EXHIBIT 10.16
REFINERY LEASE AGREEMENT
DATED AS OF MAY 25, 2001,
BY AND BETWEEN
COASTAL REFINING & MARKETING, INC., AS LESSOR,
AND
VALERO REFINING COMPANY-TEXAS, AS LESSEE
THIS REFINERY LEASE AGREEMENT (this "Lease"), dated as of May
25, 2001, is entered into by and between Coastal Refining & Marketing, Inc., a
Delaware corporation, (hereinafter referred to as "Lessor") and Valero Refining
Company-Texas, a Texas corporation, (hereinafter referred to as "Lessee").
WHEREAS, Lessor is the owner of the Leased Property, Inventory
and Equipment; and
WHEREAS, Lessor desires to lease the Leased Property and sell
the Inventory and Equipment to Lessee, and Lessee desires to lease the Leased
Property and purchase the Inventory and Equipment from Lessor;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Certain Defined Terms. Unless the context otherwise requires, the
respective terms defined in Appendix A attached hereto and incorporated herein
shall, when used herein, have the respective meanings therein specified, with
each such definition to be equally applicable both to the singular and the
plural forms of the term so defined.
1.2 References, Gender, Number. All references in this Lease to an
"Article," "Section," or "subsection" shall be to an Article, Section, or
subsection of this Lease, unless the context requires otherwise. Unless the
context otherwise requires, the words "this Lease," "hereof," "hereunder,"
"herein," "hereby," or words of similar import shall refer to this Lease as a
whole and not to a particular Article, Section, subsection, clause or other
subdivision hereof. Whenever the context requires, the words used herein shall
include the masculine, feminine and neuter gender, and the singular and the
plural.
ARTICLE 2
PRE-CLOSING AGREEMENTS
2.1 Agreement to Lease. Upon the Closing, subject to the terms and
conditions of this Lease, (i) Lessor agrees to lease the Leased Property to
Lessee, and Lessee agrees to lease the Leased Property from Lessor, and (ii) the
parties agree to execute and deliver (or cause the execution and delivery of)
the Related Agreements (other than those to be executed after the Closing
pursuant to Section 10.5) as more fully provided in Section 2.11.
(a) As of the Effective Time, subject to the terms and
conditions of this Lease and for the consideration specified below, Lessor shall
sell, assign, transfer, grant, bargain, deliver and convey to Lessee, free and
clear of all Liens, all of Lessor's and its Affiliates' right, title and
interest in, to and under the Inventory. In consideration of the transfer to
Lessee of the
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Inventory, Lessee shall deliver to Lessor the Estimated Inventory Sale Price set
forth in SCHEDULE 2.1, PART I by wire transfer of immediately available funds at
the Closing. The Estimated Inventory Sale Price is subject to later adjustment
pursuant to Section 2.2(e).
(b) As of the Effective Time, subject to the terms and
conditions of this Lease and for the consideration specified below, Lessor shall
sell, assign, transfer, grant, bargain, deliver and convey to Lessee, free and
clear of all Liens, all of Lessor's and its Affiliates' right, title and
interest in, to and under the Equipment. In consideration of the transfer to
Lessee of the Equipment, Lessee shall deliver to Lessor $9,948,318 (the
"Equipment Sale Price"). Following the Effective Time, the Equipment Sale Price
will be subject to adjustment to reflect any use or purchase of Equipment during
the period between the date of this Lease and the Effective Time. In order to
establish the appropriate adjustment, within ten business days following the
Effective Time, Lessor and Lessee shall run an inventory report on the Materials
Processing and Control System located at the Facility to establish as of the
Effective Time the final value of the Equipment ("Final Value"). If the Final
Value less $355,000 (the "Adjusted Final Value") is greater than the Equipment
Sale Price, then Lessee shall pay Lessor the difference between the Adjusted
Final Value and the Equipment Sale Price within 10 days of receipt of an
invoice from Lessor for such amount. If the Adjusted Final Value is less than
the Equipment Sale Price, then Lessor shall pay Lessee the difference between
the Adjusted Final Value and the Equipment Sale Price within 10 days of receipt
of an invoice from Lessee for such amount. Notwithstanding the foregoing, no
adjustment will be made and no amounts owed by either party in the event that
the difference between the Adjusted Final Value and the Equipment Sale Price is
less than $50,000. Any disputes between the parties regarding the Final Value
shall be submitted to the Independent Arbitrator in accordance with the
provisions in Section 2.2(f).
(c) The Estimated Inventory Sale Price will be adjusted
following Closing based on a physical inventory (the "Physical Inventory")
commenced no more than two Business Days prior to the Closing. The Physical
Inventory shall be conducted in accordance with the measurement and other
procedures specified in Schedule 2.2, PART I AND shall be conducted by
independent inspectors.
(d) Within ten Business Days of receipt of the Final Inventory
Quantity Report (as provided in Section 0 of Schedule 2.2 PART I), Lessor shall
deliver the Statement (defined below) to Lessee. As used herein, the Statement
shall mean an invoice, based on the valuation formulae set forth in Schedule 2.2
PART II and the Final Inventory Quantity and Final Inventory Quality set forth
in the Final Inventory Quantity Report, that indicates by product and in the
aggregate the final value for the Inventory conveyed to Lessee pursuant hereto.
(e) Lessee shall have ten Business Days from receipt of the
Statement to review the Statement. During this ten Business Day period, Lessee
shall be permitted to review the working papers of Lessor relating to, and shall
be given access to the employee of Lessor primarily responsible for the
preparation of, the Statement. The Statement shall become final and binding upon
the parties on the tenth Business Day following delivery thereof to Lessee,
unless Lessee gives written notice of its disagreement with the Statement
("Notice of Disagreement") to Lessor prior to such date. Any Notice of
Disagreement shall (A) specify in reasonable detail the nature of any
disagreement so asserted and (B) include only disagreements based on
mathematical or typographical errors or the amount to be paid for Inventory not
being calculated in accordance with this Section or Schedule 2.2 If a Notice of
Disagreement is received by
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Lessor in a timely manner, then the Statement (as revised in accordance with
clause (A) or (B) below) shall become final and binding upon Lessor and Lessee
upon the earlier of (A) the date Lessor and Lessee resolve in writing any
differences they have with respect to the matters specified in the Notice of
Disagreement or (B) the date any disputed matters are finally resolved in
writing by the Independent Arbitrator (as defined below). The Statement, upon
becoming final and binding in accordance with this Section 2.2, and as the same
may be revised in accordance with the preceding clause (A) or (B), is
hereinafter referred to as the "Final Statement".
(f) During the ten Business Day period following the delivery
of a Notice of Disagreement, Lessor and Lessee shall seek in good faith to
resolve in writing any differences which they may have with respect to the
matters specified in the Notice of Disagreement. During such period, Lessor
shall have access to the working papers of Lessee prepared in connection with
its certification of the Notice of Disagreement. At the end of such ten Business
Day period, Lessor and Lessee shall submit to an independent arbitrator (the
"Independent Arbitrator") for review and resolution of any and all matters which
remain in dispute and which were properly included in the Notice of
Disagreement, in the form of a written brief. The Independent Arbitrator shall
be Ernst & Young. The Independent Arbitrator shall make a final and binding
determination as to the submitted matters within 45 days after its appointment.
The Independent Arbitrator's determination shall be in the form of an opinion as
is appropriate under the circumstances and shall confirm that it was rendered in
accordance with this Section 2.2(f) Lessor and Lessee agree that judgment may be
entered upon the determination of the Independent Arbitrator in any court having
jurisdiction over the party against which such determination is to be enforced.
The fees and expenses of the Independent Arbitrator and the reasonable
attorney's fees and expenses of the parties incurred in connection with the
matters submitted to the Independent Arbitrator shall be borne by Lessor and
Lessee in inverse proportion as they may prevail on matters resolved by the
Independent Arbitrator, which proportionate allocations shall also be determined
by the Independent Arbitrator at the time the determination of the Independent
Arbitrator is rendered on the merits of the matters submitted. Notwithstanding
the foregoing, the fees and expenses of Lessor incurred in connection with its
preparation and certification of the Statement and its review of the Notice of
Disagreement shall by borne by Lessor, and the fees and expenses of Lessee
incurred in connection with its review of the Statement and the preparation and
certification of any Notice of Disagreement shall be borne by Lessee.
(g) If the amounts indicated in the Final Statement are, in
the aggregate, more than the Estimated Inventory Sale Price, Lessee shall,
within 10 days after the Statement becomes final and binding pursuant to Section
2.2 hereof, make payment to Lessor by wire transfer in immediately available
funds of the amount of such difference not otherwise paid by Lessee, together
with interest thereon at a rate equal to the Agreed Rate, calculated on the
basis of the actual number of days elapsed over 365, from and including the
Effective Time to but excluding the date of payment if paid by 12:00 noon
Central Time. If the amounts indicated in the Final Statement are, in the
aggregate, less than the Estimated Inventory Sale Price, Lessor shall, within 10
days after the Statement becomes final and binding pursuant to Section 2.2
hereof, make payment to Lessee by wire transfer in immediately available funds
of the amount of such difference overpaid by Lessee, together with interest
thereof at a rate equal to the Agreed Rate, calculated on the basis of the
actual number of days elapsed over 365, from and including the Effective Time to
but excluding the date of payment if paid by 12:00 noon Central Time. Either
party may elect, at any time in advance of the Statement becoming final and
binding, to
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pay to the other party any portion which is not in dispute of such difference in
the amount between the Estimated Inventory Sale Price and in the Statement,
which such payment shall include interest thereon at the foregoing rate from and
including the Effective Time to but excluding the date of payment if paid by
12:00 noon Central Time.
(h) Not later than ten Business Days following Lessee's
receipt of the Final Inventory Quantity Report referred to in Section 2.2(e),
Lessee shall give Lessor written notice of any solid Hazardous Material (other
than tank bottoms and sediment) stored in the tanks on the Leased Property as of
the Effective Time that Lessee requires to be disposed of by Lessor. Lessor, at
Lessor's risk and expense, agrees to promptly dispose of any solid Hazardous
Waste (other than tank bottoms and sediment) stored in tanks on the Leased
Property as of the Effective Time of which Lessee gives Lessor timely written
notice in accordance with the preceding sentence.
2.3 Access to Information.
(a) General Access. Subject to Sections 2.3(a)(3) and 2.3(b),
promptly following the execution of this Lease and until the Closing Date (or
earlier termination of this Lease):
(1) Books and Records. Lessor shall permit Lessee and
its representatives to have reasonable access at reasonable times in
Lessor's offices, and in a manner so as not to interfere unduly with
the business operations of Lessor, to all Lessor' s books and records,
including contracts, title opinions, title files, ownership maps,
assignments and documents, relating to the Leased Property, Inventory
and Equipment insofar as Lessor may do so without (i) violating legal
constraints or any legal obligation or (ii) waiving any
attorney/client, work product or like privilege.
(2) Limitation on Access. Nothing in this Lease shall
be construed to permit Lessee or its representatives to have access to
any files, records, contracts or documents of Lessor or any Affiliate
of Lessor relating to (i) Lessor's or any of its Affiliate's
inter-company or intra-company feedstock and product pricing
information, internal transfer prices, hedging activity records and
hydrocarbon inventory valuation procedures and records or (ii) this
transaction.
(b) Confidential Information. The Confidentiality Agreements
are incorporated by reference into this Lease and made a part hereof.
2.4 Conduct of Business Pending Closing. Except as otherwise
contemplated herein or agreed to by Lessee in writing (which agreement shall not
be unreasonably withheld or delayed), from the date hereof until the Closing
Date, Lessor shall:
(a) conduct its operations of the Leased Property according to
its ordinary and usual course of business consistent with past practice,
(b) use reasonable efforts to keep available the services of
Lessor's or its Affiliate's employees who are currently employed in connection
with the operation of the Leased Property,
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(c) use reasonable efforts to maintain Lessor's present
relationships with customers, service providers and others having business
relationships with the Leased Property,
(d) maintain the Leased Property in accordance with its
current plans and practices, including the conduct of scheduled turnarounds, the
replacement or upgrades of operating units, piping and storage, the continuation
of capital improvement projects and the treatment and disposal of Hazardous
Materials prior to closing, in each case to the extent required by Law or a
reasonable and prudent operator would do so to maintain safety conditions,
(e) not transfer or dispose of any Equipment or other tangible
property, including vehicles or computer equipment, or remove any books and
records at the site of the Leased Property used or useful in the business being
conducted at the Leased Property, except for (i) sales of Inventory in the
ordinary course of business and (ii) Excluded Assets,
(f) place any Lien on the Leased Property, Inventory or
Equipment except (i) Permitted Liens or (ii) any Lien arising from Lessor's
enforcement of its rights under this Lease or from Lessor's compliance with its
obligations under this Lease,
(g) not grant any general wage or benefit increase to persons
who will not be Retained Employees except consistent with past practice or the
May 1, 2001 wage increase heretofore disclosed to Lessee, and
(h) notify Lessee promptly, and in any event prior to the
Closing, of any written notice of violation or written threatened notice of
violation received from any Governmental Body after the date of this Agreement
relating to Environmental Laws or Permits at the Facility or the Site.
Notwithstanding the foregoing, Lessor may take (or not take, as the case may be)
any actions contrary to the foregoing to the extent reasonably necessary under
emergency circumstances (or if required or prohibited, as the case may be,
pursuant to Law) and provided Lessee is notified as soon thereafter as
practicable.
2.5 Public Announcements. Prior to the Closing Date, without the prior
written approval of the other party hereto, which approval shall not be
unreasonably withheld or delayed, no party hereto will issue, or permit any
agent or Affiliate of it to issue, any press releases or otherwise make, or
cause any agent or Affiliate of it to make, any public statements with respect
to this Lease and the transactions contemplated hereby, except where such
release or statement is deemed in good faith by the releasing party to be
required by Law or under the rules and regulations of any public stock exchange
on which the shares of such party or any of its Affiliates are listed. In each
case to which such exception applies, the releasing party will use its
reasonable best efforts to provide a copy of such release or statement to the
other party prior to releasing or making the same.
2.6 Actions and Efforts by Parties.
(a) Reasonable Efforts. Without limiting the respective
warranties, representations, covenants and agreements of the parties contained
herein, each of the parties
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agrees to use its reasonable efforts to satisfy the conditions to Closing set
forth in Section 2.10 and to refrain from taking any action within its control
which would cause a breach of a representation or warranty set forth herein.
Without limiting the respective warranties, representations, covenants and
agreements of the parties contained herein, each of the parties agrees to use
its reasonable efforts (and to cause its Affiliates to use their reasonable
efforts) to refrain from taking any action within its control which would cause
a breach of any of its representations and warranties contained in Articles 7 or
8, as the case may be, or which would prevent it from delivering to the other
party the certificate which it is required to deliver pursuant to Section
2.10(a)(2) or 2.10(b)(2), as the case may be. In connection with the continuing
operations of the Leased Property between signing of this Lease and the Closing,
Lessor shall use reasonable efforts to consult in good faith on a regular and
frequent basis with the representatives of Lessee to report material operational
developments and the general status of ongoing operations. Lessor and Lessee
acknowledge that any such consultation shall not constitute (i) a waiver by
Lessee or Lessor of any rights it may have under this Lease or any Related
Agreements or (ii) any warranty or representation by Lessor.
(b) Further Assurances. Lessor and Lessee each agrees that
from time to time after the Closing Date, each of them will execute and deliver
or cause their respective Affiliates to execute and deliver such further
instruments, and take (or cause their respective Affiliates to take) such other
action, as may be necessary to carry out the purposes and intents of this Lease.
Nothing in this Section shall cause any representation, warranty, covenant or
agreement contained in other Sections or provisions of this Lease to survive
later than the time stipulated for the survival of such representation,
warranty, covenant or agreement in Section 2.12. To the extent that any
Affiliate of Lessor has legal or beneficial title to any of the Leased Property,
Inventory or Equipment, Lessor will cause such Affiliate to convey (or lease, as
appropriate) such legal or beneficial title in the Leased Property, Inventory or
Equipment to Lessee on the same terms and to the same extent that Lessor is
obligated under this Lease to convey (or lease, as appropriate) such legal or
beneficial title in the Leased Property, Inventory or Equipment to Lessee.
