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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 15, 1998
----------
TEXACO INC.
(Exact name of registrant as specified in its charter)
Delaware 1-27 74-1383447
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation) Number) Identification Number)
2000 Westchester Avenue, 10650
White Plains, New York (Zip Code)
(Address of principal executive offices)
(914) 253-4000
(Registrant's telephone number, including area code)
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<PAGE>
Item 2. Acquisition or Disposition of Assets
- --------------------------------------------
On January 15, 1998, subsidiaries of Texaco Inc. and Shell Oil Company
reached agreement on the formation and operational start up of Equilon
Enterprises LLC (Equilon), a newly formed Delaware limited liability
company. Equilon is a joint venture which combines major elements of
the companies' western and midwestern U.S. refining and marketing
businesses and their nationwide trading, transportation and lubricants
businesses. Shell owns 56 percent and Texaco owns 44 percent of
Equilon.
Equilon will continue to use these assets in the refining, marketing,
trading, transportation and lubricants businesses and will market
petroleum and other products directly and through independent
wholesalers and retailers. Equilon will have exclusive rights to use
both the Shell and Texaco brands on refined oil product sales in those
areas of the United States where Equilon is authorized to conduct its
respective businesses.
Under the terms of a consent agreement accepted by the Federal Trade
Commission (FTC) and similar agreements with the attorneys general of
California, Hawaii, Oregon and Washington, certain assets will be
divested, including Shell's Anacortes, Washington refinery, certain
Texaco and Shell marketing assets in southern California and Hawaii,
and certain pipeline interests.
Texaco, Shell and Saudi Refining, Inc. (a corporate affiliate of Saudi
Aramco) are finalizing agreements for a separate joint venture
involving their eastern and Gulf Coast refining and marketing
businesses in the United States. The parties are optimistic that this
second transaction will be concluded early in 1998. This joint venture
will be initially owned 35 percent by Shell, 32.5 percent by Texaco and
32.5 percent by Saudi Refining, Inc.
Texaco's and Shell's exploration, production and chemical businesses
are not included in the joint ventures.
A copy of the Asset Transfer and Liability Assumption Agreement dated
as of January 15, 1998, among the companies is attached as Exhibit 2.1.
- 1 -
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- --------------------------------------------------------------------------
(b) Pro Forma Financial Information
Basis of Presentation
The following unaudited pro forma statements of consolidated income for
the nine months ended September 30, 1997 and the year ended December
31, 1996 and the unaudited pro forma condensed consolidated balance
sheet as of September 30, 1997 (collectively the "Pro Forma Financial
Statements") have been prepared from the historical financial
statements of Texaco Inc. and subsidiary companies, as adjusted to
reflect the January 15, 1998 formation of Equilon. For presentation
purposes, the transaction has been reflected as an acquisition by
Texaco of a 44% equity interest in Equilon, and the simultaneous
disposition of substantially all the businesses of Texaco Refining and
Marketing Inc. and Texaco Trading and Transportation Inc., and their
subsidiaries.
The unaudited pro forma statements of consolidated income have been
prepared as if the foregoing transactions had occurred on January 1,
1996. The unaudited pro forma condensed consolidated balance sheet has
been prepared as if the transactions had occurred as of September 30,
1997.
The Pro Forma Financial Statements are shown for illustrative purposes
only and are not necessarily indicative of the current or future
financial position or results of operations of Texaco. These statements
should be read in conjunction with the historical financial statements
included in Texaco's Form 10-K for the year ended December 31, 1996 and
Form 10-Q for the quarterly period ended September 30, 1997. The pro
forma adjustments, by necessity, use estimates and assumptions based on
currently available information. Management believes that the estimates
and assumptions are reasonable and that the significant effects of the
transactions are properly reflected in the Pro Forma Financial
Statements.
These Pro Forma Financial Statements do not include anticipated
benefits from operating efficiencies which may result from the
formation of Equilon. These statements do not include estimated losses
or gains that might result from selling assets to comply with the terms
of the FTC consent agreement and other agreements. Under the FTC
consent agreement, results from Shell's Anacortes refinery must be kept
separate from the results of operations of Equilon, and therefore are
excluded from Texaco's equity in the pre-tax income of Equilon in the
following Unaudited Pro Forma Statements of Consolidated Income. The
parties to the joint venture have agreed that Equilon is entitled to
the net proceeds and any gain or loss that may result from the
disposition of the Anacortes refinery. The Unaudited Pro Forma
Condensed Consolidated Balance Sheet includes Texaco's share of the net
book value of the Anacortes refining assets.
- 2 -
<PAGE>
TEXACO INC. AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------------
(Millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Unaudited
-------------------------------------------------------
Pro Forma Adjustments
------------------------------
Historical Pro Forma
Texaco Disposition(1) Acquisition Texaco
------ -------------- ----------- ------
<S> <C> <C> <C> <C>
REVENUES
Sales and services $33,630 $ 8,314 $ -- $25,316
Equity in income of affiliates, interest,
asset sales and other 988 40 212(2) 1,160
------- ------- ------- -------
34,618 8,354 212 26,476
------- ------- ------- -------
DEDUCTIONS
Purchases and other costs 26,324 6,820 -- 19,504
Operating expenses 2,184 451 -- 1,733
Selling, general and administrative expenses 1,219 495 -- 724
Maintenance and repairs 260 131 -- 129
Exploratory expenses 306 -- -- 306
Depreciation, depletion and amortization 1,145 137 -- 1,008
Interest expense 309 11 (22)(3) 276
Taxes other than income taxes 365 64 -- 301
Minority interest 54 2 -- 52
------- ------- ------- -------
32,166 8,111 (22) 24,033
------- ------- ------- -------
Income before income taxes 2,452 243 234 2,443
Provision for income taxes 411 85 82(4) 408
------- ------- ------- -------
NET INCOME $ 2,041 $ 158 $ 152 $ 2,035
======= ======= ======= =======
Net income per common share (dollars)(a)
Basic $ 3.85 $ 3.84
Diluted $ 3.75 $ 3.74
Average number of common shares outstanding
for computation of earnings per share
(thousands)(a)
Basic 519,553 519,553
Diluted 540,040 540,040
<FN>
(a) Reflects two-for-one stock split, effective September 29, 1997, and the adoption of Statement of Financial Accounting
Standards No. 128, Earnings Per Share.
</FN>
</TABLE>
The accompanying notes to the Unaudited Pro Forma Statement of Consolidated
Income are an integral part of this statement.
- 3 -
<PAGE>
TEXACO INC. AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------
(Millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Unaudited
-------------------------------------------
Pro Forma Adjustments
------------------------------
Historical Pro Forma
Texaco Disposition(1) Acquisition Texaco
------ -------------- ----------- ------
<S> <C> <C> <C> <C>
REVENUES
Sales and services $44,561 $11,381 $ -- $33,180
Equity in income of affiliates, interest,
asset sales and other 939 59 245(2) 1,125
------- ------- ------- -------
45,500 11,440 245 34,305
------- ------- ------- -------
DEDUCTIONS
Purchases and other costs 34,643 9,378 -- 25,265
Operating expenses 2,978 571 -- 2,407
Selling, general and administrative expenses 1,693 659 -- 1,034
Maintenance and repairs 367 177 -- 190
Exploratory expenses 379 -- -- 379
Depreciation, depletion and amortization 1,455 177 -- 1,278
Interest expense 434 14 (30)(3) 390
Taxes other than income taxes 496 79 -- 417
Minority interest 72 2 -- 70
------- ------- ------- -------
42,517 11,057 (30) 31,430
------- ------- ------- -------
Income before income taxes 2,983 383 275 2,875
Provision for income taxes 965 134 97(4) 928
------- ------- ------- -------
NET INCOME $ 2,018 $ 249 $ 178 $ 1,947
======= ======= ======= =======
Net income per common share (dollars)(a)
Basic $ 3.77 $ 3.63
Diluted $ 3.68 $ 3.55
Average number of common shares outstanding
for computation of earnings per share
(thousands)(a)
Basic 520,392 520,392
Diluted 541,824 541,824
<FN>
(a) Reflects two-for-one stock split, effective September 29, 1997, and the adoption of Statement of Financial Accounting
Standards No. 128, Earnings Per Share.
