMBER 31, 1998
Assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ (25.7) $ $ 57.0 $ - $ 31.3
Marketable securities and deposits 10.2 39.4 49.6
Other current assets (b) 993.7 444.4 1,438.1
---------- ---------- ---------- ----------- ----------
Total current assets 978.2 - 540.8 1,519.0
Other assets 2,567.2 261.5 1,499.5 (4.4) 4,323.8
Investment in Bayway and other subsidiaries 1,283.5 (1,283.5)
---------- ---------- ---------- ----------- ----------
$4,828.9 $ 261.5 $ 2,040.3 $ (1,287.9) $ 5,842.8
========== ========== ========== =========== ==========
Liabilities and Shareholders Equity:
Current liabilities $1,041,705 $ 362,997 $1,404,702
Revolving credit facility and long-term debt 1,510,968 43,585 1,554,553
Other liabilities 515,443 159,494 (4,366) 670,571
Intercompany liabilities (assets) (152,159) (116,506) 268,665
Trust Preferred Securities 300,000 300,000
Total shareholders' equity 1,912,990 377,989 905,517 (1,283,506) 1,912,990
----------- --------- ----------- ------------ -----------
$4,828,947 $261,483 $2,040,258 $(1,287,872) $5,842,816
=========== ========= =========== ============ ===========
STATEMENT OF INCOME - YEAR ENDED DECEMBER 31, 1998
Sales $7,429.8 $ 1,161.3 $ 3,430.4 $ - $ 12,021.5
Cost of sales (6,618.0) (1,089.2) (3,098.6) (10,805.8)
Depreciation and amortization (173.9) (18.5) (121.5) (313.9)
Special items:
Inventory writedown (240.0) (240.0)
Restructuring charge (40.0) (40.0)
Selling, general, and administrative expenses (c) (174.4) (7.9) (118.0) (300.3)
Interest expense, net (115.8) (7.6) 0.7 (122.7)
---------- ---------- ---------- ----------- ----------
Income before income taxes and distributions on
Trust Preferred Securities 67.7 38.1 93.0 198.8
Income taxes (28.1) (15.8) (38.6) (82.5)
Distributions on Trust Preferred Securities, net
of income tax benefit (10.1) (10.1)
---------- ---------- ---------- ----------- ----------
Net income $39.6 $ 22.3 $ 44.3 $ - $ 106.2
========== ========== ========== =========== ==========
STATEMENT OF CASH FLOWS - YEAR ENDED DECEMBER 31, 1998
Cash flows from operating activities:
Net income $39.6 $ 22.3 $ 44.3 $ - $ 106.2
Depreciation and amortization, provision
for bad debts, and deferred income taxes 309.7 18.5 121.5 449.7
Inventory writedown 240.0 240.0
Restructuring charge 40.0 40.0
Changes in operating assets and liabilities, net (316.8) 104.5 61.3 (151.0)
Other, net (14.0) 1.3 (12.7)
---------- ---------- ---------- ----------- ----------
Net cash provided by operating activities 298.5 145.3 228.4 672.2
---------- ---------- ---------- ----------- ----------
Cash flows from investing activities:
Purchase of property, plant, equipment, net and
increase in deferred turnarounds, charges, and
other assets, net (332.6) (44.3) (102.6) (479.5)
Intercompany transfers 109.9 (95.5) (14.4)
Intercompany dividend (0.3) (5.5) 5.8
Net change in marketable securities, deposits, and other 1.3 (7.0) (5.7)
---------- ---------- ---------- ----------- ----------
Net cash used in investing activities (221.7) (145.3) (118.2) (485.2)
---------- ---------- ---------- ----------- ----------
Cash flows from financing activities:
Net borrowings under revolving credit facilities 30.0 30.0
Payments under long-term debt agreements (0.5) (78.6) (79.1)
Payments under Circle K pre-acquisition debt (3.5) (3.5)
Repurchase of common stock (101.1) (101.1)
Dividends paid on common stock (37.1) (37.1)
Other, net 0.6 0.6
---------- ---------- ---------- ----------- ----------
Net cash used in financing activities (108.1) (82.1) (190.2)
---------- ---------- ---------- ----------- ----------
Net (decrease) increase in cash and cash equivalents (31.3) 28.1 (3.2)
Cash and cash equivalents at beginning of year 5.7 28.8 34.5
---------- ---------- ---------- ----------- ----------
Cash and cash equivalents at end of year $ (25.6) $ - $ 56.9 $ - $ 31.3
========== ========== ========== =========== ==========
(a) Effective April 1, 1998, the working capital, certain long-term assets, and
operating results of Bayway were consolidated into Tosco.