(c) Restrictions. If there are prohibitions against, or
conditions to, the transfer of any permit, license, easement, contract or other
property (other than Environmental Permits), or if the transfer, apportionment
or division of any permit, license, easement, contract or other property (other
than Environmental Permits), contemplated to be transferred to Lessee (or to be
apportioned or divided) pursuant to this Lease, the Related Agreements or the
Special Warranty Conveyance without the prior written consent of third parties,
including Governmental Bodies whose consent is needed for permits to be issued
to Lessee or modified, which if not satisfied would result in a breach of such
prohibitions or conditions or would give an outside party the right to terminate
or limit any right of Lessee or Lessor with respect to any such permit, license,
easement, contract or other property (herein called a "Restriction"), then,
without delaying the Closing, any provision contained in this Lease, the Related
Agreements or the Special Warranty Conveyance shall not become effective with
respect to such permit, license, easement, contract or other property unless and
until such Restriction is satisfied, waived or no longer applies. Following the
Closing, when and if such a Restriction is so satisfied, waived or no longer
applies, to the extent permitted by Law and any applicable contractual
provisions, the assignment of the permit, license, easement, contract or other
property subject thereto shall become effective automatically as of the
applicable closing date, without further action on the part of Lessor or Lessee
and without payment of further consideration. Each of Lessor and
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Lessee agrees to use its commercially reasonable best efforts to obtain
satisfaction of any Restriction on a timely basis post-Closing. To the extent
that any Restriction exists, Lessor agrees to use its commercially reasonable
best efforts (without infringing upon the legal rights of such third party or
outside party or violating any Law) to provide Lessee with the equivalent assets
or benefits thereof by subcontract or otherwise, at no additional cost to Lessee
(other than the assumption of any related liability and the performance and
compliance by Lessee with the terms of such permit, license, easement, contract
or other property) effective as of the applicable closing date. Lessee agrees
(without infringing upon the legal rights of such third party or outside party
or violating any Law) to bear the economic burden of any related liability and
of the performance and compliance with the terms of the permit, license,
easement, contract or other property subject to the Restriction, at no
additional cost to Lessor, effective as of the applicable closing date to the
same extent as Lessee would have borne such liability and other obligations if
this Lease, the Related Agreements or the Special Warranty Conveyance, as the
case may be, had been effective as of the applicable closing date with respect
to such permit, license, easement, contract or other property. In the case of a
contract, Lessor agrees (without infringing upon the legal rights of such third
party or outside party or violating any Law) to exercise its rights under such
contract at the direction and/or for the benefit of Lessee. Notwithstanding the
foregoing, nothing in this Section 2.6(c) shall require or obligate Lessee or
Lessor to purchase or pay consideration to acquire any new or additional permit,
license, easement, contract or other property right or interest.
(d) Environmental Permits. If there are prohibitions against,
or conditions to, the transfer of any Environmental Permit contemplated to be
transferred to Lessee pursuant to this Lease, the Related Agreements or the
Special Warranty Conveyance without the prior written consent of third parties,
including Governmental Bodies whose consent is needed for such Environmental
Permit to be issued to Lessee or modified, which if not satisfied would result
in a breach of such prohibitions or conditions or would give an outside party
the right to terminate or limit any right of Lessee with respect to any such
Environmental Permit, then, without delaying the Closing, (i) any provision
contained in this Lease, the Related Agreements or the Special Warranty
Conveyance shall not become effective with respect to such Environmental Permit
and (ii) Lessor, at Lessee's cost and expense, agrees to use reasonable
commercial efforts to assist Lessee in obtaining consent to the transfer of such
Environmental Permits to Lessee or the issuance or modification of such
Environmental Permits in Lessee's name. As an accommodation to Lessee, Lessor
shall retain, in its name, the pending applications for permits pursuant to
Title V of the Clean Air Act, Tex. Health & Safety Code Section 382.054, and 30
Tex. Administrative Code Chapter 122 until Lessee has sufficient time to
determine whether it wishes to transfer the applications to its name or submit
substitute or new application(s); provided, however, Lessee shall (i) bear all
costs related to Lessor's maintaining and continuing prosecution of the
applications; and (ii) within six months after Closing, either transfer the
applications to its name or submit the substitute or new applications for these
permits. Nothing hereunder shall in any way affect Lessee's obligations in this
Lease, including, without limitation, its obligation to comply with
Environmental Law and to indemnify Lessor for Assumed Environmental Claims and
Costs of Compliance related thereto. Lessee shall immediately after Closing
undertake, at its sole cost, all measures necessary to effect and obtain
approval of the transfer to Lessee of Landfill Post Closure Care Permit No.
HW-50261-000. The parties recognize that the transfer of said permit may not
take place for at least 90 days after Lessee submits the application for
transfer. Notwithstanding the above and subject to Section 2.9, Lessee shall
comply with all obligations of said permit and indemnify Lessor for any
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Environmental Claims and Cost of Compliance with respect thereto as provided
herein.
(e) Cooperation. Lessor and Lessee shall cooperate in
obtaining any required consents and permits to permit the transactions
contemplated by this Agreement. Lessee shall take the primary role in obtaining
any Environmental Permits and the transfer of technology licenses, and Lessor
shall take the primary role in obtaining consents to the transfer of contracts
other than technology licenses.
(f) Lease Expiration. In the event the term of any real
property lease included in the Leased Property expires after the Effective Time
and prior to the earlier of the closing of the Option or the termination of this
Lease, Lessee, at Lessee's cost and expense, agrees to use all reasonable
commercial efforts to extend or renew such lease (or obtain a replacement lease)
on terms and conditions substantially similar to the currently existing terms
and conditions of such lease; provided that, Lessee shall not be obligated to
extend, renew or replace any real property lease that is not necessary for
Lessee to comply with Lessee's obligations under Article 16. Any such extended,
renewed or new real property lease which is on terms and conditions
substantially similar to the currently existing terms and conditions of such
lease (or which is approved by Lessor) shall be considered to be part of the
Leased Property. Any such extended, renewed or new real property lease which is
not on terms and conditions substantially similar to the currently existing
terms and conditions of such lease and is not approved by Lessor shall not be
considered to be part of the Leased Property; provided, however, Lessor shall
have the option, exercisable within 30 days after the termination of this Lease
(other than by reason of the closing of the Option), to elect to cause such
extended, renewed or new lease to be deemed to have been part of the Leased
Property. Lessee assumes all risk of acquiring any extension, renewal or
replacement of a real or personal property lease that expires after the
Effective Time and, notwithstanding any other provision of this Lease, Lessor
shall not have any liability to Lessee if Lessee is unable to acquire an
extension, renewal or replacement of any such expired real or personal property
lease on similar or reasonable terms.
2.7 Casualty and Condemnation.
(a) Material Casualty. If after the date of this Lease and
prior to the Closing, all or any part of the Leased Property is damaged or
destroyed by fire or other casualty and such damage or destruction has a
Material Adverse Effect:
(1) Lessee shall have the option, exercisable within
ten days after receiving written notice thereof from Lessor (but before
Closing), to elect by written notice to Lessor to terminate this Lease;
provided, however, that such election by Lessee to terminate this Lease
shall not be effective if
(i) such damaged or destroyed Leased
Property can be repaired or replaced to the state in which it
existed immediately preceding such damage or destruction
within 180 days from the date of Lessor's receipt of Lessee' s
notice of termination, and
(ii) within ten days after Lessor's receipt
of Lessee's notice of termination, Lessor gives Lessee written
notice of Lessor's election to repair or replace such damaged
or destroyed Leased Property at Lessor's sole expense
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(including any insurance proceeds attributable thereto wider
insurance policies of Lessor or its Affiliates).
If Lessor elects to repair or replace such damaged Leased Property
pursuant to the foregoing, Lessor shall be obligated to proceed in good
faith to diligently repair or replace such damaged or destroyed Leased
Property to the state in which it existed immediately preceding such
damage or destruction and the Closing Date shall be extended until the
third Business Day following the date on which Lessor and Lessee
mutually agree that such damaged Leased Property has been so repaired
or replaced, such mutual agreement not to be unreasonably withheld or
delayed; provided, however, this Lease shall terminate, at Lessee's
option, if such damaged Leased Property is not so repaired or replaced
within 180 days from the date of Lessor's receipt of Lessee's aforesaid
notice of termination.
(2) If Lessee does not exercise its option to
terminate this Lease within the time period provided in Section 2.7(a),
Lessor shall have the option, exercisable within 25 days after Lessor
gives Lessee written notice of such damage or destruction pursuant to
Section 2.7(a) (but before Closing), to elect by written notice to
Lessee to terminate this Lease; provided, however, that such election
by Lessor to terminate this Lease shall not be effective if within ten
days after Lessee's receipt of Lessor's notice of termination, Lessee
gives Lessee written notice of Lessee's election to repair or replace
such damaged or destroyed Leased Property to the state in which it
existed immediately preceding such damage or destruction using any net
insurance proceeds attributable thereto under insurance policies of
Lessor or its Affiliates, but otherwise at Lessee's sole expense
(including any insurance proceeds attributable thereto under insurance
policies of Lessee or its Affiliates). If Lessee elects to repair or
replace such damaged Leased Property pursuant to the foregoing, then
following the Closing Lessee shall be obligated to proceed in good
faith to diligently repair or replace such damaged or destroyed Leased
Property to the state in which it existed immediately preceding such
damage or destruction. In such event,
(i) all insurance proceeds paid on account of such
damage or destruction under insurance policies held by Lessor or its
Affiliates (less any reasonable costs and expenses incurred in
collecting same) shall be made available for the payment of the cost of
such Work of repairing or replacing the same subject to Lessee
furnishing reasonable evidence of the costs incurred by Lessee for such
Work to Lessor or Lessor's or its Affiliate's insurance carrier(s) and
(ii) all such insurance proceeds not applied to such
Work shall be delivered to Lessee up to the amount of the deductible
applicable to such insurance and any excess shall be retained by Lessor
or its Affiliates as its or their sole property.
(b) Other Casualty Repair by Lessor. If after the date of this
Lease and prior to the Closing, all or any part of the Leased Property is
damaged or destroyed by fire or other casualty and either (i) such damage or
destruction does not have a Material Adverse Effect or (ii) neither party elects
to terminate this Lease pursuant to Section 2.7(a), then this Lease shall remain
in full force and effect notwithstanding any such damage or destruction, and
Lessor at Lessor's sole expense (including any insurance proceeds attributable
thereto under insurance policies of Lessor or its
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Affiliates) shall be obligated to proceed in good faith to diligently repair or
replace such damaged or destroyed Leased Property to the state in which it
existed immediately preceding such damage or destruction and the Closing Date
shall not be extended on account thereof. In the event Lessee wishes to repair
or replace such damaged or destroyed Leased Property to a state other than that
in which it existed immediately preceding such damage or destruction, Lessor
shall be obligated to do so only if (A) Lessee agrees to indemnify and hold
harmless the Lessor Indemnitees from all Covered Liabilities attributable to
such extra cost, risk and expense under clause (a) of Section 17.2 as a
Post-Closing Liability and (B) the same would otherwise have been permitted
under Section 11.5 if carried out by Lessee.
(c) Condemnation. If after the date of this Lease and prior to
the Closing, all or any part of the Leased Property is taken in condemnation or
if proceedings for such purpose shall be pending, and such taking or threatened
taking has a Material Adverse Effect, the provisions of Section 2.7(a) shall
apply to such circumstance as if such taking or threatened taking were a
casualty, mutatis mutandis, except that (A) if Lessee elects to terminate this
Lease based on condemnation which has a Material Adverse Effect, Lessor shall
not have the right to make an election analogous to the election it may make
pursuant to Section 2.7(a)(1) and (B) if this Lease is not terminated, any
portion of the condemnation award received by Lessor as a result of such
condemnation shall be and remain the sole property of Lessor and the amount of
such condemnation award so received by Lessor (less any reasonable costs and
expenses incurred in collecting same) shall operate to reduce the Purchase
Price. If after the date of this Lease and prior to the Closing, all or any part
of the Leased Property is taken in condemnation or if proceedings for such
purpose shall be pending, and either (i) such taking or threatened taking does
not have a Material Adverse Effect or (ii) neither party elects to terminate
this Lease pursuant to the preceding sentence, then this Lease shall remain in
full force and effect notwithstanding any such taking or threatened taking, and
the provisions of Section 2.7(b) shall apply to such circumstance as if such
taking or threatened taking were a casualty, mutatis mutandis.
2.8 Lessor Name, Logos, etc. Following the Closing, Lessee will not be
entitled to use (a) the names "El Paso" or "Coastal" or any variations and
derivations thereof (including any logo, trademark or design containing such
name) or (b) any logo, service ▇▇▇▇, trade name or trademark which constitutes
an Excluded Asset. Accordingly, as soon as reasonably practicable, but in any
event within six months following the Closing, Lessee will remove or paint over,
as appropriate, any logo, service ▇▇▇▇, trade name or trademark which
constitutes an Excluded Asset and is on any of the Leased Property, Inventory or
Equipment.
2.9 Release and Replacement of Bonds, Guarantees, etc. At the Closing,
Lessee shall deliver to the applicable beneficiary replacement or substitute
guaranties, letters of credit, bonds, and other surety obligations for those set
forth on Schedule 2.9 and Lessee, in form and substance acceptable to Lessor,
shall have caused the release as of the Closing Date of Lessor and its
Affiliates from all obligations relating to any such guaranties, letters of
credit, bonds, or other surety obligations and any liabilities related thereto.
In this regard, at Closing or upon transfer of the permit referred to below, if
later, Lessee shall establish the financial assurance required by Landfill Post
Closure Care Permit No. HW-50261-000 and shall provide Lessor written notice
that the financial assurance is in place and a copy of the letter of credit,
bond or other mechanism used to satisfy the financial assurance requirement.
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2.10 Closing Conditions.
(a) Lessor's Closing Conditions. The obligation of Lessor to
proceed with the Closing contemplated hereby is subject, at the option of
Lessor, to the satisfaction on or prior to the Closing Date of all of the
following conditions:
(1) Representations, Warranties and Covenants. The
(i) representations and warranties of Lessee contained in this Lease
shall be true and correct in all material respects (and in all
respects, in the case of representations and warranties which are
qualified by materiality or by the requirement of a Material Adverse
Effect) on and as of the Closing Date as though made as of the Closing
Date, and (ii) covenants and agreements of Lessee to be performed on or
before the Closing Date in accordance with this Lease shall have been
duly performed in all material respects (and in all respects, in the
case of covenants and agreements which are qualified by materiality).
(2) Officer's Certificate. Lessor shall have received
a certificate dated as of the Closing Date, executed on behalf of
Lessee by a duly authorized officer of Lessee, to the effect that the
conditions set forth in subsection (1) of this Section 2.10(a) have
been satisfied.
(3) Closing Documents. On or prior to the Closing
Date, Lessee shall have delivered, or be standing ready to deliver (or
cause to be delivered) at Closing, all agreements, instruments and
other documents that Lessee is required to deliver or cause to be
delivered pursuant to Section 2.11(c).
(4) No Existing Order. No order, writ, injunction or
decree shall have been entered and be in effect by any court of
competent jurisdiction or any Governmental Body, and no statute, rule,
regulation or other requirement shall have been promulgated or enacted
and be in effect, that restrains, enjoins or invalidates the
transactions contemplated hereby.
(5) Guaranties and Sureties. Lessor shall have
received from Lessee replacement or substitute guaranties, letters of
credit, bonds, and other surety obligations for those set forth on
Schedule 2.9 and Lessee, in form and substance acceptable to Lessor,
shall have caused the release as of the Closing Date of Lessor and its
Affiliates from all obligations relating to any such guaranties,
letters of credit, bonds, or other surety obligations and any
liabilities related thereto.
(6) Consents. Except for such consents, licenses and
approvals the failure of which to obtain or with which to comply will
not be reasonably likely to have a Material Adverse Effect,
Environmental Permits, and Post-Closing Consents, the consents,
licenses and approvals from all third parties or Governmental Bodies
necessary or appropriate for Lessor to consummate the transactions
contemplated by this Lease shall have been received.
(7) HSR Act. All necessary filings and notifications
under the HSR Act shall have been made, including any required
additional information and documents, and the waiting period referred
to in the HSR Act applicable to the transactions contemplated hereby
shall have expired or been terminated.
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(8) Contemporaneous Closing. The "Closing" under the
Other Lease shall occur simultaneously with the Closing under this
Lease.
(b) Lessee's Closing Conditions. The obligation of Lessee to
proceed with the Closing contemplated hereby is subject, at the option of
Lessee, to the satisfaction on or prior to the Closing Date of all of the
following conditions:
(1) Representations, Warranties and Covenants. The
(i) representations and warranties of Lessor contained in this Lease
shall be true and correct in all material respects (and in all
respects, in the case of representations and warranties which are
qualified by materiality or by the requirement of a Material Adverse
Effect) on and as of the Closing Date as though made as of the Closing
Date, and (ii) covenants and agreements of Lessor to be performed on or
before the Closing Date in accordance with this Lease shall have been
duly performed in all material respects (and in all respects, in the
case of covenants and agreements which are qualified by materiality).
(2) Officer's Certificate. Lessee shall have received
a certificate dated as of the Closing Date, executed on behalf of
Lessor by a duly authorized officer of Lessor, to the effect that the
conditions set forth in subsection (1) of this Section 2.10(b) have
been satisfied.
(3) Closing Documents. On or prior to the Closing
Date, Lessor shall have delivered, or be standing ready to deliver (or
cause to be delivered) at the Closing, all agreements, instruments and
documents that Lessor is required to deliver or cause to be delivered
pursuant to Section 2.11(b).
(4) No Existing Order. No order, writ, injunction or
decree shall have been entered and be in effect by any court of
competent jurisdiction or any Governmental Body, and no statute, rule,
regulation or other requirement shall have been promulgated or enacted
and be in effect, that restrains, enjoins or invalidates the
transactions contemplated hereby.
(5) Consents. Except for such consents, licenses and
approvals the failure of which to obtain or with which to comply will
not be reasonably likely to have a Material Adverse Effect,
Environmental Permits, and Post-Closing Consents, (A) the consents,
licenses and approvals necessary or appropriate for Lessor to
consummate the transactions contemplated by this Lease shall have been
received and (B) the consents, licenses, and approvals identified in
Schedule 2.10(b)(5) shall have been received.
(6) HSR Act. All necessary filings and notifications
under the HSR Act shall have been made, including any required
additional information and documents, and the waiting period referred
to in the HSR Act applicable to the transactions contemplated hereby
shall have expired or been terminated.
(7) Contemporaneous Closing. The "Closing" under the
Other Lease shall occur simultaneously with the Closing under this
Lease.
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2.11 Closing.