</FN>
</TABLE>
The accompanying notes to the Unaudited Pro Forma Statement of Consolidated
Income are an integral part of this statement.
- 4 -
<PAGE>
TEXACO INC. AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
--------------------------------------------------------
(Millions of dollars)
<TABLE>
<CAPTION>
Unaudited
-------------------------------------------------------
Pro Forma Adjustments
------------------------------
Historical Pro Forma
Texaco Disposition(1) Acquisition Texaco
------ -------------- ----------- ------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 451 $ -- $ -- $ 451
Short-term investments - at fair value 48 -- -- 48
Accounts and notes receivable 3,999 649 -- 3,350
Inventories 1,537 429 -- 1,108
Deferred income taxes and other current assets 283 4 -- 279
------- ------- ------- -------
Total current assets 6,318 1,082 -- 5,236
Investments and Advances 5,439 43 2,379(2) 7,775
Net Properties, Plant and Equipment 14,093 2,730 -- 11,363
Deferred Charges 965 109 -- 856
------- ------- ------- -------
Total $26,815 $ 3,964 $ 2,379 $25,230
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 521 $ 15 $ -- $ 506
Accounts payable and accrued liabilities 3,818 733 -- 3,085
Estimated income and other taxes 1,205 87 -- 1,118
------- ------- ------- -------
Total current liabilities 5,544 835 -- 4,709
Long-Term Debt and Capital Lease Obligations 5,116 122 (474)(3) 4,520
Deferred Income Taxes 808 3 -- 805
Employee Retirement Benefits 1,208 -- -- 1,208
Deferred Credits and Other Noncurrent Liabilities 1,873 144 -- 1,729
Minority Interest in Subsidiary Companies 649 7 -- 642
------- ------- ------- -------
Total 15,198 1,111 (474) 13,613
Stockholders' Equity 11,617 2,853 2,853 11,617
------- ------- ------- -------
Total $26,815 $ 3,964 $ 2,379 $25,230
======= ======= ======= =======
</TABLE>
The accompanying notes to the Unaudited Pro Forma Condensed Consolidated Balance
Sheet are an integral part of this statement.
- 5 -
<PAGE>
Notes to Unaudited Pro Forma Financial Statements
- -------------------------------------------------
Unaudited Pro Forma Statement of Consolidated Income for the Nine Months Ended
September 30, 1997 and Year Ended December 31, 1996
(1) The impact on revenues, costs and expenses of the pro forma
disposition.
(2) Texaco's equity in the pre-tax income of Equilon.
(3) Assumed reduction in interest expense to reflect paydown of debt
with proceeds of distribution from Equilon. (See Note 3 below.)
(4) To reflect income taxes on Texaco's equity in Equilon's pre-tax
income and additional taxes due to assumed reduction in interest
expense.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
- --------------------------------------------------------------------------------
1997
- ----
(1) The impact on assets and liabilities of the pro forma disposition.
(2) Texaco's investment in Equilon, reduced by assumed distribution by
Equilon of debt proceeds.
(3) Upon formation of Equilon, Texaco received a promissory note from
Equilon. It is anticipated that this note will be paid within the
first half of 1998 upon the issuance of debt by Equilon. Such
proceeds have been reflected as a reduction of Texaco debt.
(c) Exhibits
2.1 Copy of the Asset Transfer and Liability Assumption Agreement
dated as of January 15, 1998, among the parties, is attached
hereto and made a part hereof.
99.1 Copy of the Press Release issued by Texaco Inc. dated January
16, 1998, entitled "Texaco, Shell Announce Completion of
Western U.S. Downstream Alliance: Equilon Enterprises."
- 6 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXACO INC.
---------------------
(Registrant)
By: R. E. Koch
---------------------
(Assistant Secretary)
Date: January 30, 1998
----------------
EXHIBIT 2.1
ASSET TRANSFER
AND
LIABILITY ASSUMPTION AGREEMENT
among
TEXACO INC.,
TEXACO REFINING AND MARKETING INC.,
TRMI HOLDINGS INC.,
TEXACO PIPELINE INC.,
TEXACO TRADING AND TRANSPORTATION INC.,
TEXACO CONVENT REFINING INC.,
TEXACO ANACORTES COGENERATION COMPANY,
SHELL OIL COMPANY,
SOPC HOLDINGS WEST LLC
and
EQUILON ENTERPRISES LLC
dated as of
January 15, 1998
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
DEFINITIONS AND USAGE
<S> <C> <C>
SECTION 1.01. Defined Terms.................................................................... 1
</TABLE>
<TABLE>
<CAPTION>
ARTICLE 2
CONTRIBUTIONS TO THE COMPANY
<S> <C> <C>
SECTION 2.01. Contribution of Certain Assets................................................... 5
SECTION 2.02. Transfer Subject to Permitted Exceptions and Agreement Terms.................... 6
SECTION 2.03. Excluded Assets.................................................................. 6
SECTION 2.04. Assignment of Contracts and Rights; Equitable Ownership.......................... 6
SECTION 2.05. Contribution of Pipeline Assets.................................................. 7
SECTION 2.06. Treatment of Transactions....................................................... 12
SECTION 2.07. Instruments of Transfer......................................................... 12
</TABLE>
<TABLE>
<CAPTION>
ARTICLE 3
ASSUMPTION OF LIABILITIES
<S> <C> <C>
SECTION 3.01. Assumed Liabilities and Obligations; Exclusions................................. 13
</TABLE>
<TABLE>
<CAPTION>
ARTICLE 4
SEPARATELY HELD ASSETS
<S> <C> <C>
SECTION 4.01. Separately Held Assets......................................................... 13
</TABLE>
<TABLE>
<CAPTION>
ARTICLE 5
CERTAIN POST-CLOSING MATTERS
<S> <C> <C>
SECTION 5.01. Post-closing Recordings......................................................... 15
SECTION 5.02. Access to and Retention of Records.............................................. 16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.03. Availability of Personnel....................................................... 17
SECTION 5.04. Mail; Payments.................................................................. 17
SECTION 5.05. Existing Insurance Coverage..................................................... 18
</TABLE>
<TABLE>
<CAPTION>
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
SECTION 6.01. Representations and Warranties of Shell Newco................................... 19
SECTION 6.02. Representations and Warranties Regarding the Texaco Principal Member Group...... 20
</TABLE>
<TABLE>
<CAPTION>
ARTICLE 7
MISCELLANEOUS
<S> <C> <C>
SECTION 7.01. Further Assurance............................................................... 22
SECTION 7.02. Effectiveness................................................................... 23
SECTION 7.03. Exclusivity..................................................................... 23
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
- ---------
<S> <C>
Schedule A Intentionally Omitted
Schedule B Intentionally Omitted
Schedule C Shell Shared Assets
Schedule D Shell Common Contracts
Schedule E Texaco Common Contracts
Schedule 2.01A Shell Asset List
Schedule 2.01B Texaco Asset List
Schedule 2.03A Shell Excluded Assets
Schedule 2.03B Texaco Excluded Assets
Schedule 3.01A Shell Assumed Liabilities
Schedule 3.01B Texaco Assumed Liabilities
</TABLE>
ii
<PAGE>
ASSET TRANSFER AND LIABILITY ASSUMPTION AGREEMENT (the "Asset Transfer
Agreement"), dated as of January 15, 1998, among Texaco Inc., a Delaware
corporation ("Texaco"), Texaco Refining and Marketing Inc., a Delaware
corporation ("TRMI"), TRMI Holdings Inc., a Delaware corporation ("TRMI
Holdings"), Texaco Pipeline Inc., a Delaware corporation ("Texaco Pipeline"),
Texaco Trading and Transportation Inc., a Delaware corporation ("Texaco
Trading"), Texaco Convent Refining Inc., a Delaware corporation ("Texaco
Convent"), Texaco Anacortes Cogeneration Company, a Delaware corporation
("Texaco Anacortes"), Shell Oil Company, a Delaware corporation ("Shell"), SOPC
Holdings West LLC, a Delaware limited liability company ("Shell Newco") and
Equilon Enterprises LLC, a Delaware limited liability company (the "Company").