(b) Inventories are valued at the lower of cost or market value, which is
measured on a consolidated basis.
(c) The condensed consolidating statement of income reflects a partial
allocation of corporate selling, general, and administrative expenses to
Bayway and the Nonguarranteeing Subsidiaries. Tosco may revise its
allocation method in the future.
</TABLE>
<PAGE>
TOSCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Tosco Bayway Nonguaranteeing
(Issuer) (Guarantor) Subsidiaries Eliminations Consolidated
STATEMENT OF INCOME - YEAR ENDED DECEMBER 31, 1997 --------- ---------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $4,856.7 $4,748.3 $3,676.6 $ - $13,281.6
Cost of sales (4,246.3) (4,512.1) (3,356.4) 1.3 (12,113.5)
Depreciation and amortization (163.3) (32.2) (108.0) (303.5)
Special item:
Inventory writedown (17.0) (36.0) (53.0)
Selling, general, and administrative expenses (b) (138.4) (33.6) (123.0) (1.3) (296.3)
Interest expense, net (93.9) (29.2) (11.4) (134.5)
----------- ----------- ------------ ----------- -----------
Income before income taxes and distributions on
Trust Preferred Securities 197.8 105.2 77.8 - 380.8
Income taxes (82.0) (43.7) (32.3) (158.0)
Distributions on Trust Preferred Securities, net of
income tax benefit (10.1) (10.1)
----------- ----------- ------------ ----------- -----------
Net income $115.8 $61.5 $35.4 $ - $212.7
=========== =========== ============ =========== ===========
STATEMENT OF CASH FLOWS - YEAR ENDED DECEMBER 31, 1997
Cash flows from operating activities:
Net income $115.8 $61.5 $35.4 $ - $212.7
Depreciation and amortization, provision for
bad debts, and deferred income taxes 213.5 32.2 105.5 351.2
Inventory writedown 17.0 36.0 53.0
Changes in operating assets and liabilities, net 394.1 (176.0) (146.0) 72.1
Other, net 0.9 (3.9) (3.0)
----------- ----------- ------------ ----------- -----------
Net cash provided by (used in)
operating activities 741.3 (46.3) (9.0) 686.0
----------- ----------- ------------ ----------- -----------
Cash flows from investing activities:
Purchase of property, plant, equipment, net (177.7) (28.5) (197.8) (404.0)
Increase in deferred turnarounds, charges,
and other assets, net (64.0) (42.5) (2.8) (109.3)
Acquisition of 76 Products, net of cash acquired
and assets sold (1,116.5) (1,116.5)
Intercompany transfers (30.4) 105.0 (74.6)
Intercompany dividend (309.8) (3.8) 313.6
Net change in marketable securities, deposits,
and other 7.7 (0.3) (9.8) (2.4)
----------- ----------- ------------ ----------- -----------
Net cash (used in) provided by
investing activities (1,690.7) 29.9 28.6 (1,632.2)
----------- ----------- ------------ ----------- -----------
Cash flows from financing activities:
Proceeds from note, bond, and debenture offerings 600.0 600.0
Proceeds from common stock offering, net 697.4 697.4
Net borrowings under revolving credit facilities 166.0 166.0
Payments under long-term debt agreements (100.0) (13.7) (113.7)
Payments under Circle K pre-acquisition debt (23.8) (23.8)
Repurchase of Unocal shares (393.7) (393.7)
Dividends paid on common stock (35.9) (35.9)
Other, net (10.0) (10.0)
----------- ----------- ------------ ----------- -----------
Net cash provided by (used in)
financing activities 923.8 (37.5) 886.3
----------- ----------- ------------ ----------- -----------
Net decrease in cash and cash equivalents (25.6) (16.4) (17.9) (59.9)
Cash and cash equivalents at beginning of year 31.4 16.4 46.6 94.4
----------- ----------- ------------ ----------- -----------
Cash and cash equivalents at end of year $ 5.8 $ - $28.7 $ - $34.5
=========== =========== ============ =========== ===========
(a) Inventories are valued at the lower of cost or market value, which is measured on a consolidated basis.