(a) Place of Closing. The Closing shall be held on the Closing
Date at 10:00 a.m., local time, at the office of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, or at such other time or place as
Lessor and Lessee may otherwise agree in writing.
(b) Lessor's Closing Obligations. At or prior to Closing,
Lessor shall execute and deliver, or cause to be executed and delivered, to
Lessee the following:
(1) The Effectiveness Certificate, in the form
attached hereto as EXHIBIT 2.11, joined in by Lessee, acknowledging and
confirming that (i) the Closing has occurred, (ii) the lease of the
Leased Property from Lessor to Lessee, and by Lessee from Lessor,
pursuant to this Lease has become effective, (iii) that the Effective
Time is as set forth in the Effectiveness Certificate, and (iv)
Articles 3, 4, 5, 6, 10, 11 through 19 of this Lease have become
effective and are in full force and effect;
(2) The officer's certificate of Lessor referred to
in Section 2.10(b)(2), with such exceptions thereto which are scheduled
in such certificate with respect to matters discovered, occurring or
arising after the date of this Lease as may be necessary to make the
statements contained therein true and correct;
(3) A non-foreign affidavit, as such affidavit is
referred to in Section 1445(b)(2) of the Tax Code, in form attached
hereto as Exhibit 2.11(b)(3), dated as of the Closing Date;
(4) A copy, certified as of the Closing Date, by
Lessor's Secretary or Assistant Secretary, as the case may be, of the
resolutions duly adopted by the Board of Directors of Lessor
authorizing the transactions contemplated by this Lease;
(5) Reasonable written evidence that the waiting
period referred to in the HSR Act applicable to the transactions
contemplated hereby shall have expired or been terminated
(6) A ▇▇▇▇ of Sale and Assignment, in the form
attached hereto as EXHIBIT 2.11(b)(6), DATED as of the Effective Time;
(7) The other Related Agreements (other than those to
be executed after the Closing pursuant to Section 10.5);
(8) The Guaranty Agreement of El Paso Corporation, in
the form attached hereto as Exhibit 2.11(b)(8) and
(9) Any other agreements, instruments and documents
which are required by other terms of this Lease to be executed and/or
delivered by Lessor or its Affiliates to Lessee or its Affiliates at
the Closing.
(c) Lessee's Closing Obligations. At or prior to Closing,
Lessee shall (i) deliver, or cause to be delivered, the initial Lease Payment to
Lessor in immediately available funds to the bank account specified in Section
5.3 and (ii) execute and deliver, or cause to be executed and delivered, to
Lessor the following:
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(1) The Effectiveness Certificate, in the form
attached hereto as Exhibit 2.11, joined in by Lessor, acknowledging and
confirming that (i) the Closing has occurred, (ii) the lease of the
Leased Property from Lessor to Lessee, and by Lessee from Lessor,
pursuant to this Lease has become effective, (iii) the Effective Time
is as set forth in the Effectiveness Certificate, and (iv) Articles 3,
4, 5, 6, 10 through 19 of this Lease have become effective and are in
full force and effect;
(2) The officer's certificate of Lessee referred to
in Section 2.10(a)(2), with such exceptions thereto which are scheduled
in such certificate with respect to matters discovered, occurring or
arising after the date of this Lease as may be necessary to make the
statements contained therein true and correct;
(3) A copy, certified as of the Closing Date, by
Lessee's Secretary or Assistant Secretary, as the case may be, of the
resolutions duly adopted by the Board of Directors of Lessee
authorizing the transactions contemplated by this Lease;
(4) Reasonable written evidence that the waiting
period referred to in the HSR Act applicable to the transactions
contemplated hereby shall have expired or been terminated;
(5) The Related Agreements (other than those to be
executed after the Closing pursuant to Section 10.5);
(6) The Guaranty Agreement of Valero Energy
Corporation, in the form attached hereto as Exhibit 2.11(c)(6) and
(7) Any other agreements, instruments and documents
which are required by other terms of this Lease to be executed and/or
delivered by Lessee or its Affiliates to Lessor or its Affiliates at
the Closing.
2.12 Survival.
(a) This Section 2.12 shall not apply to the Exhibits to this
Agreement, each of which shall be considered independently. Each representation,
warranty, covenant and agreement made herein shall terminate and cease to be of
further force and effect as of the Closing or such later date after Closing as
is expressly stipulated in this Section 2.12 for the survival thereof provided,
however, that any such representation, warranty, covenant or agreement shall
survive beyond the applicable date specified herein with respect to any claim
for indemnification under Article 17 based on such representation, warranty,
covenant or agreement provided that a Claim Notice with respect to such claim
has been delivered to the applicable Indemnitor on or prior to such date.
Neither the officer's certificate of Lessee referred to in Section 2.10(a)(2) or
2.11(c)(ii)(2) nor the officer's certificate of Lessor referred to in Section
2.10(b)(2) or Section 2.11(b)(2) shall operate or cause any underlying
representation, warranty, covenant or agreement referenced or certified to
therein, or Lessee's or Lessor's obligations under said certificate with respect
to such representation, warranty, covenant or agreement, to change or survive
later than the time stipulated for the survival of such representation,
warranty, covenant or agreement in this Section 2.12. Following the Closing or
such later date stipulated in this Section 2.12 for the survival thereof, no
representation, warranty,
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covenant or agreement shall form the basis for or give rise to any claim,
demand, cause of action, counterclaim, defense, damage, indemnity, obligation or
liability which is asserted, claimed, made or filed by a party to this Lease (or
its successors or assigns as permitted herein). It is expressly agreed that the
terms and provisions of:
(1) Articles 7, 8 and 9 (except as provided in
subsection (2) below) and Sections 2.2 and 2.4 shall survive the
Closing for a period of one year from the CLOSING DATE,
(2) Sections 2.6, 2.7, 2.8, 2.9, 2.12, 7.1, 7.7, 8.1,
8.4, 8.5, and 8.6, Articles 1, 3, 4, 5, 6, and 10 through 21, shall
survive the Closing without limitation or for such shorter period of
time as may be stipulated in such provisions, in Section 2.12(a)(3) or
allowed by Law, and
(3) Article 16 shall not survive the closing of the
Option and Section 4.2, Articles 10 through 15 (other than Sections
10.1(b) and 10.2) and Sections 18.1 and 18.2 shall not survive the
earlier of the closing of the Option or the termination of this Lease;
provided that, such non-survival shall not affect, release, or
discharge any liability for any breach of such provisions prior to the
closing of the Option or the termination of this Lease.
(b) In addition, the definitions set forth in Appendix A to
this Lease or in any other provision of this Lease which are used in the
representations, warranties, covenants and agreements which survive the Closing
pursuant to this Section 2.12 shall survive the Closing to the extent necessary
to give operative effect to such surviving representations, warranties,
covenants and agreements. Subject to the limitations on survival contained in
this Section 2.12, the delivery by a party, and the acceptance by the other
party, of an officer's certificate pursuant to Section 2.11(c)(ii)(2) or
2.11(b)(2) containing any exceptions shall not operate to release or waive any
claim or cause of action which the other party might have for breach by the
party delivering such officer's certificate of any of its representations and
warranties made as of the date of this Lease or any of its covenants and
agreements hereunder. Except to the extent terminated pursuant to the foregoing
provisions of this Section 2.12, expiration or other termination of the Term of
this Lease after the Effective Time shall not affect, release or discharge any
liability for any breach of any covenants, agreements or obligations under this
Lease, and the obligations of Lessor and Lessee under Article 17 shall survive
such expiration or other termination as provided in Sections 17.1 and 17.2.
2.13 Termination Before Closing; Pre-Closing Remedies.
(a) Termination of Lease. This Lease and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(1) By the mutual consent of Lessor and Lessee;
(2) If the Closing has not occurred (A) within 365
days following the date of this Lease because the conditions in
Sections 2.10(a)(7) and 2.10(b)(6) have not been satisfied or (B) by
the close of business on August 31, 2001 because of any other reason,
then (i) by Lessor if any condition specified in Section 2.10(a) has
not been satisfied on or before such close of business, and shall not
theretofore have been waived by Lessor, or (ii) by Lessee if any
condition specified in Section 2.10(b) has not been satisfied on or
before
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such close of business, and shall not theretofore have been waived by
Lessee; provided, in each case, that the failure to consummate the
transactions contemplated hereby on or before such date did not result
from the failure by the party or parties seeking termination of this
Lease to fulfill any undertaking or commitment provided for herein on
the part of such party or parties that is required to be fulfilled on
or prior to Closing;
(3) By Lessee, if a material default shall have been
made in the observance or performance by Lessor of any agreements and
covenants of Lessor contained herein, or if there shall have been a
material breach by Lessor of any representations or warranties
contained herein and, in each case, such default or breach is not cured
within 30 days after receipt by Lessor of written notice from Lessee of
such default or breach or is incapable of being cured;
(4) By Lessor, if a material default shall have been
made in the observance or performance by Lessee of any agreements and
covenants of Lessee contained herein, or if there shall have been a
material breach by Lessee of any representations or warranties
contained herein and, in each case, such default or breach is not cured
within 30 days after receipt by Lessee of written notice from Lessor of
such default or breach or is incapable of being cured; or
(5) By either party, if there shall be any order,
writ, injunction or decree of any Governmental Body binding Lessor or
Lessee which prohibits or restrains Lessor or Lessee from consummating
the transactions contemplated hereby and such order, writ, injunction
or decree shall have become final.
(b) Effect of Termination. In the event of termination of this
Lease by Lessor, on the one hand, or Lessee, on the other hand, pursuant to
Section 2.13(a), written notice thereof shall forthwith be given by the
terminating party or parties to the other party or parties hereto, and this
Lease shall thereupon terminate; provided, however, that following such
termination Lessee will continue to be bound by its obligations set forth in
Section 2.3(b). If this Lease is terminated as provided herein all filings,
applications and other submissions made to any Governmental Body shall, to the
extent practicable, be withdrawn from the Governmental Body to which they were
made.
(c) Lessor's Remedies. Notwithstanding anything herein
provided to the contrary, if this Lease is not terminated by Lessee pursuant to
Section 2.13(a) and Lessee fails to satisfy on or prior to the Closing Date the
conditions to Closing or the Closing obligations, as the case may be, set forth
in Section 2.11(c) or subsections (1), (2), (3), (5) or (9) of Section 2.10(a),
as a result of a breach of its obligations under this Lease (or a breach of its
Affiliate's obligations under the Other Lease), Lessor, at its sole option, may
(i) enforce specific performance of this Lease and the Other Lease or (ii)
terminate this Lease (without waiving or releasing Lessee's obligations under
Section 2.3(b)) and recover from Lessee any and all actual damages, costs and
expenses sustained or incurred by Lessor as a result of Lessee's failure to
close and to perform Lessee's obligations under Section 2.11 and other
provisions of this Lease; including the recovery of damages equal to the damages
to which Lessor would be entitled under Section 19.2 if the Closing had occurred
on the Closing Date (but without any Lease Payments being made) and this Lease
was terminated on account of Lessee's default effective as of the Effective
Time. Such remedies shall be Lessor's sole and exclusive remedies for such
failure, all other remedies being expressly waived by Lessor.
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(d) Lessee's Remedies. Notwithstanding anything herein
provided to the contrary, if this Lease is not terminated by Lessor pursuant to
Section 2.13(a) and Lessor fails to satisfy on or prior to the Closing Date the
conditions to Closing or the Closing obligations, as the case may be, set forth
in Section 2.11(b) or subsections (1), (2), (3), or (8) of Section 2.10(b), as a
result of a breach of its obligations under this Lease (or a breach of its
Affiliate's obligations under the Other Lease), Lessee, at its sole option, may
(i) enforce specific performance of this Lease and the Other Lease, or (ii)
terminate this Lease and recover from Lessor any and all actual damages, costs
and expenses sustained or incurred by Lessee as a result of Lessor's failure to
close and to perform Lessor's obligations under Section 2.11 and the other
provisions of this remedies being expressly waived by Lessee.
ARTICLE 3
LEASE GRANT
3.1 Grant of Lease. Subject to all of the terms and conditions of this
Lease, effective as of the Effective Time, (i) Lessor does hereby lease, demise
and let unto Lessee the Leased Property for the Term stated herein and (ii)
Lessee does hereby hire, take and lease from Lessor the Leased Property for the
Term stated herein. The Leased Property, consisting of the Facility, the Site,
and certain subleasehold interests, is more fully described in Exhibit A
attached hereto and incorporated herein.
3.2 Quiet Enjoyment. Effective as of the Effective Time, Lessor
covenants and warranties that Lessee, on payment of all Rent hereunder as and
when the same comes due and payable and performance and compliance with all of
the other terms and conditions hereof to be performed and complied with by
Lessee, may peaceably and quietly have, hold, occupy and enjoy the Leased
Property during the Term hereof, provided that, Lessor reserves, and shall have,
the right of access to the Leased Property as provided in this Lease.
3.3 Net Lease. Without limiting Lessor's obligations under Section
17.1, Lessee agrees that this is an absolutely net lease and Lessor shall not be
required to provide or furnish any services or do any act or thing with respect
to the Leased Property (except as otherwise specifically provided in this
Agreement or in any Related Agreement), or any part thereof or the appurtenances
thereto, and the Lease Payments reserved herein and all other sums payable by
Lessee hereunder (other than on account of Section 17.2(a) or a breach or
non-fulfillment of a representation or warranty covered by Section 17.2(b))
shall be paid without any claim on the part of Lessee for diminution, setoff or
abatement and nothing shall suspend, ▇▇▇▇▇ or reduce any rent to be paid
hereunder. Except for Pre-Closing Liabilities, Lessee shall (i) pay when due all
rent and other sums coming due under any lease, easement, license or other
property use right included in the Leased Property and (ii) comply with (or
cause to be complied with) any and all covenants and other obligations of the
lessee, grantee, licensee or other transferee under any such lease, easement,
license or other property use right, all at Lessee's sole cost and expense.
ARTICLE 4
LEASE TERM AND PERMITTED USES
4.1 Term. Subject to the earlier termination of this Lease as provided
herein, this Lease shall be for a term of 20 years beginning as of the Effective
Time and ending 20 years thereafter at
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midnight, Central time, on the same day of the month as the day on which Closing
occurred (the "Term"). The "Effective Time" shall be 12:01 a.m., Central time,
on the day following the day of Closing.
4.2 Permitted Uses. Lessee shall use the Leased Property for (a)
operating a petroleum refinery, including (i) the operation, maintenance,
modification, repair, expansion, improvement, and enhancement of the existing
refinery and other facilities included in the Leased Property; (ii) the
refining, manufacturing, producing, blending, processing, storing, loading,
unloading, transporting, sale, marketing, distributing and/or otherwise dealing
with petroleum products; (iii) the receiving, storing, loading, unloading,
transporting and/or otherwise dealing with raw materials, supplies, spare parts,
tools, equipment and other materials related to the operation of such refinery
facilities; (iv) the conduct or provision of support services relating thereto
(such as, but not limited to, managerial, sales, marketing, finance, payroll,
invoicing, accounts payable, accounting, treasury, computer and data processing,
communications, employee benefits, record and data storage and handling,
insurance and legal services); and (v) any lawful purposes as may be related or
incidental thereto and (b) with the written consent of Lessor, any other lawful
purpose.
ARTICLE 5
RENT
5.1 Lease Payment. On and after the Closing, Lessee, in consideration
of the leasing of the Leased Property to Lessee by Lessor, hereby covenants and
agrees to pay Lease Payments to Lessee during the Term in amounts as set out in
SCHEDULE 5.1 attached hereto and incorporated by reference herein, without
notice or demand and without any setoff or deduction whatsoever. The Lease
Payments shall be due and payable quarterly in advance, with the first Lease
Payment being due and payable at Closing on the Closing Date and the remaining
Lease Payments equal to one-fourth of the annual payment being due and payable
quarterly in advance during the Term on the same day of each third consecutive
month following the Closing Date, with the annual Lease Payments for each of the
first two years of the Term being $14,000,000 and the annual Lease Payments for
each of the next 18 years of the Term being $33,000,000. By way of example, if
the Closing occurs on May 1, 2001, then the quarterly Lease Payments shall be
due and payable in advance on each August 1, November 1, February 1 and May 1
thereafter during the Term. If any Lease Payment falls due on a day that is not
a Business Day, then such Lease Payment shall be due and payable on the next day
that is a Business Day. Notwithstanding the foregoing, if Lessee is ready,
willing and able to exercise the Option referred to in Article 6, but is unable
to lawfully do so because an order, writ, injunction or decree shall have been
entered into and be in effect by a court of competent jurisdiction that
restrains or enjoins the Option Closing (other than as a result of any claim or
Action under the HSR Act), then:
(a) if primarily as a result of an act or failure to act by
Lessor after the Effective Time in breach of its obligations under this Lease or
any act by Lessor or any Affiliate of Lessor before or after the Effective Time,
then during the period when such restriction is in effect, the annual Lease
Payments shall be $14,000,000 per annum;
(b) if primarily as a result of an act or failure to act by
Lessee after the Effective Time in breach of its obligations under this Lease or
any act by Lessee or any Affiliate of Lessee before or after the Effective Time,
then the annual Lease Payments shall be $33,000,000 per annum as above provided;
and
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(c) if resulting from any cause not set forth in clause (a) or
(b) above, then during the period when such restriction is in effect, the annual
Lease Payments shall be $23,500,000 per annum, subject to escalation as provided
in this clause (c). If the annual Lease Payment under this clause (c) continues
in effect for longer than one year, then the annual Lease Payment under this
clause (c) shall be increased annually as of each anniversary of the date the
first Lease Payment became due pursuant to this clause (c) (each such
anniversary being referred to as an "Index Date") by an amount equal to the
Escalation Amount on such Index Date. The Escalation Amount for an Index Date
shall be deemed to be zero if the Escalation Amount for such Index Date is zero
or a negative number. Commencing with each Index Date and continuing until the
next succeeding Index Date (such period being referred to as an "Index Year"),
the annual Lease Payment under this clause (c) shall be an amount equal to the
Lease Payment amount in effect under this clause (c) during the preceding Index
Year (or $23,500,000, if the first Index Year) plus the Escalation Amount, if
any. The "Escalation Amount" shall be determined as of the applicable Index
Date, in accordance with the following formula, but the Escalation Amount for
any Index Year shall not exceed $950,000:
EA = LP x CPI-PPI
-------
PPI
Where:
EA = Escalation Amount
LP = The annual Lease Payment in effect for the preceding
Index Year (or $7,250,000, in the case of the first
Escalation Amount calculation)
CPI = The Producer Index for the current Index Date
PPI = The larger of (i) the Producer Index for the
immediately preceding Index Date (or the date the
first Lease Payment became due pursuant to this clause
(c), in the case of the first Escalation Amount
calculation) or (ii) the Producer Index for any
preceding Index Date or the date the first Lease
Payment became due pursuant to this clause (c)
As used in the foregoing formula, "Producer Index" means the Producer Price
Index - Finished Goods (final and not seasonally adjusted), published by the
Bureau of Labor Statistics (BLS). If the Producer Index is not published for an
Index Date, the Producer Index for the nearest preceding date shall be used.