R E C I T A L S :
- - - - - - - -
WHEREAS, Texaco and Shell have entered into a Master Agreement, dated
as of January 15, 1998, whereby they have agreed, inter alia, to enter into, and
to cause the Company, TRMI Holdings, TRMI, Texaco Pipeline, Texaco Trading,
Texaco Convent, Texaco Anacortes and Shell Newco to enter into this Asset
Transfer Agreement and certain other Equilon Joint Venture Documents for the
purpose of organizing and operating the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and adequacy of which are acknowledged by each of the
parties hereto, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
SECTION 1.01. Defined Terms. Unless the context shall otherwise
require, terms used and not defined herein shall have the meanings assigned
thereto in Schedule A to the Master Agreement and all rules as to usage set
forth therein shall apply hereto. Schedule B to the Master Agreement contains
provisions regarding the Procedural Conventions and Dispute Resolution which
shall govern this Asset Transfer Agreement. Such Schedules A and B are hereby
incorporated
<PAGE>
herein by reference. In addition, the following capitalized terms shall have the
respective meanings set forth below:
"Amberjack" means Amberjack Pipeline Company, a Texas general
partnership.
"California Pipeco" means California Pipeco LLC, a Delaware limited
liability company.
"Chase" means Chase Transportation Company, a joint venture between
Texaco Pipeline and Chase Pipe Line Company, a Kansas corporation.
"Colonial" means Colonial Pipeline Company, a Delaware corporation.
"Explorer" means Explorer Pipeline Company, a Delaware corporation.
"FERC" means the Federal Energy Regulatory Commission.
"Gaviota" means Gaviota Terminal Company, a California general
partnership.
"Inland" means Inland Corporation, an Ohio corporation.
"Jolliet" means Jolliet Pipe Line Company, a Delaware general
partnership.
"LOCAP" means LOCAP Inc., a Delaware corporation.
"LOOP" means LOOP L.L.C., a Delaware limited liability company.
"MARS" means Mars Oil Pipeline Company, a Texas general partnership.
"Odyssey" means Odyssey Pipeline L.L.C., a Delaware limited liability
company.
"Operating Expenses" means all Indebtedness, liabilities and operating
expenses incurred by or arising from the Separately Held Assets on or after the
Effective Date.
2
<PAGE>
"Pearsall" means Pearsall Pipeline Company, a Texas general
partnership.
"Plantation" means Plantation Pipe Line Company, a Delaware and a
Virginia corporation.
"Poseidon" means Poseidon Oil Pipeline Company, L.L.C., a Delaware
limited liability company.
"Ram/Powell" means the 38% ownership interest in the 12-inch crude oil
pipeline from Viosca Knoll 956 to Main Pass 289C.
"Seashell" means Seashell Pipeline Company, a Delaware corporation.
"Shell California" means Shell California Pipeline Company, a
California corporation.
"Shell Joint Interest Stock Companies" means, collectively, (i) Butte
Pipe Line Company, a Delaware corporation, (ii) Explorer, (iii) West Shore and
(iv) Wolverine Pipe Line Company, a Delaware corporation.
"Shell Pipe" means Shell Pipe Line Corporation, a Maryland corporation.
"Shell Pipeline Assets" means, collectively, the Shell Unregulated
Pipeline Assets and the Shell Regulated Pipeline Assets.
"Shell Pipe LLC" means Shell Pipe LLC, a Delaware limited liability
company.
"Shell Plantation Interest" means all of the interest of Shell and its
Affiliates in Plantation.
"Shell Regulated Pipeline Assets" means, collectively, (i) the equity
interest of Shell and its Affiliates in each of the Shell Joint Interest Stock
Companies, Plantation, LOCAP, Shell California and Seashell, (ii) the ownership
interest of Shell and its Affiliates in each of MARS, Amberjack and Ship Shoal,
(iii) the prospective ownership interest of Shell in URSA, (iv) the ownership
interest of Shell and its Affiliates in each of the undivided interest regulated
pipelines that are included in Shell Contributed Assets, and (v) the right,
title and interest of Shell and its Affiliates in each of the wholly-owned
regulated pipelines
3
<PAGE>
that are included in Shell Contributed Assets (including all related equipment,
permits and rights of way).
"Shell Unregulated Pipeline Assets" means, collectively, (i) the equity
interest of Shell and its Affiliates in Inland, (ii) the ownership interest of
Shell and its Affiliates in each of Odyssey, LOOP and Ram/Powell, and (iii) the
right, title and interest of Shell and its Affiliates in each of the
wholly-owned unregulated pipelines that are included in Shell Contributed Assets
(including all related equipment, permits and rights of way).
"Ship Shoal" means Ship Shoal Pipeline Company, a Texas general
partnership.
"SPL Holdings" means SPL Holdings Inc., a Delaware corporation.
"Texaco California" means Texaco California Pipe Line Inc., a
California corporation.
"Texaco California Pipeco" means Texaco California Pipeco LLC, a
Delaware limited liability company.
"Texaco CO2" means Texaco CO2 Pipeline Inc., a Delaware corporation.
"Texaco Colonial Interest" means all of the interest of Texaco and its
Affiliates in Colonial.
"Texaco Joint Interest Stock Companies" means, collectively, (i) Badger
Pipe Line Company, a Delaware corporation, (ii) Butte Pipe Line Company, a
Delaware corporation, (iii) Explorer, (iv) Kaw Pipe Line Company, a Delaware
corporation, (v) LOCAP, (vi) Olympic Pipe Line Company, a Delaware corporation,
(vii) Osage Pipe Line Company, a Delaware corporation, (viii) Paloma Pipe Line
Company, (ix) Texas-New Mexico Pipe Line Company, a Delaware corporation, (x)
West Shore and (xi) Wolverine.
"Texaco Pipeline Assets" means, collectively, the Texaco Unregulated
Pipeline Assets and the Texaco Regulated Pipeline Assets.
"Texaco Regulated Pipeline Assets" means, collectively, (i) the equity
interest of Texaco and its Affiliates in each of the Texaco Joint Interest Stock
4
<PAGE>
Companies, Colonial and Texaco California, (ii) the ownership interest of Texaco
and its Affiliates in each of Chase, Gaviota, Jolliet and Pearsall, (iii) the
ownership interest of Texaco and its Affiliates in each of the undivided
interest regulated pipelines that are included in Texaco Contributed Assets, and
(iv) the right, title and interest of Texaco and its Affiliates in each of the
wholly-owned regulated pipelines that are included in Texaco Contributed Assets
(including all related equipment, permits and rights of way).
"Texaco Terminals" means Texaco Terminals LLC, a Delaware limited
liability company.
"Texaco Unregulated Pipeline Assets" means, collectively, (i) the
equity interest of Texaco and its Affiliates in Texaco CO2, (ii) the ownership
interest of Texaco and its Affiliates in each of LOOP, Odyssey, Poseidon and
Texaco Terminals, and (iii) the right, title and interest of Texaco and its
Affiliates in each of the wholly-owned unregulated pipelines that are included
in Texaco Contributed Assets (including all related equipment, permits and
rights of way).