(b) The condensed consolidating statement of income reflects a partial allocation of corporate selling, general,
and administrative expenses to Bayway and the Nonguarranteeing Subsidiaries. Tosco may revise its
allocation method in the future.
</TABLE>
<PAGE>
(This Page Intentionally Left Blank)
<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, in the City of
Stamford, and the State of Connecticut, on March 16, 2000.
TOSCO CORPORATION
(Registrant)
BY /S/ THOMAS D. O'MALLEY
--------------------------------------
(Thomas D. O'Malley)
Chairman of the Board of Directors
and Chief Executive Officer
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 dates indicated.
SIGNATURE TITLE
/s/ THOMAS D. O'MALLEY Chairman of the Board of Directors March 16, 2000
- ------------------------- and Chief Executive Officer
(Thomas D. O'Malley)
/s/ JEFFERSON F. ALLEN President, Principal Financial March 16, 2000
- ------------------------- Officer, and Director
(Jefferson F. Allen)
/s/ ROBERT I. SANTO Vice President and Principal March 17, 2000
- ------------------------- Accounting Officer
(Robert I. Santo)
/s/ PATRICK M. de BARROS Director March 16, 2000
- -------------------------
(Patrick M. de Barros)
/s/ WAYNE A. BUDD Director March 16, 2000
- --------------------------
(Wayne A. Budd)
/s/ HOUSTON I. FLOURNOY Director March 16, 2000
- ---------------------------
(Houston I. Flournoy)
/s/ EDMUND A. HAJIM Director March 16, 2000
- --------------------------
(Edmund A. Hajim)
/s/ JOSEPH P. INGRASSIA Director March 16, 2000
- --------------------------
(Joseph P. Ingrassia)
/s/ CHARLES J. LUELLEN Director March 16, 2000
- --------------------------
(Charles J. Luellen)
/s/ EIJA MALMIVIRTA Director March 16, 2000
- --------------------------
(Eija Malmivirta)
/s/ MARK R. MULVOY Director March 16, 2000
- --------------------------
(Mark R. Mulvoy)
/s/ KATHRYN L. MUNRO Director March 16, 2000
- --------------------------
(Kathryn L. Munro)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 28,300
<SECURITIES> 53,800
<RECEIVABLES> 291,400
<ALLOWANCES> 17,900
<INVENTORY> 1,173,400
<CURRENT-ASSETS> 1,644,500
<PP&E> 4,736,900
<DEPRECIATION> 1,061,700
<TOTAL-ASSETS> 6,212,400
<CURRENT-LIABILITIES> 1,607,100
<BONDS> 350,000
300,000
0
<COMMON> 133,600
<OTHER-SE> 1,974,700
<TOTAL-LIABILITY-AND-EQUITY> 6,212,400
<SALES> 14,362,100
<TOTAL-REVENUES> 14,362,100
<CGS> 13,103,300
<TOTAL-COSTS> 13,103,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123,800
<INCOME-PRETAX> 765,900
<INCOME-TAX> 314,000
<INCOME-CONTINUING> 451,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 441,700
<EPS-BASIC> 2.97
<EPS-DILUTED> 2.83
</TABLE>