5.2 Supplemental Rent. If Lessee fails to perform or comply with any of
its covenants or agreements contained in this Lease (other than on account of
Section 17.2(a) or a breach or non-fulfillment of a representation or warranty
covered by Section 17.2(b)), then upon not less than 20 days' prior written
notice to and demand upon Lessee, and without releasing Lessee from any
obligation hereunder, Lessor shall have the right, but not the obligation, to
perform or comply with such covenants or agreements, and Lessee shall indemnify
and pay to Lessor, on demand, all costs and expenses sustained by Lessor in
complying with any such covenants or agreements (such costs and expenses being
herein called the "Supplemental Rent"). Any action taken by Lessor under this
Section shall not be deemed to cure any default or Event of Default hereunder
(except to the extent all related Supplemental Rent is paid by Lessee).
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5.3 Payment of Rent. The Lease Payments and Supplemental Rent are
referred to herein as "Rent". Payments of Rent shall be made by wire transfer in
immediately available funds to First Union Natl BK NC, Automated Clearing House
Bank Routing Number ▇▇▇▇▇▇▇▇▇, D/5000000016439 - Corp Trust Ops, Reference:
1572004860/EPC/Coastal Escrow, Attn to: CT1 870 (or any other banking
institution as Lessor may specify in writing to Lessee from time to time,
provided that any such change shall not become effective until the second (2nd)
Business Day following delivery to Lessee of written notice thereof, including
the bank name and address, the account name and number and routing number). To
the extent permitted by Law, Rent not paid when due shall bear interest from the
date due until paid at the Default Rate. The expiration or other termination of
Lessee's obligation to pay Lease Payments shall not limit or modify the
obligations of Lessee with respect to the Supplemental Rent as provided
hereunder.
ARTICLE 6
PURCHASE OPTION
6.1 Option. Lessor hereby grants to Lessee an option (the "Option") to
purchase the Leased Property pursuant to the terms of this Article for the
Purchase Price provided in Section 6.2; provided, however, Lessee shall not have
the right to purchase the Leased Property pursuant to the Option unless (i) at
the time of exercise of the Option and the time of the closing of Lessee's
purchase of the Leased Property, an Event of Default as a result of failure to
pay any Lease Payment does not exist under this Lease, (ii) at the time of
exercise of the Option and the time of the Option Closing, the Other Lease is in
full force and effect and an "Event of Default" as a result of failure to pay
any "Lease Payment" thereunder does not exist under the Other Lease, (iii)
contemporaneous with Lessee's exercise of the Option, the Other Lessee exercises
its option to purchase the Other Leased Property pursuant to the Other Lease
Option, and (iv) contemporaneous with Lessee's purchase of the Leased Property
pursuant to the Option, the Other Lessee purchases the Other Leased Property
pursuant to the Other Lease Option. If the Other Lessee is ready, willing and
able to exercise the Other Lease Option, but is unable to lawfully do so because
an order, writ, injunction or decree shall have been entered into and be in
effect by a court of competent jurisdiction that restrains or enjoins the
"Option Closing" under the Other Lease (other than as a result of any claim or
Action under the HSR Act) under circumstances which would cause a reduction in
the Lease Payments under Section 5.1 of this Lease, but the Option Closing under
this Lease is not restrained or enjoined, then clauses (ii), (iii) and (iv) of
the preceding sentence and the provisions of this Article 6 requiring a
contemporaneous closing and purchase by Lessee of the Leased Property and by the
Other Lessee of the Other Leased Property shall be suspended and inapplicable as
long as such restriction regarding the "Option Closing" under the Other Lease is
in effect.
6.2 Purchase Price. The purchase price (the "Purchase Price") that
Lessee shall pay to Lessor for the Leased Property pursuant to the Option shall
be a lump sum cash payment equal to the fixed purchase price amount which is set
forth in Schedule 6.2 next to (a) the Lease Year during which Lessee delivers
the Option Notice to Lessor or (b) the third Lease Year if Lessee delivers the
Option Notice to Lessor during the 30 days preceding the commencement of the
third Lease Year. If any Rent or other amount (other than the Purchase Price) is
due and payable by Lessee to Lessor (or would be due and payable but for the
fact that the grace period for curing an Event of Default has not yet expired)
on the Option Closing Date, such unpaid Rent and other amounts plus the Purchase
Price (collectively, the "Option Closing Payment") shall be due and payable at
the Option Closing; provided, however, that the Option Closing Payment shall not
include (i) any disputed item of Supplemental Rent or (ii) any amounts owed on
account of Section 17.2(a) or a breach or non-fulfillment of a representation or
warranty covered by Section 17.2(b), however, the exclusion of
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such amounts from the Option Closing Payment, or the failure to include in the
Option Closing Payment any other amount which may be payable by Lessee to Lessor
under this Lease, shall not release or impair any liability or obligation of
Lessee therefor under this Lease and such liabilities and obligations shall
survive the Option Closing. The quarterly Lease Payment for the quarter during
which the Option Closing occurs shall be apportioned to the Option Closing Date
and Lessee shall be entitled to a refund or credit for any portion of a Lease
Payment theretofore paid under this Lease which is attributable to the period
after the Option Closing Date. Otherwise, Lessee shall not be entitled to any
refund or pro ration of Rent or other amounts theretofore paid or due and
payable under this Lease on or before the Option Closing as a result of Lessee's
exercise of the Option and purchase of the Leased Property. The term "Lease
Year" means any 12-month period commencing at the Effective Time or any
anniversary thereof and ending on the first or a subsequent anniversary of the
Effective Time. By way of example, first Lease Year shall begin at the Effective
Time and end on the first anniversary thereof, and the second Lease Year shall
begin on the first anniversary of the Effective Time and end on the second
anniversary of the Effective Time.
6.3 Option Exercise and Closing. Lessee may exercise the Option by
delivering to Lessor written notice of Lessee's election to exercise the Option
(the "Option Notice") at any time after the 30 days preceding the commencement
of the third Lease Year and on or before the expiration of the Term or the
earlier termination of this Lease. If Lessee timely gives the Option Notice,
then as of the delivery of the Option Notice Lessee shall be legally obligated
to purchase the Leased Property in accordance with this Section 6.3 and the
closing of the sale of the Leased Property from Lessor to Lessee (the "Option
Closing") shall occur (i) on the first Business Day of the third Lease Year if
Lessee exercises the Option more than five Business Days prior to the first
Business Day of the third Lease Year and (ii) otherwise on the fifth Business
Day following the date of delivery of the Option Notice or such earlier or later
date as Lessee and Lessor may mutually agree in writing. The date on which the
Option Closing is required to occur under this Section shall be referred to as
the "Option Closing Date". If Lessee exercises the Option during the second
Lease Year as permitted above and closes its purchase of the Leased Property on
the Option Closing Date as herein provided, no Lease Payment shall be due with
respect to the third Lease Year. If Lessee has delivered the Option Notice in a
timely manner to Lessor, then on the Option Closing Date:
(a) Lessee shall be legally obligated (i) to purchase the Leased
Property from Lessor for the Purchase Price, (ii) to pay the
Option Closing Payment to Lessor in the manner provided in
this Section, and (iii) to duly and properly execute,
acknowledge and deliver, as grantee therein, an original
counterpart of Lessor's Special Warranty Conveyance.
(b) Subject to the full and complete satisfaction of all
requirements of Section 6.1 (or the waiver thereof, in whole
or in part, in writing by Lessor at Lessor's option) and
compliance by Lessee with Section 6.3(a), Lessor shall be
legally obligated (i) to sell the Leased Property to Lessee
for the Purchase Price, (ii) to duly and properly execute,
acknowledge and deliver, as grantor therein, an original
counterpart of Lessor's Special Warranty Conveyance and (iii)
to deliver to Lessee an owner's title policy covering the
portion of the Leased Property that constitutes land and
improvements to real property issued by LandAmerica Financial
Group (the "Title Policy") in the amount of $100,000,000,
being the portion of the Purchase Price that Lessor and
Lessee, for purposes of the title policy only, have allocated
to the portion of the Leased Property that constitutes land
and improvements to real property. The
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Title Policy shall be in the standard form promulgated by the
Texas State Board of Insurance or other appropriate
Governmental Body. It shall not be a requirement of the Option
Closing that the Title Policy have the survey exception
modified in any manner or that any other special endorsements
be made to the Title Policy, including any endorsement
regarding restrictive covenants.
(c) The Purchase Price shall be paid to Lessor by wire transfer in
immediately available funds to First Union Natl BK NC,
Automated Clearing House Bank Routing Number ▇▇▇▇▇▇▇▇▇,
D/5000000016439 - Corp Trust Ops, Reference: 1572004860/EPC/
Coastal Escrow, Attn to: CT1870 (or any other banking
institution as Lessor may specify in writing to Lessee from
time to time, provided that any such change shall not become
effective until the next Business Day following delivery to
Lessee of written notice thereof, including the bank name and
address, the account name and number and routing number).
(d) Except for the provisions of this Lease which survive the
Option Closing as provided in Section 2.12, this Lease shall
terminate and merge into Lessor's Special Warranty Conveyance
upon the Option Closing. Following the Option Closing the sole
obligations of Lessor to Lessee, and of Lessee to Lessor, with
respect to the transaction evidenced by this Lease shall be
(i) under Lessor's Special Warranty Conveyance and (ii) under
the provisions of this Lease which survive the Option Closing
as provided in Section 2.12, but only to the extent provided
in Section 2.12.
If Lessee fails to deliver the Option Notice to Lessor on or before the
expiration of the Term or the earlier termination of this Lease, then the Option
shall terminate and be of no further force and effect. If Lessee delivers an
Option Notice to Lessor and fails to purchase the Leased Property on the Option
Closing Date as provided above for any reason other than a legal restriction
referred to in the last sentence of Section 5.1 or fails to satisfy all
requirements of Section 6.1 and Lessor is able to deliver the Special Warranty
Conveyance without exception to the warranties set forth therein and the Title
Policy, then the Option shall terminate and be of no further force and effect.
If Lessee timely delivers the Option Notice to Lessor, and Lessor or Lessee
fails to comply with its obligations under this Article 6 for any reason other
than a legal restriction referred to in the fifth sentence of Section 5.1, the
other shall have all rights and remedies available at law or in equity (all of
which shall be cumulative), including the right to specifically enforce Lessee's
purchase of the Leased Property and payment of the Option Closing Payment (plus
interest thereon at the Default Rate from the Option Closing Date until paid),
to specifically enforce Lessor's obligation to sell the Leased Property or to
recover damages on account of such non-compliance. If title to the whole of the
Leased Property shall be "taken" as provided in Section 15.2, then the Option
shall be deemed to have been exercised as provided in Section 15.2, and this
Article 6 shall be modified by the provisions of Section 15.2.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF LESSOR
Except as set forth in this Article 7 and the Schedules hereto prepared
by Lessor and attached hereto at the time of the execution hereof, Lessor
represents and warrants to Lessee that all of the following statements contained
in this Article 7 are true as of the date of this Lease:
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7.1 Organization and Authority. Lessor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessor has all requisite power and authority to own, operate and lease its
properties and assets and to carry on its business in the manner currently
conducted, except where the failure to have that power and authority would not
have a Material Adverse Effect. Lessor is licensed or qualified to transact
business as a foreign corporation and is in good standing in the State of Texas.
Lessor has all requisite corporate power and authority to enter into this Lease,
to perform its obligations under this Lease and to consummate the transactions
contemplated hereby. This Lease, and the transactions contemplated hereby, have
been duly authorized and approved by all necessary action on the part of Lessor,
including the approval of the directors of Lessor and, to the extent required by
law, its stockholders. This Lease has been duly executed and delivered by Lessor
and is a legal, valid and binding obligation of Lessor enforceable against
Lessor in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect that affect creditors' rights generally and by legal
and equitable limitations on the availability of specific remedies.
7.2 Consents; Conflict with Other Instruments.
(a) Except as set forth in Schedule 7.2(a), compliance with and filings
under the HSR Act, and the transfer or obtaining of any Environmental Permit, no
order, license, consent, waiver, permit, authorization or approval of, or
exemption by, or the giving of notice to, or the qualification, registration
with, or the taking of any other action in respect of, any Person not a party to
this Lease, including any Governmental Body, and no filing, recording,
publication or registration in any public office or any other place is now, or
under existing law in the future will be, necessary on behalf of Lessor to
authorize its execution, delivery and performance of this Lease and the
consummation of the transactions contemplated hereby, or to effect the legality,
validity, binding effect or enforceability hereof; except for any of the
foregoing which would not have or reasonably be expected to have a Material
Adverse Effect.
(b) The execution, delivery and performance of this Lease (including
the Option), the consummation of the transactions contemplated hereby and the
compliance by Lessor with the provisions hereof will not, with or without the
passage of time or the giving of notice or both:
(1) conflict with, constitute a breach, violation or
termination of any provision of, or give rise to any right of
termination, cancellation or acceleration, or loss of any material
right or benefit or both, under any agreement, indenture, instrument,
lease, contract or other undertaking to which Lessor is a party or by
which Lessor or its assets may be bound;
(2) result in an acceleration of any amounts due from
Lessor to any Person;
(3) conflict with or violate the Certificate of
Incorporation or bylaws of Lessor;
(4) give rise to any preferential or other right of
any third party to purchase the Facility or the Site;
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(5) result in the creation or imposition of any Lien
on the Facility or the Site; or
(6) violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or any other
restriction of any kind or character applicable to Lessor or any of its
material properties,
except, with respect to clauses (1), (2) and (6), for such violations, conflicts
and other matters which will not (i) prevent or materially delay the
consummation of the transactions contemplated by this Lease, (ii) prevent Lessor
from performing its obligations under the Lease or (iii) result or reasonably be
expected to result in a Material Adverse Effect. Notwithstanding the foregoing,
Lessor makes no representation or warranty, express or implied, under this
Section 7.2 relating to any Environmental Law or Environmental Permit.
7.3 Licenses and Authorizations.
(a) To the knowledge of Lessor, SCHEDULE 7.3(a) sets forth (i)
a true and complete list of all material Intellectual Property, (ii) the name of
the Person who owns such Intellectual Property, and (iii) in the case of such
Intellectual Property not owned by Lessor, other than licenses for software
having a value of less than $1,000.00 per license, identifying information
regarding the agreement pursuant to which Lessor uses any such Intellectual
Property ("Intellectual Property Contracts"). Except as otherwise specified on
SCHEDULE 7.3(a), Lessor has the right to assign to Lessee the Intellectual
Property and Intellectual Property Contracts upon the consummation of the
transactions contemplated hereunder. Lessor has taken reasonable precautions to
protect its rights in and to the Intellectual Property, including maintaining
the confidentiality of trade secrets, pending patent applications, know-how, and
other confidential Intellectual Property; provided that Lessor does not
represent or warrant that any of the Intellectual Property is proprietary to
Lessor or that Lessor has any proprietary rights to assign in the Intellectual
Property. To the knowledge of Lessor, Lessor is not in material breach of any
agreement, commitment, contractual understanding, license, sublicense,
assignment, or indemnification which relates to any of the Intellectual
Property.
(b) To the knowledge of Lessor, Schedule 7.3(b) sets forth an
accurate and complete list of all Environmental Permits that are in force and
effect with respect to the operations or ownership of the Assets by Lessor.
Lessor makes no representation or warranty, express or implied, under this
Section 7.3(b) relating to whether any other Environmental Permits are necessary
to the operation or ownership of the Assets.
(c) To the knowledge of Lessor, Schedule 7.3(c) sets forth an
accurate and complete list of all material permits, licenses, or similar rights
from any Governmental Body (other than Environmental Permits) that are in force
and effect with respect to the operations or ownership of the Assets by Lessor.
Lessor makes no representation or warranty, express or implied, under this
Section 7.3(c) relating to whether any other permits, licenses, or similar
rights are necessary to the operation or ownership of the Assets.