"URSA" means the appropriate ownership share (to be determined) in the
proposed 45 miles of 18-inch crude oil pipeline from Mississippi Canyon 810 to
West Delta 143.
"West Shore" means West Shore Pipe Line Company, a Delaware
corporation.
"Wolverine" means Wolverine Pipe Line Company, a Delaware corporation.
ARTICLE 2
CONTRIBUTIONS TO THE COMPANY
SECTION 2.01. Contribution of Certain Assets. (a) On the Closing Date,
effective as of the Effective Time, Texaco, TRMI, TRMI Holdings, Texaco
Pipeline, Texaco Trading, Texaco Convent and Texaco Anacortes shall each
transfer or cause to be transferred directly to the Company all of its and its
Affiliates' right, title and interest in the Texaco Contributed Assets (other
than the Texaco Separately Held Assets and the Texaco Pipeline Assets).
5
<PAGE>
(b) On the Closing Date, effective as of the Effective Time, Shell or
Shell Newco shall transfer or cause to be transferred directly to the Company
all of its and its Affiliates' right, title and interest in the Shell
Contributed Assets (other than the Shell Separately Held Assets and the Shell
Pipeline Assets).
SECTION 2.02. Transfer Subject to Permitted Exceptions and Agreement
Terms. The Contributed Assets shall be transferred to the Company subject to
Permitted Exceptions and in accordance with, and subject to, all provisions of
the Master Agreement and this Asset Transfer Agreement whether or not any of the
Transfer Instruments contains a specific exception for or reference to Permitted
Exceptions, the Master Agreement or this Asset Transfer Agreement.
SECTION 2.03. Excluded Assets. No party to this Asset Transfer
Agreement nor any of its Affiliates shall transfer any right, title or interest
with respect to the Excluded Assets.
SECTION 2.04. Assignment of Contracts and Rights; Equitable Ownership.
(a) Without limitation to any representation, warranty or indemnification
obligation set forth in the Master Agreement, this Asset Transfer Agreement
shall not constitute an agreement to assign or assume any Contributed Contract
or any claim, right, benefit, or liability thereunder, if such assignment,
without the approval or consent of a Third Party thereto, would be ineffective
or would constitute a breach or other contravention thereof or give rise to any
right of termination thereof and such approval or consent is not obtained. The
party required to contribute such Contributed Contract shall use its reasonable
efforts (which shall not require any payment of money to any Third Party by such
party or any of its Affiliates) to obtain the approval or consent of such Third
Party for the assignment to or assumption by the Company of any such Contributed
Contract, claim, right, benefit or liability arising thereunder. If as of the
Effective Time such assignment or assumption will be ineffective or will give
rise to any right of termination thereof or relates to a Common Contract, the
parties will cooperate in arranging a mutually agreeable alternative to enable
the Company to obtain the benefits and assume the obligations under such
Contributed Contract as of the Effective Time or as soon as practicable
thereafter (including through a sub-contracting, sub-licensing,
sub-participation or sub-leasing arrangement, or an arrangement under which the
Person contributing such Contributed Contract would enforce such Contract for
the benefit of the Company, with the Company, to the extent permissible,
assuming such Person's executory obligations and any and all rights of such
Person against the other party thereto). If the approval of
6
<PAGE>
the other party to such Contributed Contract is obtained, such approval will, as
between the Person contributing such Contributed Contract and the Company,
constitute a confirmation (automatically and without further action of the
parties) that such Contributed Contract is assigned to the Company as of the
Effective Time, and (automatically and without further action of the parties)
that the liabilities with respect to such Contributed Contract are assumed as of
the Effective Time.
(b) The parties hereto agree that if any Contributed Assets (other
than any Separately Held Asset) or any claim, right, benefit or liability
thereunder are not transferred as provided hereunder to the Company at the
Effective Time as a result of any restriction under any Applicable Law or
Contract that prohibits such transfer or makes such transfer unduly burdensome,
the party required to contribute such Contributed Assets will use its reasonable
efforts (which shall not require any payment of money to any Third Party by such
party or any of its Affiliates) to obtain such Contractual Consents or
Governmental Consents as might be required to consummate the contributions in
respect of such assets as soon as practicable after the Effective Time. During
the period between the Effective Time and the consummation of such contribution,
such party shall operate all such assets pursuant to instructions from the
Company and all benefits of, and risks arising out of or related to, the
ownership and operation of such assets shall be for the account of the Company.
The parties hereto agree that, at or as promptly as practicable after the
Effective Time, they will enter (and will cause the Company and each applicable
Affiliate and Specified Subsidiary to enter) into such agreements as might be
reasonably required to carry out the intent of the immediately preceding
sentence, including agreements (i) specifying, to the extent feasible, such
assets, (ii) setting up separate accounting systems for such assets, (iii)
providing for undertaking by the Company of any indemnity obligations of the
contributing party in respect of such assets (other than such obligations set
forth in the Equilon Joint Venture Documents), (iv) providing that until the
legal ownership is transferred to the Company, each party will treat such assets
in every respect as being equitably owned by the Company as of the Effective
Time and (v) providing such further specific assurances as the Company or
another party may reasonably request.
SECTION 2.05. Contribution of Pipeline Assets. (a) At or prior to the
Closing Date:
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(i) Formation of Pipeco. The Company shall form and establish
Pipeco LLC as a single-member limited liability company under the
Delaware Act.
(ii) Formation of California Pipeco. Shell shall cause SPL
Holdings to form and establish California Pipeco LLC as a single-member
limited liability company under the Delaware Act.
(b) On the Closing Date, effective as of the Effective Time:
(i) Shell Pipeline Assets -- Assignments. Shell shall assign
or cause to be assigned (1) to the Company, the Economic Benefits and
Detriments of Shell and its Affiliates in each of the Shell Unregulated
Pipeline Assets other than LOOP, and (2) to Pipeco, the Economic
Benefits and Detriments of Shell and its Affiliates in each of the
Shell Regulated Pipeline Assets.
(ii) Texaco Pipeline Assets -- Assignments. Texaco shall assign
or cause to be assigned, (1) to the Company, the Economic Benefits and
Detriments of Texaco and its Affiliates in each of the Texaco
Unregulated Pipeline Assets other than LOOP, and (2) to Pipeco, the
Economic Benefits and Detriments of Texaco and its Affiliates in each
of the Texaco Regulated Pipeline Assets.
(iii) Assumption by the Company and Pipeco of Economic Benefits
and Detriments.
(A) The Company shall assume the Economic Benefits
and Detriments of the Shell Unregulated Pipeline Assets and
the Texaco Unregulated Pipeline Assets assigned to it pursuant
to Sections 2.05(b)(i) and (ii). The assignment and assumption
of such Economic Benefits and Detriments shall be made
pursuant to the procedures described in Section 2.04(b); and
(B) Pipeco shall assume the Economic Benefits and
Detriments of the Shell Regulated Pipeline Assets and the
Texaco Regulated Pipeline Assets assigned to it pursuant to
Sections 2.05(a)(iii) and (iv). The assignment and assumption
of such
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Economic Benefits and Detriments shall be made
pursuant to the procedures described in Section 2.04(b).
(c) As promptly as practicable after the Closing Date, effective as of
the Effective Time, Shell shall transfer or cause to be transferred:
(i) to the Company, its ownership interest in Odyssey, its
equity interest in Inland and its Ram/Powell interest;
(ii) to the Company, the right, title and interest of Shell and
its Affiliates in each of the wholly-owned unregulated pipelines that
are included in Shell Contributed Assets (including all related
equipment, permits and rights of way), upon receipt of all the consents
from applicable Governmental Entities and property owners required to
transfer the rights of way (including land rights and easements) for
such pipeline to the Company; and
(iii) to Pipeco, (A) SPL Holdings' equity interest in LOCAP,
upon receipt of approval for such transfer from the other shareholders
of LOCAP, and (B) the equity interest of Shell and its Affiliates in
each of the Shell Joint Interest Stock Companies.