(d) Lessor has not assigned or encumbered its interest in the
"Contracts" included in the "Conveyed Personally" (as such terms are defined in
the ▇▇▇▇ of Sale and Assignment included in the Related Agreements) and there is
no default under such "Contracts" that would have a Material Adverse Effect on
the operations of the Leased Property after the Effective Time.
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7.4 Title.
(a) Lessor has Defensible Title in and to the Leased Property.
(b) Except as set forth in SCHEDULE 7.4(b) and excluding any
representation or warranty relating to Environmental Laws or Environmental
Permits, Lessor has not received any written notice to the effect that (i) any
betterment assessments have been levied against, or condemnation or re-zoning
proceedings are pending or threatened with respect to the Leased Property, or
(ii) any zoning, building or similar law or regulation is or will be violated by
the continued maintenance, operation or use of any buildings or other
improvements on the Leased Property as used and operated on the date of this
Lease. There are no outstanding abatement proceedings or appeals with respect to
the assessment of the Leased Property for the purpose of real property taxes,
and, except as referenced in Section 21.14(d), there is no written agreement
with any Governmental Body with respect to such assessments or tax rates on the
Leased Property. Schedule 7.4(b) sets forth a list of material leases related to
the Leased Property where Lessor is the lessee or lessor.
(c) All pipelines, pipeline easements, utility lines, utility
easements and other easements, leaseholds, servitudes and rights-of-way
burdening or benefiting any of the Leased Property will not at Closing
unreasonably and materially interfere with or prevent any material operations
conducted on the Leased Property by Lessor in the manner operated on the date of
this Lease. Except as set forth on Schedule 7.4(c) and for Permitted
Encumbrances, with respect to any pipeline, utility, access or other easements,
servitudes or leaseholds located on or directly serving the Leased Property and
owned or used by Lessor in connection with its operations at the Leased
Property: (i) Lessor either has the contractual right to use or is the exclusive
or non-exclusive legal and beneficial owner of the respective easement and
leasehold established thereunder; (ii) such leaseholds, easements and the rights
and interests of Lessor thereunder are in all material respects in full force
and effect; and (iii) to Lessor's knowledge, no material defaults exist
thereunder and no events or conditions exist which, with or without notice of
lapse of time or both, would constitute a material default thereunder or result
in a termination.
(d) Lessor has good and valid title to the Equipment and
Inventory, free and clear of all Liens except Permitted Liens.
7.5 Tax Matters. With respect to Lessor's business and the Facility and
the Site, Lessor has filed or will timely file or send all applicable federal,
state, county and local returns, declarations and reports and information
returns and statements required to be filed by or with respect to them in
respect of any Taxes for any period ending on or before the date hereof
(collectively, "Returns") where the failure to so file would have a Material
Adverse Effect. Lessor has timely paid or will timely pay all Taxes that it
owes, including all Taxes that have been shown or will be shown as due and
payable on its Returns and Lessor is not delinquent in the payment of any Taxes;
except those which would not have or reasonably be expected to have a Material
Adverse Effect and those being contested in good faith. Schedule 7.5 lists the
pending tax disputes with respect to the Assets.
7.6 No Violations or Litigation. Subject to the exclusions set forth in
this Section 7.6 and except as set forth in Schedule 7.6, (i) there is no Action
or any change in any zoning or building ordinance pending or, to the knowledge
of Lessor, threatened (A) against or affecting the Facility or
-26-
the Site or otherwise affecting operations at the Facility or (B) relating to
the transactions contemplated by this Lease, at law or in equity, before or by
any Governmental Body which would have a Material Adverse Effect, and (ii) there
is no outstanding order, writ, injunction, decree judgment or award or action,
suit, claim, investigation or legal, administrative, arbitration or other
proceeding against or affecting the Assets which would have a Material Adverse
Effect. Notwithstanding the foregoing, Lessor makes no representation or
warranty, express or implied, under this Section 7.6 relating to (a) any
Environmental Claims, Environmental Law, Environmental Permit, or Tax Law or (b)
Lessor's title to any Assets or the existence or non-existence of any title
defect.
7.7 Finder's Fees. Lessor has not employed or retained any investment
banker, broker, agent, finder or other party, or incurred any obligation for
brokerage fees, finder's fees or commissions, with respect to the lease by
Lessor of the Facility or the Site or with respect to the transactions
contemplated by this Lease, or otherwise dealt with anyone purporting to act in
the capacity of a finder or broker with respect thereto whereby any party hereto
may be obligated to pay a fee or commission.
7.8 Compliance with Laws. Subject to the exclusions set forth in this
Section 7.8 and except as disclosed in SCHEDULE 7.8, (i) LESSOR has complied in
all material respects with all Laws with respect to the Facility and the Site
and has filed with the proper Governmental Bodies all statements and reports
with respect to the Facility and the Site required by all Laws; except where the
failure to so comply would not have a Material Adverse Effect, and (ii) Lessor
has not received any written notice from any Governmental Body or other third
party that alleges any violation by Lessor of any Laws with respect to the
Facility or the Site. Notwithstanding the foregoing, Lessor makes no
representation or warranty, express or implied, under this Section 7.8 relating
to (a) any Environmental Law, Environmental Permit, or Tax Law, including any
compliance therewith or any filings or notices with respect thereto, or (b)
Lessor's title to any Assets or the existence or non-existence of any title
defect.
7.9 Employee and Labor Matters. Lessor has delivered to Lessee complete
and correct lists of (i) all current directors and officers of Lessor employed
at the Facility and (ii) all employees of Lessor employed at the Facility
indicating each such employee's expected salary and minimum bonus for 2001.
Except as described IN SCHEDULE 7.9, THERE ARE NO MATERIAL labor-related
disputes of any kind asserted against Lessor in connection with the operation of
any of the Assets pending before or, to Lessor's knowledge, threatened before,
any Governmental Body. With respect to the Assets and except to the extent set
forth in SCHEDULE 7.9: (i) THERE is no unfair labor practice charge or complaint
against Lessor actually pending or, to Lessor's knowledge, threatened, before
the National Labor Relations Board; (ii) there is no labor strike, slowdown or
stoppage actually pending or, to Lessor's knowledge, threatened against or
affecting the Assets; (iii) none of the operations of any of the Assets have
experienced any material labor disputes or any material work stoppage due to
labor disagreements within the past three years; and (iv) no attempt to organize
employees has resulted in an election within the past three years or, to
Lessor's knowledge, is threatened with respect to the Assets. None of the Assets
are now, nor at any time within the past three years have been, subject to any
collective bargaining agreement, contract, letter of understanding or other
similar arrangement with any labor union or organization.
7.10 Disclosure Relating to Environmental Matters. Lessor has disclosed
to Lessee all judgments, orders, consent decrees and written notices of
violation received from any Governmental
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Body during the last five years
relating to Environmental Laws or Permits at the Facility or the Site.
7.11 No Material Changes. To the knowledge of Lessor, except as set
forth in SCHEDULE 7.11, THERE HAS NOT OCCURRED AT, ON OR UNDER THE LEASED
PROPERTY (a) ANY event or occurrence giving rise to a release, emission, spill
or discharge or (b) any other event or occurrence not relating to Environmental
Claims or Hazardous Materials since December 31, 2000 that has caused or would
reasonably be expected to cause an adverse change in the value, or results of
operations, of the Leased Property of more than $2,000,000. For avoidance of
doubt, as used in this Section 7.11 , an "event or occurrence" shall not include
the continuation of any event or occurrence which existed on or prior to
December 31, 2000.
7.12 Sufficiency of Assets. The assets included in the Leased Property,
the Inventory, the Equipment, the Assignment of the Environmental Permits and
the Related Agreements constitute substantially all the assets currently used by
Lessor in conducting its business at the Facility prior to the Closing.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF LESSEE
Except as set forth in this Article 8 and the Schedules hereto prepared
by Lessee and attached hereto at the time of the execution hereof, Lessee
represents and warrants to Lessor that all of the following statements contained
in this Article 8 are true as of the date of this Lease:
8.1 Organization and Authority. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Lessee has all requisite power and authority to own, operate and lease its
properties and assets and to carry on its business in the manner currently
conducted, except where the failure to have that power and authority would not
have a Material Adverse Effect. Lessee is licensed or qualified to transact
business as a corporation and is in good standing in the State of Texas. Lessee
has all requisite corporate power and authority to enter into this Lease, to
perform its obligations under this Lease and to consummate the transactions
contemplated hereby. This Lease, and the transactions contemplated hereby, have
been duly authorized and approved by all necessary action on the part of Lessee,
including the approval of the directors of Lessee. This Lease has been duly
executed and delivered by Lessee and is a legal, valid and binding obligation of
Lessee enforceable against Lessee in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect that
affect creditors' rights generally and by legal and equitable limitations on the
availability of specific remedies.
8.2 Consents; Conflict with Other Instruments.
(a) Except as set forth in Schedule 8.2(a) attached hereto and
compliance with and filings under the HSR Act, and the transfer or obtaining of
any Environmental Permit, no order, license, consent, waiver, permit,
authorization or approval of, or exemption by, or the giving of notice to, or
the qualification, registration with, or the taking of any other action in
respect of, any Person not a party to this Lease, including any Governmental
Body, and no filing, recording, publication or registration in any public office
or any other place is now, or under existing law in the future will be,
necessary on behalf of Lessee to authorize its execution, delivery and
performance of this Lease and the consummation of the transactions contemplated
hereby, or to effect the legality,
-28-
validity, binding effect or enforceability hereof except for any of the
foregoing which would not have or reasonably be expected to have a Material
Adverse Effect.
(b) The execution, delivery and performance of this Lease,
including the Option, the consummation of the transactions contemplated hereby
and the compliance by Lessee with the provisions hereof will not, with or
without the passage of time or the giving of notice or both:
(1) conflict with, constitute a breach, violation or
termination of any provision of, or give rise to any right of
termination, cancellation or acceleration, or loss of any material
right or benefit or both, under any agreement, indenture, instrument,
lease, contract or other undertaking to which Lessee is a party or by
which Lessee or its assets may be bound;
(2) result in an acceleration or increase of any
amounts due from Lessee to any Person;
(3) conflict with or violate the Certificate of
Incorporation or bylaws of Lessee; or
(4) violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or any other
restriction of any kind or character applicable to Lessee or any of its
material properties,
except, with respect to clauses (1), (2) and (4), for such violations and
conflicts which will not (i) prevent or materially delay the consummation of the
transactions contemplated by this Lease, (ii) prevent Lessee from performing its
obligations under this Lease or (iii) result or reasonably be expected to result
in a Material Adverse Effect.
8.3 No Violations or Litigation. Except as disclosed in the reports,
schedules, forms, statements and other documents required to be filed by Valero
Energy Corporation with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, since January 1, 1999 or in Schedule 8.3, there is no action, suit,
claim, investigation or legal, administrative, arbitration or other proceeding,
or governmental investigation or examination, at law or in equity which would
delay the transactions contemplated hereby or would have a material impact on
Lessee's ability to perform its obligations hereunder.
8.4 Independent Decision. Lessee has made its own independent judgment
of the commercial potential, condition and usefulness of the Facility and the
Site, taking into consideration all current Laws, including Environmental Laws,
and assuming all risks associated with the likelihood that such Laws will change
in the future. Lessee has such experience in business and financial affairs in
general, and of the oil refining business as conducted and regulated in Texas in
particular, as to be capable of evaluating the merits and risks of this
transaction.
8.5 Finder's Fees. Lessee has not employed or retained any investment
banker, broker, agent, finder or other party, or incurred any obligation for
brokerage fees, finder's fees or commissions, with respect to the lease to
Lessee of the Leased Property or with respect to the transactions contemplated
by this Lease, or otherwise dealt with anyone purporting to act in the
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capacity of a finder or broker with respect thereto whereby any party hereto may
be obligated to pay a fee or commission.
8.6 Disclaimer. THE LEASED PROPERTY IS LEASED (AND THE INVENTORY AND
EQUIPMENT ARE TRANSFERRED), AND IF THE OPTION IS EXERCISED THE LEASED PROPERTY
WILL BE TRANSFERRED, TO LESSEE ON AN "AS-IS, WHERE-IS" BASIS WITHOUT ANY IMPLIED
OR EXPLICIT REPRESENTATIONS OR WARRANTIES EXCEPT AS EXPLICITLY PROVIDED IN THIS
LEASE OR THE RELATED AGREEMENTS. LESSEE HEREBY ACKNOWLEDGES THAT IT HAS
INDEPENDENTLY EVALUATED AND CONDUCTED ENVIRONMENTAL DUE DILIGENCE SATISFACTORY
TO LESSEE WITH RESPECT TO THE ASSETS AND HAS BEEN REPRESENTED BY, AND HAD THE
ASSISTANCE OF, COUNSEL IN THE CONDUCT OF SUCH DUE DILIGENCE, THE PREPARATION AND
NEGOTIATION OF THIS LEASE AND THE RELATED AGREEMENTS, AND THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. FURTHER, LESSOR HAS MADE
AVAILABLE TO LESSEE AND ITS REPRESENTATIVES CERTAIN INFORMATION, BOOKS, RECORDS,
DOCUMENTS, REPORTS AND ASSOCIATED DATA RELATING TO THE ASSETS. EXCEPT AS
EXPLICITLY PROVIDED IN THIS LEASE OR THE RELATED AGREEMENTS, IT IS UNDERSTOOD
AND AGREED BY THE PARTIES THAT NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, HAS BEEN MADE BY LESSOR, ANY AFFILIATE OF LESSOR OR ANY DIRECTOR,
OFFICER, EMPLOYEE, AGENT, REPRESENTATIVE, INVESTMENT BANKER, COUNSEL, CONSULTANT
OR ADVISOR OF LESSOR OR ANY AFFILIATE OF LESSOR REGARDING THE ACCURACY OR
COMPLETENESS OF ANY SUCH INFORMATION, BOOKS, RECORDS, DOCUMENTS, REPORTS AND
ASSOCIATED DATA, AND THAT NEITHER LESSOR, ITS AFFILIATES NOR SUCH OTHER PERSONS
WILL HAVE OR BE SUBJECT TO ANY LIABILITY TO LESSEE OR ANY OTHER PERSON RESULTING
FROM THE DISTRIBUTION TO LESSEE OR LESSEE'S USE OF ANY SUCH INFORMATION,
DOCUMENTS, STATEMENTS, REPORTS OR RECORDS. ALL STATEMENTS OF FACT OR
DISCLOSURES, IF ANY, MADE IN THIS LEASE OR THE RELATED AGREEMENTS OR IN
CONNECTION WITH THIS LEASE OR THE RELATED AGREEMENTS ARE FOR INFORMATIONAL
PURPOSES ONLY AND SUCH STATEMENTS DO NOT CONSTITUTE WARRANTIES OR
REPRESENTATIONS OF ANY NATURE.
ARTICLE 9
EMPLOYEE MATTERS
9.1 Employment. SCHEDULE 9.1 sets forth the list of employees of Lessor
whom Lessor does not intend to continue to employ after the Effective Time.
Lessee may offer employment to any employees of Lessor working at the Facility,
in Lessee's sole discretion. Any such employees that Lessee in fact employs upon
or promptly following the Effective Time shall be referred to as "Transferred
Employees". Any employees engaged in Lessor's business at the Facility who are
not employed by Lessee upon or promptly following the Effective Time, or any
Transferred Employees who are identified in writing by Lessee to Lessor within
six months of the Effective Time as employees whose employment Lessee intends to
terminate, shall be referred to as "Retained Employees".
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9.2 Retained Employees. Lessor may retain the services of any Retained
Employee or terminate any such Retained Employee's employment by Lessor on or
following the Effective Time Except to the extent otherwise described in this
Article 9 as the responsibility of Lessee, Lessor shall retain liability and be
responsible for (including after the Effective Time) all claims, costs,
expenses, liabilities and other obligations, including liability for severance
benefits, accrued vacation, benefits under SFAS 106, benefits required by
Section 4980(f) of the Tax Code, or other applicable statute and all other
retiree medical benefits that any Retained Employee may otherwise be entitled to
received under any employee benefit plan, related to the retention, termination
or transfer of any Retained Employee; provided, however, that Lessee shall
reimburse Lessor for the cost of any severance payments (including payments made
for the termination of employment agreements) provided by Lessor to any Retained
Employee if Lessee or any of its Affiliates hires such Retained Employee in any
capacity (including as a consultant) within one year of the Effective Time for a
period in excess of 30 days, except as provided in the Transition Services
Agreement. Lessor shall be responsible for complying with all requirements of
the WARN Act applicable to its business prior to, on and following the Effective
Time. Lessee shall be responsible for complying with all such requirements
applicable to it or its business prior to, on and following the Effective Time.
9.3 Transferred Employees. Except to the extent otherwise described in
this Article 9 as the responsibility of Lessor, Lessee shall assume and be
responsible for (including after the Effective Time) all claims, costs,
expenses, liabilities and other obligations related to the Transferred
Employees, including for compensation (salary and bonuses), for post-retirement
medical and insurance benefits under SFAS 106 and for all other employee
benefits. Lessor shall be responsible for all claims, costs, expenses,
liabilities and other obligations related to the Transferred Employees (other
than for compensation) to the extent attributable to the employment of the
Transferred Employees by Lessor prior to the Effective Time. Lessee shall
provide, or cause to be provided, compensation packages and benefits plans and
programs to each Transferred Employee substantially comparable in the aggregate
to those provided by Lessee for its other employees and, for eligibility and
vesting purposes only, each Transferred Employee shall be given full credit for
such Transferred Employee's prior service with Lessor and its predecessors as if
such service was with Lessee. Lessee agrees to cause all waiting periods and
pre-existing condition exclusions to be waived for the Transferred Employees
under Lessee's medical, dental, disability and life insurance benefits. The
schedule of information delivered by Lessor to Lessee with respect to the
employees at the Facility and their respective ages, tenure and salaries is
complete and accurate in all material respects.