(d) On the first day of the month in which the appropriate FERC
adoption notices and Pipeco's new tariffs become effective and upon receipt of
permission from the Louisiana Public Service Commission to transfer the pipeline
assets it regulates:
(i) Shell shall:
(A) cause Seashell to be liquidated into SPL Holdings
and shall thereupon cause SPL Holdings to transfer Seashell's
assets to Pipeco;
(B) form and establish Shell Pipe LLC as a
single-member limited liability company under the Delaware
Act;
(C) cause Shell Pipe to be merged into Shell Pipe
LLC, transferring Shell Pipe's equity interest in SPL Holdings
to Shell; and
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(D) cause Shell Pipe LLC to be merged into Pipeco.
(ii) Texaco Trading shall cause Texaco Pipeline to be merged
into Pipeco.
(e) Promptly upon receipt of permission from the California Public
Utilities Commission to transfer the Shell Pipeline Assets or the Texaco
Pipeline Assets regulated by it and upon receipt of all the consents from
applicable Governmental Entities and property owners required to transfer the
rights of way (including land rights and easements) for all of such pipelines:
(i) Shell shall:
(A) cause Shell California to be merged into
California Pipeco; and
(B) cause SPL Holdings to transfer California Pipeco
to Pipeco.
(ii) Texaco Trading shall:
(A) form and establish Texaco California Pipeco as a
single-member limited liability company under the Delaware
Act;
(B) cause Texaco California to be merged into Texaco
California Pipeco; and
(C) cause Texaco California Pipeco to be merged into
California Pipeco following the transfer of California Pipeco
to Pipeco as set forth in Section 2.05(e)(i)(B).
(f) Promptly upon receipt of all the consents from applicable
Governmental Entities and property owners required to transfer the rights of way
(including land rights and easements) for all of the wholly-owned unregulated
pipelines that are included in Texaco Contributed Assets and in no event prior
to December 31, 1998,
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(i) Texaco Trading shall cause Texaco CO2 to be merged into
the Company;
(ii) TRMI Holdings shall cause Texaco Trading to be merged into
the Company, transferring to TRMI Holdings Texaco Trading's equity
interest in Texaco Oilport Holdings II, a Delaware corporation,
Colonial, Explorer, West Shore, Wolverine and any other Texaco Joint
Interest Stock Company with respect to which rights of first refusal or
governance issues remain outstanding; and
(iii) the Company shall transfer to Pipeco the ownership
interest in Gaviota and the equity interest in any Texaco Joint
Interest Stock Company that was transferred to it pursuant to the
merger of Texaco Trading into the Company.
(g) Thereafter,
(i) subject to the adoption of revised governance provisions
for LOCAP satisfactory to the Company, TRMI shall transfer to Pipeco
its equity interest in LOCAP; and
(ii) subject to eliminating any rights of first refusal and any
governance issues with respect to any Texaco Joint Interest Stock
Company remaining with TRMI Holdings, TRMI Holdings shall transfer to
Pipeco its equity interest in such Texaco Joint Interest Stock Company.
(h) On or after the date which is more than 12 months after any other
transfer of ownership interest in LOOP (by any member of LOOP) that would in the
aggregate constitute a transfer of 50% or more of the total interests in LOOP,
Shell and Texaco shall transfer to the Company each of their respective
ownership interest in LOOP or the Economic Benefits and Detriments of such
ownership interest.
(i) Colonial and Plantation.
(i) Shell shall transfer or cause to be transferred to Pipeco,
the equity interest of Shell and its Affiliates in Plantation, as soon
as practicable after the Closing Date, effective as of the Effective
Time, subject to the provisions of Section 4.01.
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(ii) TRMI shall transfer or cause to be transferred to Pipeco,
the equity interest of Texaco and its Affiliates in Colonial, as soon
as practicable after the Effective Time, subject to the provisions of
Section 4.01.
(j) Interim Provisions relating to LOOP.
(i) Shell, Texaco and the Company agree that the Company shall
purchase (on a dollar for dollar basis) all of the advance
transportation credits acquired by Shell or Texaco as a result of the
September 1998 LOOP cash call which remain at the time of the transfer
by Shell and Texaco of their respective LOOP ownership interest to the
Company.
(ii) The purchase of the advance transportation credits by the
Company shall take place within 30 days after the transfer by Texaco or
Shell of its respective LOOP ownership interest to the Company.
SECTION 2.06. Treatment of Transactions. For all purposes under the
Code and the Regulations, for purposes of maintaining the capital accounts under
Article 4 of the LLC Agreement and for purposes of calculating financial results
of the Company and its Subsidiaries, the Separately Held Assets, the Shell
Plantation Interest, the Texaco Colonial Interest and all other assets with
respect to which Economic Benefits and Detriments were transferred in accordance
with this Agreement shall be deemed to be contributed to the Company as of the
Effective Time. After the Effective Time, all items of income, gain, loss or
deduction relating to such assets shall be deemed to be items derived or
incurred by the Company. No adjustments to capital accounts shall be made with
respect to any payments made pursuant to Section 4.01(c) or 4.01(d), as the case
may be.
SECTION 2.07. Instruments of Transfer. (a) At the Closing, Shell and
Shell Newco shall deliver such Shell Transfer Instruments (other than those to
be delivered at a later time pursuant to Section 2.05 or Section 5.01(a)), in
form and substance reasonably satisfactory to TRMI, as shall be necessary or
desirable to convey the Shell Contributed Assets to the Company.
(b) At the Closing, Texaco, TRMI, TRMI Holdings, Texaco Pipeline,
Texaco Trading, Texaco Convent and Texaco Anacortes shall deliver such Texaco
Transfer Instruments (other than those to be delivered at a later time pursuant
to
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Section 2.05 or Section 5.01(a)), in form and substance reasonably
satisfactory to Shell Newco, as shall be necessary or desirable to convey the
Texaco Contributed Assets to the Company.
ARTICLE 3
ASSUMPTION OF LIABILITIES
SECTION 3.01. Assumed Liabilities and Obligations; Exclusions. (a) On
the Closing Date, effective as of the Effective Time, the Company shall assume
and thereafter pay, perform or discharge the Assumed Liabilities. Such
assumption may be effectuated by the Company making full payments in respect of
any Assumed Liability at the time of the discharge of such Assumed Liability to
any Person which, after the Effective Time, remained liable in respect of such
Assumed Liability and thereafter discharged such Assumed Liability in accordance
with the terms of the agreement or instrument under which such Assumed Liability
arose (but only to the extent that such discharge was in accordance with the
terms of the relevant agreement or instrument as in effect at the Effective
Time).
(b) Upon the terms and subject to the conditions hereof and in
consideration of the transfer of the Contributed Assets, the Company shall,
effective as of the Effective Time, perform and discharge all obligations of
Shell Newco, TRMI, TRMI Holdings, Texaco Pipeline, Texaco Convent and Texaco
Trading under the Contributed Contracts.
ARTICLE 4
SEPARATELY HELD ASSETS
SECTION 4.1. Separately Held Assets. (a) (i) Promptly upon the
consummation of any sale of the Shell Oahu Distribution Assets (as defined in
the Consent Decree), Texaco or its Affiliates shall assign or cause to be
assigned to the Company all of its and its Affiliates' interest in the Texaco
Oahu Distribution Assets (as defined in the Consent Decree) or (ii) promptly
upon the consummation of any sale of the Texaco Oahu Distribution Assets, Shell
Newco
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shall assign or cause to be assigned to the Company all of its and its
Affiliates' interest in the Shell Oahu Distribution Assets.