ARTICLE 10
COVENANTS
10.1 Post-Closing Access.
(a) Access to Leased Property. In addition to, and without in
any manner limiting, the access provided in Section 17.6, from and after the
Effective Time, during the Term, Lessee shall afford the duly authorized
representatives of Lessor, upon reasonable prior notice, access to the Leased
Property (i) to inspect the Leased Property for compliance by Lessee with the
terms of this Lease and (ii) such access is reasonably required in connection
with any Action or other obligation under this Lease or required by Law
involving Lessor which pertains to the Leased Property. Lessor shall indemnify
Lessee against any Covered Liabilities to the extent resulting from such access
by Lessor's representatives.
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(b) Access to Records and Personnel.
(1) Property Records. During the Term, each of Lessor and
Lessee agrees to maintain the Property Records in its possession substantially
in the manner maintained by Lessor prior to Closing and Lessee shall deliver the
Property Records to Lessor upon the expiration or earlier termination of this
Lease or if Lessee purchases the Leased Property pursuant to the Option, Lessee
shall maintain the Property Records in its possession substantially in the
manner maintained by Lessor prior to Closing until the sixth anniversary of the
Option Closing (or for such longer period of time as one party shall advise the
other party in writing is necessary in order to have Property Records available
with respect to open years for tax audit purposes), or, if any of the Property
Records pertain to any claim or dispute pending by or against a party or its
Affiliates on the sixth anniversary of the Option Closing, the other party shall
maintain any of the Property Records designated by the first party until such
claim or dispute is finally resolved and the time for all appeals has been
exhausted ("Document Retention Period"). Each of Lessor and Lessee agrees to
maintain the Property Records in its possession so that they may be reasonably
retrievable and shall provide the other party and its representatives reasonable
access during business hours to and the right to copy the Property Records in
its possession, at the other's expense, for the purposes of (i) preparing and
delivering any accounting provided for under this Lease and adjusting, prorating
and settling the charges and credits provided for in this Lease, (ii) complying
with any Law relating to the Leased Property, (iii) preparing Tax returns, (iv)
responding to or disputing any Tax audit, (v) asserting, defending or otherwise
dealing with any claim or dispute, known or unknown, under this Lease or with
respect to the Leased Property, or (vi) asserting, defending or otherwise
dealing with any Third Party claim or dispute by or against Lessor, Lessee or
their respective Affiliates relating to the Leased Property or any activities or
operations relating to the Leased Property, including any claim or Action for
death, injury or damage to person or property and specifically including but not
limited to the pending matters set forth in Schedule 10.1(b)(1) AND including
any environmental issues relating to the Elementis Property. During the Document
Retention Period, none of Lessee or Lessor or any of their Affiliates shall
destroy any Property Records without giving the other party 60 days' advance
written notice thereof and the opportunity during such 60-day period, at such
other party's expense, to obtain such Property Records prior to their
destruction.
(2) Special Documents. Lessor shall retain custody of all
documents listed on the index provided by Lessor to Lessee at Closing and which
are stored at the File Pro warehouse in Corpus Christi, Texas as of the date of
Closing. Lessor agrees to retain and store said documents in the File Pro
warehouse for so long as Lessor believes that it needs access to the documents
to defend any claim or Action relating to the Leased Property or any activities
or operations relating to the Leased Property. Lessor, at Lessee's expense,
shall make all such documents reasonably available to Lessee at the File Pro
warehouse on an as needed basis during normal business hours. All such documents
shall constitute Confidential Information of Lessor and Lessee's access thereto
shall be subject to the requirements of Section 10.2. At such time as Lessor no
longer needs access to said documents, Lessor shall so advise Lessee in writing
and Lessee shall have 60 days thereafter to obtain permanent custody of the
documents. In the event Lessee does not take custody of the documents at that
time, Lessor shall be free to destroy said documents.
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(3) Personnel.
(i) Lessee shall permit Lessor and its
representatives, at Lessor's expense, to have reasonable access to all
former employees and other personnel of Lessor or its Affiliates who
are employed or retained by Lessee or any of Lessee's Affiliates and
who have relevant information regarding any claim or dispute referenced
in clause (vi) of Section 10.1(b)(1).
(ii) Lessor shall permit Lessee and its
representatives, at Lessee's expense, to have reasonable access to
those employees and other personnel of Lessor or its Affiliates who are
or have been employed by Lessor or any of Lessor's Affiliates in
connection with the Assets or the Other Leased Property and who have
relevant information regarding any claim or dispute referenced in
clause (vi) of Section 10.1(b)(1).
(iii) Lessee and Lessor agree, for purposes of this
Section 10.1(b)(3), that:
(A) the requesting party must provide
advance notice to the providing party of its request to obtain
access to specified employees with sufficient enough time to
allow the providing party to rearrange work schedules to
accommodate the absence of the specified employee(s) from
their work;
(B) access to the specified employees
must be during reasonable work hours (or as otherwise agreed
to by the parties and the specified employees) and be
conducted in a manner so as not to interfere unduly with the
business operations of the providing party;
(C) the requesting party will have access
to the specified employees only at the providing party's
offices, unless otherwise agreed to by the providing party
(such agreement not to be unreasonably withheld);
(D) when a requesting party requires
access to any employee in excess of three Business Days in any
calendar year, the expenses to be borne by the requesting
party will include reimbursement for such employee's wages
upon receipt of an invoice from the providing party;
(E) the providing party will not be held
responsible for the specified employee's actions taken or
testimony given on behalf of the requesting party; and
(F) access to any employees or other
personnel pursuant to this Section 10.1(b)(3) shall be limited
to information which (i) is relevant to a claim or dispute
referenced in clause (vi) of Section 10.1 (b)(1) and (ii)
relates to the period prior to the earlier of the expiration
of the Term or the closing of the Option.
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(4) Agreed Judgment Records. Notwithstanding the
foregoing, Lessee shall preserve and retain all existing and future
records and documents coming into its possession relating to past,
present or future environmental conditions at, on or relating to the
Leased Property, including groundwater contamination, and all records
and documents relating to Environmental Activities previously
undertaken by Lessor and to be undertaken by Lessee pursuant to the
Agreed Judgment. If Lessee purchases the Leased Property, such records
and documents shall be retained by Lessee until the Agreed Judgment has
been terminated as provided for therein or such later date as may be
applicable under the foregoing provisions of this Section 10.1 . Lessor
shall have access to such records and documents in the manner provided
above with respect to Property Records and Lessee shall also provide
access to such records and documents as may be required by the Agreed
Judgment.
10.2 Confidentiality. It is anticipated that from time to time after
Closing, in the course of the activities relating to this Lease, a party to this
Lease will directly or indirectly disclose to the other party to this Lease
certain proprietary information and material developed or acquired by such party
or an Affiliate of such party ("Confidential Information"). The party disclosing
such Confidential Information shall be designated as the disclosing party and
the party receiving Confidential Information shall be designated the receiving
party. The disclosing party shall designate and identify in writing
(electronically or otherwise) the information and materials it considers
Confidential Information.
(a) In consideration of any disclosure referred to above, the
receiving party agrees that the Confidential Information is proprietary and is
the property of the disclosing party or its Affiliate. The receiving party
agrees such Confidential Information shall be kept strictly confidential and
shall not be sold, traded, published or otherwise disclosed to anyone in any
manner whatsoever or photocopied or reproduced in any way, without the
disclosing party's prior written consent, except as provided below.
(b) The receiving party may disclose the Confidential
Information without the disclosing party's prior written consent only to the
extent such information is:
(1) already known to the receiving party or any of
its Affiliates as of the date of disclosure hereunder or becomes
available from a source other than the disclosing party who is entitled
to make such disclosure;
(2) already in possession of the public or becomes
available to the public other than through the act or omission of the
receiving party;
(3) required to be disclosed under Law or judicial
proceeding, by a Governmental Body, or by a rule of any recognized
stock exchange affecting the receiving party or any of its Affiliates
and to the extent permitted under Law after notification to the
disclosing party; or
(4) independently developed by the receiving party or
any of its Affiliates without reference to the Confidential
Information.
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(c) The receiving party shall be entitled to disclose the
Confidential Information (including making photocopies or reproduction of such
Confidential Information for purposes of such disclosure) without the disclosing
party's prior written consent to persons (said persons to be limited to
employees, officers, directors, agents, attorneys, accountants, consultants, or
representatives of the receiving party or any of its Affiliates) who have a
clear need to know in order for the receiving party or its Affiliates (i) to
perform or comply with its obligations under this Lease or the Related
Agreements, (ii) to exercise or enforce its rights under this Lease or the
Related Agreements, or (iii) to comply with Laws. The receiving party shall be
responsible for ensuring that all persons to whom the Confidential Information
is disclosed by the receiving party under this Lease shall keep such information
confidential.
(d) The restrictions and obligations on disclosure or use of
Confidential Information contained in this Section shall survive and continue in
full force and effect for a period of two years after the earlier of the closing
of the Option or the termination of this Lease. Such restrictions and
obligations shall terminate upon the expiration of such 2-year period, however,
such termination shall not affect, release, or discharge any liability for any
breach of such provisions prior to such termination.
10.3 Foreign Trade Zone.
(a) The Facility is operating as a subzone, Subzone 122A (the
"Subzone") under a valid grant of authority from the Foreign Trade Zones Board
and has been activated with the U.S. Customs Service.
(b) Prior to Closing, Lessor and Lessee will take all steps
necessary to transfer Lessor's grant of authority for the Subzone to Lessee to
be effective as of the Effective Time, including the following:
(1) Lessor and Lessee shall jointly notify the
Foreign Trade Zones Board of the parties' intent to transfer the grant
of authority to Lessee;
(2) Lessor and Lessee shall jointly request a change
in operator of the Subzone with the Grantee of the Subzone, the Port of
Corpus Christi, to be effective as of the Effective Time; and
(3) prior to or upon receipt of the Grantee's
approval of the change in operator of the Subzone, Lessee will submit a
new operator package to the Grantee, including a foreign trade zones
bond and operator manual, that will be substituted for Lessor's
existing operator package (including bond and manual).
10.4 Liens. After Closing and prior to the Option Closing, Lessor
agrees not to take any action which would result in placement of any Lien on the
Leased Property except (i) a memorandum of this Lease, (ii) any Lien arising
from Lessor's enforcement of its rights under this Lease or from Lessor's
compliance with its obligations under this Lease, (iii) any right-of-way,
easement or other taking of any of the Leased Property granted or conveyed by
Lessor pursuant to Section 15.2 or at Lessee's written request, (iv) any Lien or
encumbrance created or granted at Lessee's written request, and (v) the
easements and rights-of-way granted or reserved pursuant to Section 10.5. Any
Lien which results from any action taken by, through or under Lessee shall not
be considered to have been placed on the Leased Property by Lessor.
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10.5 LPG/Crude Easements & Rights-of-Way. Lessor expressly reserves the
right to execute and deliver to the Other Lessor one or more easements and
rights-of-way in the forms attached hereto as Exhibit C(2) granting easements
and rights-of-way on, over, across, under and through the LPG/Crude Property,
together with rights of ingress and egress on, over and through the Leased
Property to the LPG/Crude Property as provided in such forms. The "LPG/Crude
Property" means only the portion of the land included in the Leased Property
that is reasonably necessary for the operation, maintenance, repair, replacement
and improvement of the Adjacent Lessor Facilities in the manner historically
conducted by the Other Lessor. Following Closing, Lessor shall cause the
LPG/Crude Property to be surveyed and plats and metes and bounds descriptions
thereof prepared and furnished to Lessee. If Lessee has any objections to the
land included in the LPG/Crude Property or such plat and metes and bounds
description of the LPG/Crude Property it shall advise Lessor of such objections
within 30 days after receipt of same. If Lessee raises any objections, Lessor
and Lessee will in good faith attempt to reach agreement on the LPG/Crude
Property. If agreement is not reached within 30 days after the end of said
30-day period, either party may submit the determination of the LPG/Crude
Property to arbitration. The arbitrator shall determine the boundaries taking
into account to the maximum extent possible the respective rights hereunder and
concerns of both Lessor and Lessee. Lessor, the Other Lessor and the surveyor
will be allowed reasonable access to the Leased Property to determine and survey
the LPG/Crude Property. Until the foregoing easements and rights-of-way have
been executed and delivered to the Other Lessor pursuant to the foregoing,
Lessor hereby reserves from the Leased Property easements and rights-of-way on,
over, across, under and through the LPG/Crude Property (as defined above),
together with reasonable access rights, all on the terms and provisions
contained in the easement and right-of-way forms attached hereto as EXHIBIT
C(2).
ARTICLE 11
USE, MAINTENANCE, ALTERATIONS, AND REPAIRS
11.1 Use by Lessee.
(a) Lessee shall at all times use reasonable care in the use
of the Leased Property.
(b) At Lessee's sole cost and expense, Lessee shall obtain and
comply with (or cause to be obtained or complied with) any and all Permits
necessary for any use of the Leased Property or any operations thereon by
Lessee, Lessee's employees, Affiliates, contractors or agents, or anyone
claiming by, through or under Lessee, except those which would not have (or the
failure to comply with which would not have) a Material Adverse Effect.
(c) Except with respect to Retained Environmental Claims, at
Lessee's sole cost and expense, Lessee shall comply with (or cause to be
complied with) all Laws relating to the use of the Leased Property or any
operations thereon, and shall promptly comply with all orders and directives of
any Governmental Body for the correction, prevention and abatement of nuisances,
wastes or hazards in, upon, or in connection with the Leased Property or any
operations thereon, all at Lessee's sole cost and expense, except those which
would not have (or the failure to comply with which would not have) a Material
Adverse Effect.
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(d) In its use, occupancy and operation of the Leased
Property, Lessee shall not take any action (or allow Lessee's employees,
Affiliates, contractors or agents, or anyone claiming by, through or under
Lessee to take any action) that would cause the termination, revocation or
denial of any insurance policies required to be maintained under this Lease or
that pursuant to written notice from any applicable insurer, would be the basis
for a defense to any claim under any insurance policy required by this Lease in
respect of the Leased Property, and Lessee shall otherwise comply in all
material respects with the requirements of any insurer that issues a policy of
insurance required by this Lease in respect of the Leased Property, failure with
which to comply would cause cancellation of the policy, provided that Lessee
shall be afforded a reasonable time to comply with any insurance requirements.
(e) Lessee shall have no right or power to grant or create any
Lien in or against the Leased Property or Lessee's or Lessor's interest therein
except for the filing of a memorandum of this Lease in the property records and
except for Permitted Encumbrances which will not survive the termination of this
Lease (other than Permitted Encumbrances under clauses (b), (c) or (d) of the
definition of Permitted Encumbrances). Lessee shall not allow the Leased
Property or Lessee's or Lessor's interest therein to become subject to any Liens
in connection with or as a result of any activities or actions by Lessee, its
employees, Affiliates, contractors or agents, or anyone claiming by, through or
under Lessee (or anyone acting for or on behalf of any of the foregoing), and
shall at all times keep the Leased Property and Lessee's and Lessor's respective
interests therein free and clear of all Liens on account of such matters except
for Permitted Encumbrances which will not survive the termination of this Lease
(other than Permitted Encumbrances under clauses (b), (c) or (d) of the
definition of Permitted Encumbrances) and to the extent Section 11.9 (Permitted
Contests) applies.
11.2 Operation, Maintenance and Repairs.
(a) Operations. Except with respect to Retained Environmental
Claims, Lessee, at its sole cost and expense, shall operate the Leased Property
in a manner consistent with (i) Prudent Operating Practices, (ii) Codes and
(iii) Laws, except to the extent Section 11.9 (Permitted Contests) shall apply,
except those which would not have (or the failure to comply with which would not
have) a Material Adverse Effect.
(b) Maintenance and Repairs. Lessee, at its sole cost and
expense, shall maintain, service and repair the Leased Property in use (or
temporarily out of use due to turnarounds or unscheduled outages) at the time of
Closing in accordance with standards of prudence applicable to the United States
petroleum industry consistent with Lessor's past practices, ordinary wear and
tear excepted, but in any event (a) in accordance with Laws, subject to the
application of Section 11.9 (Permitted Contests), and (b) to the extent required
to (i) maintain the Leased Property in good operating condition, (ii) cause the
Leased Property to have the capacity and functional ability to perform on a
continuing basis, in normal commercial operation (whether or not then
operating), the functions for which it was designed, subject to actions required
in Lessee's discretion to comply with Assumed Environmental Claims, to Section
11.4 (Alterations Required by Law) and Lessee's rights to make any Alterations
permitted by Section 11.5 (Optional Alterations), and (iii) comply with such
standards and periodic maintenance inspections as shall be required to enforce
warranty claims which Lessor or Lessee may have against third parties, except
those which would not have (or the failure to comply with which would not have)
a Material Adverse Effect.
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(c) Utilities. Lessee, at its sole cost and expense, shall
provide, or cause to be provided, all electricity, telephone, water, wastewater,
sewage, garbage and other utilities or utility services necessary for the
operation, maintenance, repair and other use of the Leased Property.