(b) (i) Promptly upon the consummation of any sale of the Shell
Plantation Interest, Texaco or its Affiliates shall assign or cause to be
assigned to Pipeco the Texaco Colonial Interest, or (ii) promptly upon the
consummation of any sale of the Texaco Colonial Interest, Shell Newco shall
assign or cause to be assigned to Pipeco the Shell Plantation Interest, subject,
in each case, to the restrictions set forth in Section 2.05 of this Agreement.
(c) (i) Promptly upon the consummation of any sale of any Separately
Held Assets, the Shell Plantation Interest or the Texaco Colonial Interest, the
party consummating such sale shall deliver to the Company the Net Proceeds of
such sale. With respect to the portion of the consideration which is received in
the form of other assets, (x) if the business conducted with such assets is
within the scope of the Company Business, such assets shall be contributed to
the Company or (y) if such assets are not within the scope of the Company
Business, the Fair Market Value of such assets shall be contributed to the
Company.
If the parties cannot agree on the Fair Market Value of the
securities or assets included in the consideration received within 30 days of
the acquisition of such assets or securities, the Company shall select an IB
Firm to determine the Fair Market Value of such assets or securities. Such IB
Firm shall, within 45 days of its retention, determine the Fair Market Value of
such assets or securities, and such determination shall be final, binding and
conclusive upon the parties hereto. The fees and expenses of such IB Firm shall
be borne by the Company.
(d) In connection with any sale described in Section 4.01(c), the
Company shall assume all of the liabilities, obligations and indemnities of the
party that is selling assets and which arise under any agreement that provides
for the disposition of any Separately Held Assets. If the Operating Expenses of
such asset in the period between the Effective Time and the disposition exceed
the gross earnings from such asset during such period, the Company shall,
promptly upon the consummation of any disposition described in Section 4.01(c),
pay to the party disposing of such asset the amount of such excess. If the gross
earnings from such asset in the period between the Effective Time and the
disposition exceed the Operating Expenses from such asset during such period,
the party disposing such asset shall, promptly upon the consummation of any
disposition described in Section 4.01(c), pay to the Company the amount of such
excess.
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ARTICLE 5
CERTAIN POST-CLOSING MATTERS
SECTION 5.01. Post-closing Recordings. (a) Shell Newco (or the
applicable Affiliate of Shell Newco) will use its best efforts to (i) deliver or
cause to be delivered to the Company (x) deeds to be recorded for all real
property that is included in the Shell Contributed Assets, (y) all transfer and
gains tax returns required by any Governmental Entity in respect of the
properties transferred by such deeds, and (z) subject to Section 2.04 hereof,
assignments of lease to be recorded with respect to all leased real property
that is included in the Shell Contributed Assets and (ii) cause such deeds and
such assignments of leases (with respect to recorded leases) to be recorded, in
each case, within 180 days after the later of (A) the Closing Date or (B) the
date on which the Contributed Asset is transferred. Promptly upon receipt of any
evidence of recordation in connection with the recording of deeds provided for
in this Section 5.01(a), Shell Newco (or the applicable Affiliate of Shell
Newco) shall provide the Company with evidence of such recording. Costs of title
and survey documentation, recordation, transfer taxes, deed stamps, sales taxes
and similar charges relating to Shell Transfer Instruments delivered under this
Section 5.01(a) or otherwise arising out of the transfers contemplated pursuant
to this Asset Transfer Agreement shall be borne by Shell Newco (or the
applicable Affiliate of Shell Newco).
(b) TRMI (or the applicable Affiliate of TRMI) will use its best
efforts to (i) deliver or cause to be delivered to the Company (x) deeds to be
recorded for all real property included in the Texaco Contributed Assets, (y)
all transfer and gains tax returns required by any Governmental Entity in
respect of the properties transferred by such deeds, and (z) subject to Section
2.04 hereof, assignments of lease to be recorded with respect to all leased real
property that is included in the Texaco Contributed Assets and (ii) cause such
deeds and such assignments of leases (with respect to recorded leases) to be
recorded, in each case, within 180 days after the later of (A) the Closing Date
or (B) the date on which the Contributed Asset is transferred. Promptly upon
receipt of any evidence of recordation in connection with the recording of deeds
provided for in this Section 5.01(b), TRMI (or the applicable Affiliate of TRMI)
shall provide the Company with evidence of such recording. Costs of title and
survey documentation, recordation, transfer taxes, deed stamps, sales taxes and
similar charges relating to
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Texaco Transfer Instruments delivered under this Section 5.01(b) or otherwise
arising out of the transfers contemplated pursuant to this Asset Transfer
Agreement shall be borne by TRMI (or the applicable Affiliate of TRMI).
(c) Except with respect to Contributed Assets covered under Section
2.04, all deeds and assignments of lease shall be dated the Effective Time, and
notwithstanding the date of recordation thereof, as between the parties hereto
the date of transfer with respect to the Contributed Assets shall be the
Effective Time. Notwithstanding the foregoing, in the event that any penalties
or interest will be payable to any Governmental Entity with respect to any
recording or transfer tax or fee due to any difference in the date of the deeds
and the recorded assignments of lease and the date of actual recordation, the
party submitting such deed or assignment of lease may date such document as of
such later date as may be necessary to prevent the incurrence of such penalties
or interest, it being agreed that notwithstanding the date of such deed or
assignment of lease, as between the parties, the date of transfer shall be the
Effective Time. During the period between the Effective Time and the date of
recordation of the deeds and any recorded assignments of lease, the transferor
of the relevant Contributed Assets shall take no action adversely affecting the
Company's title thereto.
<PAGE>
SECTION 5.02. Access to and Retention of Records. As of the Effective
Time, the Company shall acquire and take possession of the Books and Records,
provided that if any part of such Books and Records cannot without unreasonable
effort be separated from books, records, files and other data that do not
constitute Books and Records or relate to services to be provided to the
Company, then Shell Newco, TRMI or their relevant Affiliates, as the case may
be, shall retain such part of the Books and Records and make such part available
to the Company as provided herein. Each of the parties hereto agrees that it
shall, and shall cause its relevant Affiliates to, (i) preserve and keep the
Books and Records or the parts thereof in its possession, as the case may be,
(A) in accordance with their respective records retention programs, or (B) for
any longer period as may be required by any Governmental Entity or ongoing
litigation or as required by any of the Equilon Joint Venture Documents and (ii)
during such period, subject to the Equilon Only Confidentiality Agreement or the
Confidentiality Agreement, shall as applicable, allow each other party's
counsel, accountants, officers, employees and other representatives access to
such Books and Records upon such other party's reasonable request and during
normal business hours for the purpose of examining and, at the examining party's
expense, copying them, to the extent reasonably required by such party in
connection with (A) any insurance claims by,
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legal proceedings against or governmental investigations of, such party, (B) the
preparation of any tax return required to be filed by such party, the defense of
any audit, examination, administrative appeal or litigation of any tax return,
or (C) any other reasonable business purpose reasonably related to such party's
or its Affiliates' Ownership Interest.
SECTION 5.03. Availability of Personnel. Each of the parties hereto
shall afford, and shall cause their respective Affiliates to afford, to each
other on a reasonable basis their respective personnel as necessary to permit
the Company, as the case may be, to provide background information necessary to
(i) prepare tax returns, (ii) prosecute Claims or (iii) investigate, defend
against, or otherwise oppose any pending or threatened Claim against any party
or any of such party's Affiliates, as the case may be, in each case, in
connection with the Contributed Assets. The party affording its, or its
Affiliates', personnel shall be reimbursed by the other party for its reasonable
incremental out-of-pocket expenses of such personnel, but shall not charge any
other fee to any other party hereto.