(d) Environmental. Except with respect to Retained
Environmental Claims, Lessee, at its sole cost and expense, shall:
(1) provide and be responsible for the proper
handling, treatment, storage and disposal of all Hazardous Materials
and waste products produced, generated, used, stored, handled or
present at, in or on the Leased Property in accordance with all
Environmental Laws and other Laws except to the extent Section 11.9
(Permitted Contests) shall apply;
(2) cause the Leased Property and all operations
conducted thereon by Lessee, its employees, Affiliates, contractors or
agents, or anyone claiming by, through or under Lessee (or anyone
acting for or on behalf of any of the foregoing) to be in compliance
with all Environmental Laws, except to the extent Section 11.9
(Permitted Contests) shall apply;
(3) from time to time undertake and implement, or
cause to be undertaken or implemented, all Environmental Activities
with respect to the Leased Property which are required by Environmental
Law or which would be undertaken or implemented by a reasonably prudent
owner or operator of the Leased Property, except to the extent Section
11.9 (Permitted Contests) shall apply;
(4) obtain air permits for the "grandfathered" units
identified in SCHEDULE 7.3(b), submit an application for permits for
these units by September 1, 2001, except to the extent otherwise agreed
to by the applicable agencies, and use its reasonable best efforts to
obtain the prompt issuance of these permits, it being agreed that any
and all costs of obtaining, renewing, or maintaining all such permits,
including the cost of obtaining, installing, and operating any new or
upgraded environmental controls, is a Cost of Compliance;
(5) maintain in good standing and in full force and
effect, all Environmental Permits required by applicable Environmental
Law, it being agreed that any and all costs of obtaining, renewing, or
maintaining all such Environmental Permits, including the cost of
obtaining, installing, and operating any new or upgraded environmental
controls, is a Cost of Compliance;
(6) PROVIDE Lessor written notice of any anticipated
new or renewal Environmental Permit and provide Lessor a copy the
proposed draft of any new, renewal or modification application at least
ten days prior to its submission to the relevant Governmental Body;
(7) subject to Sections 2.6(d) and (e), take all
measures necessary to have the Facility Environmental Permits (other
than the TPDES permit 03556 with respect to the ▇▇▇▇▇▇ terminal)
transferred to Lessee or to otherwise obtain the Facility Environmental
Permits, it being agreed that Lessor will execute any documents or take
such additional actions as Lessee, at Lessee's expense, may reasonably
require to transfer or obtain the Facility Environmental Permits;
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(8) comply with all restrictions placed in the deed
records and identified ON SCHEDULE 11.2(d)(8) REGARDING the allowed
uses of certain areas of the Leased Property because of Hazardous
Materials that remain following Environmental Activities, Lessor
agreeing, however, that no such restrictions shall be permitted to be
placed of record with respect to Retained Environmental Claims to the
extent that they would materially interfere with the conduct of
business at the Facility as it has been conducted prior to the
Effective Time; and
(9) maintain in force the financial assurance
required by Landfill Post Closure Care Permit No. HW-50261-000 and any
other financial responsibility required under Environmental Laws with
respect to the Leased Property or operations conducted in connection
therewith.
except, in each case, those which would not have (or the failure to comply with
which) would not have a Material Adverse Effect.
11.3 Replacement of Parts. Lessee, at its expense, shall (unless
prohibited by Law) replace all necessary or useful appliances, parts,
instruments, appurtenances, accessories and miscellaneous equipment of whatever
nature (hereinafter collectively referred to as "Parts") that may from time to
time be incorporated or installed in or attached to the Leased Property and that
may from time to time fail to function or become worn out, destroyed, damaged
beyond repair, lost, condemned, confiscated, stolen or seized for any reason
whatsoever in accordance with Prudent Operating Practices, except to the extent
the failure to do so would not have a Material Adverse Effect. In addition, in
the ordinary course of maintenance, service, repair or testing, Lessee may
remove any Parts if Lessee causes such Parts to be replaced as promptly as
practicable. All replacement Parts shall be free and clear of all Liens except
Permitted Liens and shall be in at least as good operating condition as, and
shall have a value and utility at least equal to, the Parts replaced, assuming
such replaced Parts were in the condition and repair required to be maintained
by the terms hereof.
11.4 Alterations Required By Law. Lessee, at its own expense, shall
make such alterations, modifications and additions (herein collectively referred
to as "Alterations") to the Leased Property as may be required or as may be
anticipated by Lessee to be required from time to time to meet the requirements
of Laws as soon as practicable after such requirements shall arise, except to
the extent Section 11.9 (Permitted Contests) shall apply, except those which
would not have (or the failure to comply with which would not have) a Material
Adverse Effect.
11.5 Optional Alterations. Unless an Event of Default shall have
occurred and be continuing, Lessee, at its own expense, may from time to time
make any Alteration to the Leased Property unless such Alteration (a) will
materially impair the value or utility of the Leased Property or (b) will cause
the Leased Property at the time of termination of the Lease not to have the
capacity and functional ability to perform on a continuing basis, in normal
commercial operation (whether or not then operating) the functions it was
performing or capable of performing at Closing; provided, however, that to the
extent it shall be reasonably feasible to do so, any such Alteration shall be
made in such a manner that title thereto will not pass to Lessor for the reasons
described in 11.6 (Title to Parts).
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11.6 Title to Parts.
(a) Title to each Part (including any Alteration) incorporated
or installed in or attached to the Leased Property pursuant to this Article 11
shall without further act vest in Lessor and shall be deemed to constitute a
part of the Leased Property and be the property of Lessor subject to this Lease
if:
(1) such Part shall be in replacement of or in
substitution for, and not in addition to, any Part originally
incorporated in or installed as a part of the Leased Property at the
Effective Time or any Part title to which shall have vested in Lessor
pursuant to this Section 11.6;
(2) such Part shall be incorporated or installed in
or attached to the Leased Property pursuant to Section 11.3
(Replacement of Parts) or Section 11.4 (Alterations Required by Law);
(3) such Part cannot be readily removed from the
Leased Property without materially diminishing or impairing the value,
utility or condition that the Leased Property would have had at such
time had such Part not been so incorporated or installed; or
(4) such Part shall be paid for by Lessor.
(b) Title to all other property incorporated or installed in
or attached to the Leased Property as a result of Alterations made pursuant to
Section 11.5 (Optional Alterations) shall vest in Lessee (or in such other
Person as is entitled thereto) and such property shall not be part of the Leased
Property.
(c) All Parts, title to which is vested in Lessor, that are at
any time removed from the Leased Property shall remain the property of Lessor,
no matter where located, until such time as such Parts shall be replaced by
Parts that have been incorporated or installed in or attached to the Leased
Property and that meet the requirements for replacement Parts specified in
Section 11.3 (Replacement Parts). Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Leased Property as provided in
Section 11.3 (Replacement Parts) without further act, (a) title to the removed
Part shall vest in Lessee or such Person as shall be designated by Lessee, free
and clear of all rights of Lessor, (b) title to such Replacement Parts shall
vest in Lessor, and (c) such Replacement Parts shall become subject to this
Lease and be deemed part of the Leased Property for all purposes hereof to the
same extent as the Parts originally incorporated or installed in or attached to
the Leased Property.
11.7 Removal of Parts. Parts installed or incorporated in or attached
to the Leased Property to which Lessee (or any other Person other than Lessor)
shall have title pursuant to the provisions of Section 11.6 (Title to Parts) may
be removed at any time by Lessee (or such other Person) so long as such removal
shall not result in any violation of Laws and, unless an Event of Default shall
have occurred and be continuing before the delivery of the Leased Property to
Lessor in accordance with the provisions of this Lease, and title to such Parts
shall at all times remain in Lessee (or such other Person). Lessor may, prior to
the removal of such Parts pursuant to this Section, elect to purchase for cash
any such Parts owned by Lessee (or such other Person) at the time of re-delivery
of the Leased Property to Lessor in accordance with the provisions of this
Lease. To exercise such rights, Lessor
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shall give Lessee (or such other Person) written notice of its election to
purchase at least fifteen (1 5) days before such re-delivery. The purchase price
of the Parts shall be the fair market value thereof as of the date of purchase.
11.8 Parts Free and Clear of Liens. Lessee shall insure that any Part,
title to which shall vest in Lessor pursuant to Section 11.6 (Title to Parts),
shall be free and clear of all Liens except Permitted Encumbrances which will
not survive the termination of this Lease (other than Permitted Encumbrances
under clauses (b), (c) or (d) of the definition of Permitted Encumbrances).
11.9 Permitted Contests. If, to the extent and for so long as (a) a
test, challenge, appeal or proceeding for review of any applicable requirement
of Law or of a Governmental Body relating to the operation or maintenance of the
Leased Property shall be prosecuted in good faith by Lessee (or an appropriate
representative of Lessee's interest in such test, challenge, appeal or
proceeding) or (b) compliance with such requirement shall have been excused or
exempted by a nonconforming use permit, waiver, extension or forbearance
believed in good faith by Lessee to excuse or exempt it from such requirement,
Lessee shall not be required to comply with such requirement, if, but only if,
such test, challenge, appeal, proceeding or noncompliance shall not involve any
material risk of (i) foreclosure, sale, forfeiture or loss of, or imposition of
any Lien except Permitted Encumbrances which will not survive the termination of
this Lease (other than Permitted Encumbrances under clauses (b), (c) or (d) of
the definition of Permitted Encumbrances), on any part of the Leased Property
(or Lessee's or Lessor's interest therein)or of impairment of the operation of
the Leased Property, (ii) extending the ultimate imposition of such requirement
beyond the termination of the Term then in effect, as the case may be, (iii) any
material claim against Lessor or the Leased Property, (iv) the nonpayment of
Rent, or (v) subjecting Lessor to criminal liability.
11.10 Operating Logs; Plans and Specifications. Lessee shall (a)
maintain daily operating logs showing the production from the Leased Property,
(b) keep maintenance and repair reports in sufficient detail to indicate the
nature and date of major work done by Lessee, and (c) maintain a current
operating manual and, to the extent Lessor has delivered to Lessee "as built"
plans of units, maintain a complete set of "as-built" plans and specifications
(which shall reflect all Parts incorporated in the Leased Property and all
Alterations). Such logs, reports, manual, and plans shall be kept on file by
Lessee at its offices and shall be made available to Lessor upon reasonable
request solely for purposes of determining compliance with the terms of this
Lease or complying with Lessor's legal obligations as owner of the Leased
Property; provided, however, that such logs and reports may be destroyed in
accordance with a reasonable and prudent document retention program.
ARTICLE 12
[INTENTIONALLY OMITTED]
ARTICLE 13
IMPOSITIONS
13.1 Responsibility for Impositions. Lessee shall pay or cause to be
paid, as and when the same shall become due, all Impositions, except that:
(a) All Impositions for the tax year or other taxable period
in which the Term begins as well as for the tax year or other taxable period in
which the Term of this Lease expires or
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is otherwise terminated shall be apportioned so that Lessee shall pay its
proportionate share of the Impositions which are attributable to such tax period
in which the Term begins and in such tax period in which the Term of this Lease
expires or is otherwise terminated, and Lessor shall pay its proportionate part;
provided, however, that if Lessee purchases the Leased Property pursuant to the
Option, Lessee shall pay all Impositions attributable to any tax period other
than the tax period in which the Term begins.
(b) Where any Imposition is permitted by law to be paid in
installments, Lessee may pay such Imposition in installments as and when such
installments become due; provided, however, that the amount of all installments
of any such Impositions which are to become due and payable after the expiration
of the Term or earlier termination of this Lease shall not be apportioned
(except to the extent such Imposition would have been apportioned between Lessor
and Lessee under Section 13.1(a) if not paid in installments) but shall be and
become due and payable to Lessor or the taxing authority six (6) months before
the date of the expiration of the Term or earlier termination of this Lease.
13.2 Payment of Impositions. Lessee shall pay all such Impositions
directly to the taxing authority, and shall exhibit and deliver to Lessor
photostatic copies of the receipted bills or other evidence reasonably
satisfactory to Lessor showing such payment promptly after written request from
Lessor for such receipts shall have been received by Lessee.
13.3 Contest of Impositions. Lessee may, if Lessee shall so desire,
contest the validity or amount of any Imposition, in which event, Lessee may
defer the payment thereof during the pendency of such contest; provided that,
Lessee shall be fully liable for and shall indemnify Lessor against such
contested item together with all interest, fines, and penalties thereon and
additions thereto. Nothing herein contained, however, shall be so construed as
to allow such items to remain unpaid for such length of time as shall permit the
Leased Property, or any part thereof, to be sold by Governmental Body for the
non-payment of the same; and if at any time, in the judgment of Lessor,
reasonably exercised, it shall become necessary so to do, Lessor, after written
notice to Lessee, may require Lessee (under protest if so requested by Lessee)
to immediately pay all amounts as may be required to prevent the sale of the
Leased Property or any part thereof, or foreclosure of the lien created thereon
by such item.
13.4 Evidence of Payment. The certificate, advice, ▇▇▇▇ or statement
issued or given by the appropriate officials authorized or designated by law to
issue or give the same or to receive payment of any Impositions, of the
existence, non-payment or amount of such Imposition shall be prima facie
evidence for all purposes of the existence, non-payment or amount of such
Imposition.
13.5 Rendering of Leased Property. Lessee may render the Leased
Property for all taxing jurisdictions and may, if Lessee so desires, endeavor at
any time or times to obtain a lowering of the assessed valuation upon the Leased
Property for any tax year or other taxable period that does not include the
Effective Time (and for the period that does include the Effective Time, with
Lessor's prior written consent) for the purpose of reducing taxes thereon and,
in such event, Lessor will offer no objection, and, at the request of Lessee,
will cooperate with Lessee, but without expense to Lessor, in effecting such a
reduction. Lessee shall be authorized to collect any tax refund payable as a
result of any proceeding Lessee may institute for that purpose and any such tax
refund shall be the property of Lessee to the extent to which it may be based on
a payment made by Lessee, subject, however, to an apportionment between Lessor
and Lessee with respect to taxes paid or contributed
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by Lessor for the tax period in which this Lease began and the tax period in
which the Term ends or this Lease is otherwise terminated, after deducting from
such refund the reasonable costs and expenses, including reasonable legal fees,
incurred in connection with obtaining such refund.
13.6 Joinder by Lessor. Lessor shall not be required to join in any
action or proceeding referred to in Section 13.3 or Section 13.5 unless required
by Law in order to make such action or proceeding effective, in which event, any
such action or proceeding may be taken by Lessee in the name of, but without
expense to, Lessor, Lessee hereby agreeing to indemnify and hold harmless Lessor
and all Lessor Indemnitees from all Covered Liabilities by reason of, in
connection with, on account of, growing out of, or resulting from, any such
action or proceeding.
13.7 Apportionment of Impositions. Whenever it is necessary for
purposes of Section 13.1(a) or 13.5 to determine the proportionate share of any
Impositions apportioned between Lessee or Lessor under Section 13.1(a) or 13.5:
(a) the determination of Lessee's proportionate share for a
tax year or other taxable period beginning on or before and ending after the
Effective Time, shall be made, by multiplying such Impositions by a fraction,
the numerator of which is the number of days in such tax period after the
Effective Time and the denominator of which is the total number of days in such
tax period,
(b) the determination of Lessee's proportionate share for a
tax year or other taxable period beginning on or before and ending after the
expiration of the Term or earlier termination of this Lease, shall be made, by
multiplying such Impositions by a fraction, the numerator of which is the number
of days before the expiration of the Term or earlier termination of this Lease
and the denominator of which is the total number of days in such tax period, and
(c) Lessor's proportionate share of such Impositions shall be
the share not apportioned to Lessee pursuant to (a) or (b) above; provided that,
this Section shall not operate to apportion to Lessor any Impositions or share
thereof which are the obligation of Lessee under Sections 13.1(b) or 13.3.
ARTICLE 14
INSURANCE
14.1 Coverage.
(a) Without limiting any obligations or liabilities under this
Lease, Lessee shall, at its own expense, provide and maintain or cause to be
maintained for the life of this Lease, the following minimum insurance coverage
with insurers reasonably acceptable to Lessor:
(1) Workers' Compensation Insurance in accordance
with all applicable state, federal and maritime laws (including
protection under the U.S. ▇▇▇▇▇▇▇▇▇ and Harbor Worker's Act, Outer
Continental Shelf lands Act, and Maritime Law, including ▇▇▇▇▇ Act and
Death on the High Seas Act, where applicable) and Employers' Liability
coverage in the amount US$1,000,000 per accident. Coverage shall
include an alternate employers endorsement.
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(2) Automobile Liability Insurance including owned,
hired, rented or non-owned vehicles for both bodily injury and property
damage (and containing appropriate no fault insurance provisions or
other endorsements as are required under State and Federal
regulations), with Combined Single Limit Each Occurrence: US$1,000,000
or amount required by Applicable Law, whichever is greater.
(3) Commercial General Liability Insurance including
coverage for bodily injury (including mental injury/mental anguish) and
property damage with a combined single limit of not less, on an
occurrence basis, One Million Dollars (US$1,000,000) each occurrence
and in the annual aggregate. Coverage shall include such terms and
conditions as are usually carried by Persons operating similar
properties in the same general region.
(4) Terminal Operators Liability Insurance (or the
equivalent), if not provided for elsewhere in the insurance program
carried by Lessee, including Stevedores Liability; pollution liability
from loading and unloading operations); Products Liability; third party
bodily injury and death, all with a combined single limit per
occurrence for these coverages of at least $1,000,000.