SECTION 5.04. Mail; Payments. (a) Each of Shell Newco, TRMI, TRMI
Holdings, Texaco Pipeline, Texaco Trading, Texaco Convent and Texaco Anacortes
authorizes and empowers the Company from and after the Effective Time to receive
and open all mail and other communications directed to any of Shell Newco, TRMI,
TRMI Holdings, Texaco Pipeline, Texaco Trading, Texaco Convent, Texaco Anacortes
or their Affiliates and received by the Company, and, except for matters as to
which Shell Newco or TRMI is providing indemnification under any Equilon Joint
Venture Document, to act with respect to such communications in such manner as
the Company may elect if such communications relate to the Contributed Assets.
If such communications do not relate to the Contributed Assets or relate to
matters as to which Shell, Texaco or any of their respective Affiliates is
providing indemnification under any Equilon Joint Venture Document, the Company
shall forward the same promptly to the party (or parties) providing such
indemnification or to whom such communications relate. Each of Shell Newco,
TRMI, TRMI Holdings, Texaco Pipeline, Texaco Trading, Texaco Convent and Texaco
Anacortes shall, and shall cause their respective Affiliates to, promptly
deliver to the Company any cash, checks, other instruments of payment and funds
to which the Company is entitled and shall hold such cash, checks, other
instruments of payment and funds in trust for the Company until such delivery.
The Company shall promptly deliver to Shell Newco, TRMI, TRMI Holdings, Texaco
Pipeline, Texaco Trading, Texaco Convent, Texaco Anacortes or their Affiliates,
as applicable, any cash, checks or
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other instruments of payment to which such entity is entitled and shall hold
such cash, checks or other instruments of payment in trust for such entity until
such delivery.
(b) The Company authorizes and empowers Shell Newco, TRMI, TRMI
Holdings, Texaco Pipeline, Texaco Trading, Texaco Convent and Texaco Anacortes
and their Affiliates from and after the Effective Time to receive and open all
mail and other communications directed to the Company and received by any such
entity, and to act with respect to such communications in such manner as such
entity may elect if such communications do not relate to the Contributed Assets
or do relate to matters as to which such entity or any of its Affiliates is
providing indemnification under any Equilon Joint Venture Document or, if such
communications do relate to the Contributed Assets and not to such indemnified
matters, to forward the same promptly to the Company.
SECTION 5.05. Existing Insurance Coverage. If, after December 1, 1997,
any of Shell Newco, TRMI, TRMI Holdings, Texaco Pipeline, Texaco Trading, Texaco
Convent, Texaco Anacortes or their Affiliates receives, directly or indirectly,
from any insurer cash proceeds attributable to (i) casualty and property (but
not liability or business interruption for periods prior to the Effective Time)
insurance coverage applicable to any of the Contributed Assets with respect to
any occurrence or any series of related occurrences on or after December 1, 1997
or (ii) real property title insurance in respect of any of the Contributed
Assets, which proceeds, in either the case of clause (i) or (ii), aggregate in
excess of $1,000,000 for such occurrence or series of related occurrences, then
such recipient shall pay over such cash proceeds to the Company (net of any
deductible, co-payment, retro fees, premiums, costs or other charges payable to
the insurance carrier or obligations to reimburse the insurance carrier for
which it is liable and net of the cost of collection) except to the extent that
(x) the damage or loss incurred as a result of such occurrence or series of
occurrences was repaired, restored or reimbursed by or on behalf of such
recipient prior to the Effective Time or will be obligated to be reimbursed by
such recipient pursuant to the Equilon Joint Venture Documents or (y) Shell and
Texaco have otherwise expressly agreed in writing that such proceeds shall not
be paid over to the Company. Any such payment paid over to the Company shall
reduce any amounts payable by such recipient or its Affiliates with respect to
such occurrence under Article 8 of the Master Agreement. Any other insurance
proceeds received by any of Shell Newco, TRMI, TRMI Holdings, Texaco Pipeline,
Texaco Trading, Texaco Convent, Texaco Anacortes
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or their Affiliates with respect to any occurrence or series of occurrences
prior to the Effective Time shall be retained by such recipient.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of Shell Newco. Shell
Newco represents and warrants to each of the other parties hereto as follows;
provided that Shell Newco shall have no liability to any other party hereto or
any other Person (including any Person indemnified under Article 8 of the Master
Agreement) for the breach of any representation or warranty hereunder to the
extent that the facts or circumstances that gave rise to such breach:
(i) were actually disclosed in writing in the Due Diligence
Process to any of the Due Diligence Representatives of such other
party;
(ii) would reasonably be expected to be discovered by such
other party based on facts or circumstances so disclosed in writing
during the Due Diligence Process; or
(iii) were actually known to such other party or such other
party's Due Diligence Representatives on or prior to the Closing Date.
(a) Good, Indefeasible or Marketable Title. With such exceptions as
would not, individually and in the aggregate, have a Company Material Adverse
Effect, each entity contributing Shell Contributed Assets has good (and in the
case of interests in real property, indefeasible or marketable) title to all
Shell Contributed Assets so contributed thereby, free of all Liens other than
(x) Permitted Exceptions and (y) provisions in contracts, licenses and
agreements which prohibit or otherwise restrict assignment and, upon the
granting of the deeds and other instruments of transfer provided for herein, the
Company shall receive good (and in the case of interests in real property,
indefeasible or marketable) title to the Shell Contributed Assets as described
above.
For the avoidance of doubt, in the event that any representation or
warranty with respect to title to the Shell Contributed Assets set forth in any
of the Shell Transfer Instruments or implied by Applicable Law may be
interpreted to
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create representations or warranties other than those set forth in this Section
6.01(a), the representation and warranty set forth in this Section 6.01(a) shall
govern and such other representations and warranties shall be without force or
effect.
(b) Pro Forma Financial Information. With such exceptions as would
not, individually and in the aggregate, have a Company Material Adverse Effect:
(i) the Shell Pro Forma Financial Information represents
Shell's good faith allocation of the results of operations and cash
flows of Shell Oil Products Company's refining, marketing and
transportation business, for the periods indicated therein, among (A)
the Shell Valuated Units, (B) the businesses being contributed to
Eastco, (C) Shell's interest in the business conducted by DPRLP and (D)
the Shell Excluded Assets;
(ii) the Shell oil products business segment information
referred to in clause (i) was included in Shell's audited financial
statements for the periods indicated therein; and
(iii) the Shell Pro Forma Financial Information was not
necessarily prepared in accordance with GAAP, but was prepared with due
care after reasonable inquiry and is a fair presentation of the
financial performance of the Shell Valuated Units for the periods
indicated therein.
(c) Shell Contributed Assets. With such exceptions as would not,
individually and in the aggregate, have a Company Material Adverse Effect,
except for the Shell Excluded Assets and the Shell Intellectual Property Rights,
the Shell Contributed Assets constitute all of the assets used for or necessary
to the operation of the Shell Valuated Units in the ordinary course of business
and in substantially the same manner as such Shell Valuated Units were operated
as of December 1, 1997.
SECTION 6.02. Representations and Warranties Regarding the Texaco
Principal Member Group. Each of TRMI, TRMI Holdings, Texaco Pipeline, Texaco
Trading, Texaco Convent and Texaco Anacortes represents and warrants to Shell
Newco as follows; provided that TRMI, TRMI Holdings, Texaco Pipeline, Texaco
Trading, Texaco Convent and Texaco Anacortes shall have no liability to any
other party hereto or any other Person (including any Person indemnified under
Article 8 of the Master Agreement) for the breach of any
20
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representation or warranty hereunder to the extent that the facts or
circumstances that gave rise to such breach:
(i) were actually disclosed in writing in the Due Diligence
Process to any of the Due Diligence Representatives of such other
party;
(ii) would reasonably be expected to be discovered by such
other party based on facts or circumstances so disclosed in writing
during the Due Diligence Process; or
(iii) were actually known to such other party or such other
party's Due Diligence Representatives on or prior to the Closing Date.
(a) Good, Indefeasible or Marketable Title. With such exceptions as
would not, individually and in the aggregate, have a Company Material Adverse
Effect, each entity contributing Texaco Contributed Assets has good (and in the
case of interests in real property, indefeasible or marketable) title to all
Texaco Contributed Assets so contributed thereby, free of all Liens other than
(x) Permitted Exceptions and (y) provisions in contracts, licenses and
agreements which prohibit or otherwise restrict assignment and, upon the
granting of the deeds and other instruments of transfer provided for herein, the
Company shall receive good (and in the case of interests in real property,
indefeasible or marketable) title to the Texaco Contributed Assets as described
above.
For the avoidance of doubt, in the event that any representation or
warranty with respect to title to the Texaco Contributed Assets set forth in any
of the Texaco Transfer Instruments or implied by Applicable Law may be
interpreted to create representations or warranties other than those set forth
in this Section 6.02(a), the representation and warranty set forth in this
Section 6.02(a) shall govern and such other representations and warranties shall
be without force or effect.
(b) Pro Forma Financial Information. With such exceptions as would
not, individually and in the aggregate, have a Company Material Adverse Effect:
(i) the Texaco Pro Forma Financial Information represents
Texaco's good faith allocation of the results of operations and cash
flows of TRMI's and Texaco Trading's refining, marketing and
transportation
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business, for the periods indicated therein, between (A) the Texaco
Valuated Units and (B) the Excluded Assets;
(ii) the information referred to in clause (i) was included in
Texaco's consolidated audited financial statements for the periods
indicated therein; and
(iii) the Texaco Pro Forma Financial Information was not
necessarily prepared in accordance with GAAP, but was prepared with due
care after reasonable inquiry and is a fair presentation of the
financial performance of the Texaco Valuated Units for the periods
indicated therein.
(c) Texaco Contributed Assets. With such exceptions as would not,
individually and in the aggregate, have a Company Material Adverse Effect,
except for the Texaco Excluded Assets and the Texaco Intellectual Property
Rights, the Texaco Contributed Assets constitute all of the assets used for or
necessary to the operation of the Texaco Valuated Units in the ordinary course
of business and in substantially the same manner as such Texaco Valuated Units
were operated as of December 1, 1997.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Further Assurance. From and after the Effective Time,
each of the parties hereto shall, at any time and from time to time, at the
request of any other party hereto, make, execute and deliver, or use its best
efforts to cause to be made, executed and delivered, such assignments,
conveyances, deeds, bills of sale, filings and other instruments, agreements
(including any agreements which may be necessary or desirable in connection with
the making of any filing or the obtaining of any approval in any jurisdiction),
consents and assurances and take or cause to be taken all such action as the
parties hereto may reasonably request for the effectual consummation of this
Asset Transfer Agreement and the Equilon Joint Venture Transactions. It is
understood that this Section 7.01 may be applied to require the assignment or
conveyance (i) to the Company of assets owned or leased by any party or its
Affiliates that constitute Shell Contributed Assets or Texaco Contributed Assets
but by mistake were not assigned or
22
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conveyed to the Company at the Effective Time, or (ii) to any party or Affiliate
of a party of assets transferred to the Company that were not listed on the
Asset List (or was listed on the Asset List but was an Excluded Asset or the
non-contributed portion of a Shell Common Contract or Shell Shared Asset or a
Texaco Common Contract) and are not Shell Contributed Assets or Texaco
Contributed Assets, but were assigned or conveyed by mistake to the Company.
SECTION 7.02. Effectiveness. This Asset Transfer Agreement shall be
effective as of the Effective Time.
SECTION 7.03. Exclusivity. For avoidance of doubt, Section 8.01 of the
Master Agreement shall constitute the exclusive remedy for any misrepresentation
or breach of warranty or covenant contained in or arising under this Asset
Transfer Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Asset Transfer
Agreement to be duly executed as of the day and year first above written.
TEXACO INC.
By G. F. Tilton
--------------------------------
TEXACO REFINING AND MARKETING INC.
By Wilson L. Berry, Jr.
--------------------------------
TRMI HOLDINGS INC.
By G. F. Tilton
--------------------------------
TEXACO PIPELINE INC.
By Arthur Nicoletti
--------------------------------
TEXACO TRADING AND
TRANSPORTATION INC.
By Arthur Nicoletti
--------------------------------
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<PAGE>
TEXACO CONVENT
REFINING COMPANY
By T. P. Dougherty, Jr.
--------------------------------
TEXACO ANACORTES
COGENERATION COMPANY
By Louise Nemanich
--------------------------------
SHELL OIL COMPANY
By J. M. Morgan
--------------------------------
SOPC HOLDINGS WEST LLC
By M. R. Williams
--------------------------------
EQUILON ENTERPRISES LLC
By J. M. Morgan
--------------------------------
EXHIBIT 99.1
TEXACO, SHELL ANNOUNCE COMPLETION OF WESTERN
U.S. DOWNSTREAM ALLIANCE:
EQUILON ENTERPRISES
FOR IMMEDIATE RELEASE: FRIDAY, JANUARY 16, 1998.
WHITE PLAINS, N.Y., Jan. 16, 1998 -- Texaco Inc. and Shell Oil Company
today announced the formation and operational start up of their joint venture
combining major elements of their western and midwestern U.S. refining and
marketing businesses and their nationwide trading, transportation and lubricants
businesses. Shell will have 56 percent ownership and Texaco will hold 44 percent
of the company.
The new company will operate as Equilon Enterprises LLC. Equilon is not
intended to be used as a product or brand name. The location of Equilon
Enterprises' corporate center will be announced at a later date.
James M. Morgan, president and chief executive officer of Shell Oil
Products Company, will be president and chief executive officer of Equilon
Enterprises.
"This combination of Texaco and Shell assets will allow us to
accomplish a fundamental change in the way we operate our downstream businesses,
improve performance and create an environment to grow the business," said Texaco
Chairman and CEO Peter I. Bijur and Shell Oil Company President and CEO Philip
J. Carroll. "Ultimately, this alliance will generate new opportunities for our
customers, employees, vendors and the communities where we work and live."
"Equilon Enterprises will market gasoline and other products under both
the Shell and Texaco brands, which are key recognizable strengths of the new
company," said Morgan. "These quality brands and our highly talented, innovative
people promise to be a winning combination in every respect."
Texaco, Shell and Saudi Refining, Inc. are finalizing agreements for a
separate joint venture involving their eastern and Gulf Coast refining and
marketing businesses. All three parties are optimistic that this second
transaction will be concluded early in 1998. The eastern operations company will
be owned 35 percent by Shell, 32.5 percent by Texaco and 32.5 percent by Saudi
Refining, Inc. The exploration, production and chemical businesses of these
companies are not included in the alliance.
Texaco Inc. is based in White Plains, N.Y. Shell Oil Company is a
Houston-based affiliate of the Royal Dutch/Shell Group of Companies. Saudi
Aramco is the state-owned oil company of the kingdom of Saudi Arabia. The
company's U.S. corporate affiliate Saudi Refining, Inc. is based in Houston.
For more information contact: Shell Oil Company
Kitty Borah, Stacy Hutchinson 713-241-4544
Texaco
Chris Gidez (New York) 914-253-4042
Kelly McAndrew (New York) 914-253-6295
Paul Weeditz (Houston) 713-752-6475
Saudi Refining, Inc.
Henry Hayes 713-432-4149
Bill Tracy 713-432-4645
NOTE TO EDITORS: Additional information on Equilon Enterprises' senior
leadership team is available on the World Wide Web at:
http://www.shellus.com
http://www.texaco.com