(5) Excess/Umbrella Liability Insurance coverage in
excess of the limits, terms and conditions in 14.1(a)(1), (2), (3) &
(4) above, with a combined single limit for Bodily Injury and/or
Property Damage of US$450,000,000 for each occurrence and in the annual
aggregate. If after the second Lease Year, Lessee provides reasonable
evidence to Lessor that the insurance coverage required under this
Section 14.1(a)(5) is impossible to obtain on commercially reasonable
terms at the level of US$450,000,000 or that obtaining such insurance
coverage at such dollar level would be unreasonably burdensome on
Lessee, then Lessor will in good faith consider reducing the dollar
level of such required coverage, but not below US$100,000,000.
(6) Property damage insurance (including boiler and
machinery coverage) with respect to the Leased Property insuring
against loss or damage from all risks, including flood and earthquake,
customarily included under all-risk policies available with respect to
facilities similar in construction, location and occupancy to the
Facility, in amounts equal to not less than the greater of $231,000,000
or the Option Price; and
(7) such other insurance with respect to the Leased
Property in such amounts and against such insurable hazards as Lessor
may from time to time reasonably request and as is usually carried by
Persons operating similar properties in the same general region.
(b) Any insurance policies carried in accordance with this
Section 14.1 (Coverage) may be subject to (i) such normal exclusions as are
usual and customary for companies similarly situated, and (ii) such deductible
amounts and retentions, which shall be for the sole account of Lessee, as shall
be reasonable in the circumstances and shall be normal and customary for similar
facilities, if any, owned or leased by Lessee or its Affiliates.
(c) Notwithstanding anything to the contrary in this Article
14 (Insurance), Lessee shall at all times maintain insurance with respect to the
Leased Property at least in
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accordance with its standard corporate practice with respect to other similar
facilities, including the use of self-insurance, deductibles, insurance
subsidiaries and industry-captive insurance companies, provided that such
standard corporate practice is not lower than the standard practiced by the
United States petroleum refining industry.
14.2 Policy Provisions. Any insurance policy maintained by Lessee
pursuant to Section 14.1 (Coverage) shall to the extent permissible under the
policy:
(a) name Lessor as additional insured as respect to the
Property Insurance (referred to in 14.1(a)(6)) and, except for workers'
compensation insurance, name Lessor as an additional insured with respect to all
other insurance (but only to the extent required in (b) below) and as its
respective interests may appear;
(b) include effective waivers by the insurer of all claims for
insurance premiums or commissions or (if such policies provide for the payment
thereof) additional premiums or assessments against Lessor;
(c) to the extent commercially available, include
non-vitiation clause which provides that in respect of the interests of Lessor,
such policies shall not be invalidated by any action or inaction of Lessee or
any other Person and shall insure to Lessor, regardless of any claims for losses
shall be payable notwithstanding;
(1) any act of negligence, including any breach of
any condition or warranty in any policy of insurance, of Lessee,
Lessor, or any other Person, or
(2) any change in the title to or ownership of any of
the Leased Property;
(d) provide that such insurance shall be primary insurance
with respect to claims attributable solely to events occurring completely after
the Effective Time and that the insurers under such insurance policies shall be
liable under such policies without right of contribution from any other
insurance coverage effected by or on behalf of Lessor under any other insurance
policies covering the loss;
(e) provide that any cancellation thereof or material change
therein shall not be effective as to Lessor until at least 30 days after receipt
by Lessor of written notice thereof and
(f) WAIVE ANY right of subrogation of the insurers against
Lessor, in its capacities as Lessor under this Lease and owner of the Leased
Property, and waive any right of the insurers to any setoff or counterclaim or
any other deduction, whether by attachment or otherwise, in respect of any
liability of Lessor, in its capacities as Lessor under this Lease and owner of
the Leased Property, with respect to claims attributable solely to events
occurring completely after the Effective Time.
14.3 Delivery of Policies. Lessee shall deliver to Lessor on or prior
to the Closing Date, certificates of insurance signed by the insurance
underwriters or their duly authorized agents or an insurance broker
knowledgeable with respect to the insurance of Lessee (and, upon request, copies
of all insurance policies) with respect to the Leased Property that Lessee shall
be required to maintain pursuant to this Article 14 (Insurance).
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14.4 Insurance Report. Within 30 days after any material change in the
information set forth in the certificates of insurance provided pursuant to
Section 14.3 (Delivery of Policies) (including changes in deductible amounts or
renewals of existing policies), Lessee shall deliver to Lessor a certificate of
an officer of Lessee certifying compliance with this Article 14 (Insurance).
14.5 Insurance Maintenance. If Lessee should fail to maintain or cause
to be maintained such required insurance for the benefit of Lessor as specified
under 14.1 (Coverage), Lessor may effect the same at Lessee's expense (with such
amounts immediately payable to Lessor by Lessee). Lessor shall not be limited in
the proof of any damages which Lessor may claim against Lessee arising out of
Lessee's failure to provide and keep in force such policies as are required
hereunder to the amount of the insurance premium or premiums not paid or
incurred by Lessee which would have been payable on such insurance, but shall
also be entitled to recover, as damages for such breach, the uninsured amount of
any loss, liability, damages, claims, costs and expenses of suit, judgements and
interest, suffered, or incurred by Lessor by reason of Lessee's failure to
maintain insurance for any occurrence on the Leased Property which should have
been insured in accordance with this Lease.
14.6 Notice by Insurers. Lessee shall cause the insurers with which it
maintains insurance required by this Article 14 (Insurance) to advise Lessor in
writing promptly of any act or omission on the part of Lessee of which such
insurer has knowledge that may invalidate or render unenforceable, in whole or
in part, any such insurance.
14.7 Straddle Claims. With respect to injuries and damages which are of
a continuous or ongoing nature and extend over the Effective Time and are
apportioned between Pre-Closing Liabilities and Post-Closing Liabilities,
Lessor's insurance shall be the primary insurance for Pre-Closing Liabilities
and the insurers under such insurance policies shall be liable under such
policies without right of contribution from any other insurance coverage
effected by or on behalf of Lessee under any other insurance covering the loss
relating to the period prior to Closing, and Lessee's insurance shall be the
primary insurance for Post-Closing Liabilities and the insurers under such
insurance policies shall be liable under such policies without right of
contribution from any other insurance coverage effected by or on behalf of
Lessor under other insurance covering the loss relating to the period after
Closing.
14.8 Capacity of Lessor. Notwithstanding anything in this Article 14,
including the naming of Lessor as additional insured or the waiver of
subrogation in Section 14.2, Lessee's insurer shall be permitted to subrogate
against Lessor, to the extent Lessee would have a claim against Lessor under
Article 17 in the absence of insurance. The waiver of subrogation provided in
Section 14.2 and the legal effect of naming Lessor as an additional insured
under Lessee's insurance policies shall not extend beyond the scope of Lessor's
capacity as Lessor under the Lease.
ARTICLE 15
CASUALTY AND CONDEMNATION
15.1 Damage or Destruction.
(a) After the Effective Time, if the buildings, improvements,
equipment, fixtures and personal property constituting part of the Leased
Property are damaged or destroyed by fire or other casualty, the Term of this
Lease shall not be reduced or affected in any way, this Lease shall nevertheless
continue in full force and effect, and Lessee at its sole cost and expense (but
with the
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use of available insurance proceeds as provided in Section 15.3) shall promptly
and diligently replace, rebuild, repair and restore the damaged or destroyed
buildings, improvements, equipment, fixtures and personal property to
substantially the same condition and to their productive capacity existing at
the Effective Time (such replacement, rebuilding, repair and restoration being
referred to in this Article as the "Work"). All insurance money paid on account
of such damage or destruction under insurance policies provided for in Article
14 (less any reasonable costs and expenses incurred in collecting same) shall be
available for the payment of the cost of the Work as provided in Section 15.3.
Under no circumstances shall Lessor be obligated to make any payment,
disbursement, contribution or reimbursement towards the cost of the Work. Upon
completion of the Work, any insurance money paid on account of such damage or
destruction under insurance policies provided for in Article 14 and not applied
to the payment of the cost of the Work shall be retained by Lessee as Lessee's
sole property, Lessor hereby expressly assigning to Lessee any and all right,
title and interest of Lessee now or hereafter arising in or to any such
proceeds.
(b) In no event shall Lessee be entitled to any abatement,
allowance, reduction or suspension of Rent or other payments under this Lease
because all or any part of the Leased Property shall be untenantable owing to
the partial or total damage or destruction of the Leased Property; and
notwithstanding anything herein to the contrary, no such damage or destruction
shall affect in any way the obligation of Lessee to pay the Rent and other
payments herein reserved or required to be paid by Lessee or release Lessee of
or from any obligations imposed upon Lessee under this Lease.
15.2 Condemnation. In the event condemnation proceedings for the taking
of title to the whole of the Leased Property are commenced against the Leased
Property during the Term, Lessee shall have control of such proceedings. In the
event any other condemnation proceedings for the taking of title to the Leased
Property are commenced against the Leased Property during the Term, Lessor shall
have control of such proceedings; provided that, prior to the third Lease Year
Lessee and Lessor shall have joint control with respect to any such proceedings.
(a) If, at any time during the Term of this Lease, title to
the whole of the Leased Property shall be taken in condemnation proceedings or
by any right of eminent domain or any transfer thereof shall be made by Lessor
at the request and with the consent of Lessee in lieu or under threat thereof,
Lessee shall be deemed to have exercised the Option as of the date of such
taking or transfer in lieu or threat thereof and the Lease Payments reserved
shall be apportioned and paid to the date of such taking or transfer in lieu or
threat thereof provided, however, if such taking occurs prior to the third Lease
Year, Lessee shall be deemed to have exercised the Option on the first day of
the third Lease Year, no Lease Payments shall be due for the third Lease year,
and the closing of the Option shall occur on the first Business Day of the third
Lease Year. For purposes of this Article 15, any transfer by Lessor at the
request and with the consent of Lessee of the Leased Property or any part
thereof in lieu or under threat of condemnation or taking under right of eminent
domain shall be deemed a "taking" and all payments received by Lessor as
consideration for such transfer shall be deemed an "award" for such deemed
taking. In the event of any such taking of the whole of the Leased Property,
Lessee shall be entitled to receive the whole of any and all awards which may be
paid or made on account of any such taking, and Lessor will promptly forward any
payments received by it to Lessee; provided, however, any such proceeds or
payments which are received by or payable to Lessor or Lessee prior to the third
Lease Year shall be placed in escrow. Such escrowed funds, plus any income
earned thereon, shall be applied to pay the costs and expenses of such escrow
and the balance thereof shall be paid to Lessee upon the Option Closing. The
escrow agent and the terms and conditions of such escrow shall be determined by
Lessor,
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subject to the consent of Lessee which shall not be unreasonably withheld or
delayed. In lieu of placing such proceeds and payments in escrow pursuant to the
foregoing, Lessee may instead furnish Lessor with a letter of credit in an
amount equal to the aggregate amount of such proceeds and payments which would
otherwise be required to be placed in escrow; provided, however, such letter of
credit must be from a financial institution and on terms and in form approved by
Lessor, which approval shall not be unreasonably withheld or delayed.
(b) In the event of any such taking of less than the whole of
the Leased Property, the Term of this Lease shall not be reduced or affected in
any way, this Lease shall nevertheless continue in full force and effect, and
Lessee at its sole cost and expense (but with the use of available awards
received on account of such taking as provided in Section 15.3) shall promptly
and diligently replace, rebuild, repair and restore the buildings, improvements,
equipment, fixtures and personal property not taken, but adversely affected by
such taking, to substantially the same condition and to their productive
capacity at the Effective Time (such replacement, rebuilding, repair and
restoration being referred to in this Article as the "Work"). All awards paid on
account of such taking (less any reasonable costs and expenses incurred in
collecting same) shall be available for the payment of the cost of the Work as
provided in Section 15.3. Under no circumstances shall Lessor be obligated to
make any payment, disbursement, contribution or reimbursement towards the cost
of the Work. Any awards paid to Lessor on account of such a taking under this
Section 15.2(b) and not applied to the payment of the cost of the Work (i) shall
be retained by Lessor as Lessor's sole property, Lessee hereby expressly
assigning to Lessor any and all right, title and interest of Lessee now or
hereafter arising in or to any such awards, and (ii) the amount so retained by
Lessor (less any reasonable costs and expenses incurred in collecting same)
shall operate to reduce the Purchase Price.
(c) In the event Lessor or Lessee shall receive notice of any
proposed or pending condemnation proceeding affecting the Leased Property, the
party receiving such notice shall promptly notify the other party of the receipt
and contents thereof.
(d) In no event shall Lessee be entitled to any abatement,
allowance, reduction or suspension of Rent or other payments under this Lease
because all or any part of the Leased Property shall be untenantable owing to
the partial or total taking of the Leased Property; and notwithstanding anything
herein to the contrary, no such taking shall affect in any way the obligation of
Lessee to pay the Rent and other payments herein reserved or required to be paid
by Lessee or release Lessee of or from any obligations imposed upon Lessee under
this Lease.
15.3 Disbursement of Insurance and Condemnation Proceeds. All insurance
proceeds under insurance policies provided for in Article 14 on account of any
damage or destruction referred to in Section 15.1 and all awards received on
account of any taking referred to in Section 15.2(b), in each case less any
reasonable costs and expenses incurred in collecting same, shall be handled in
accordance with this Section 15.3 for the express purpose of paying the cost of
the Work necessitated as a result of such damage, destruction, or taking. Such
proceeds and awards shall be received, held, and disbursed for the cost of the
Work as follows:
(a) As to any loss not in excess of $20,000,000, all insurance
proceeds shall be paid to Lessee (or, if received by Lessor, forwarded promptly
to Lessee) for application to the cost of the Work.
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(b) As to any loss in excess of $20,000,000, all insurance
proceeds shall be paid to Lessee (or, if received by Lessor, forwarded promptly
to Lessee); provided that Lessee must first secure Lessor's approval of the
plans and specifications for the proposed Work (which approval will not be
unreasonably withheld).
(c) The insurance proceeds under insurance policies provided
for in Article 14 on account of any damage or destruction referred to in Section
15.1 shall be applied by Lessee to such Work as above provided and all excess
insurance proceeds under such policies shall be retained by Lessee or promptly
delivered to Lessee.
(d) The funds that are attributable to a taking giving rise to
such Work shall be applied by Lessee to such Work as above provided and all
excess funds shall be promptly delivered to Lessor as Lessor's sole property.
ARTICLE 16
SURRENDER OF LEASE
16.1 Surrender of Leased Property. Upon the expiration or earlier
termination of this Lease, Lessee shall peaceably surrender to Lessor and place
Lessor in peaceful possession of the Leased Property (and shall assign and
transfer to Lessor any extended, renewed or replacement lease included in the
Leased Property pursuant to Section 2.6(f)), including all Alterations,
improvements and changes (except as provided in Section 16.2), free and clear
of any and all Liens (except Permitted Encumbrances under clauses (b), (c) or
(d) of the definition of Permitted Encumbrances) created by or growing out of
Lessee's construction, improvement, modification, repair, maintenance,
operation, possession or use thereof, in the same condition that the Leased
Property was in at the Effective Time, subject only to (i) ordinary and
customary wear and tear and (ii) damage resulting from fire or other casualty;
provided that all insurance proceeds with respect to such casualty have been
deposited with Lessor or are applied to the Work with respect thereto in
accordance with Section 15.3. Lessee, at Lessee's sole cost and expense, shall
be obligated to cause the Leased Property so surrendered to Lessor pursuant to
this Section to constitute and contain all assets necessary for Lessor to
conduct, as a separate economic operating unit, substantially the same business
and refinery configuration on the Leased Property that was conducted on the
Leased Property on the Closing Date. If this Lease expires or is terminated for
any reason, other than the exercise of the Option, Lessee shall immediately (a)
transfer and assign to Lessor all assignable Environmental Permits for the
Leased Property in effect at that time, (b) transfer and deliver to Lessor all
files, books and records of Lessee related to the operation, construction,
maintenance, or repair of the Leased Property (including plans, operational
manuals and operational files, but excluding any marketing, financial and tax
(except property tax) records and any litigation and other legal department
records subject to work product, attorney-client or other privilege), (c) at
Lessor's option, reassign, convey, transfer, and deliver to Lessor any Assigned
Contracts (as amended and to the extent then in existence) and any third party
warranties, guarantees, indemnities, and claims related to the Leased Property,
and (d) at Lessor's option, enter into a transition services agreement with
Lessor under which Lessee would provide to Lessor the same transition services
(or those services as Lessor may elect) as Lessor (or its Affiliate) provided to
Lessee under the transitions services agreement included in the Related
Agreements, all on terms and conditions (including remuneration) which are
substantially the same as those contained in such Related Agreements, mutatis
mutandis. Lessee shall cooperate with Lessor in obtaining the assignment of all
legally assignable Environmental Permits.
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16.2 Removal of Alterations and Lessee's Property. If any furnishings,
equipment, furniture, trade fixtures or other removable equipment not included
in the Leased Property initially leased hereunder are not removed on or before
the expiration or earlier termination of this Lease, then Lessee hereby grants
to Lessor the option, exercisable at any time thereafter without the requirement
of any notice to Lessee, (a) to treat such property, or any portion thereof, as
being abandoned by Lessee to Lessor, whereupon Lessor shall be deemed to have
full rights of ownership thereof; (b) to elect to remove and store such
property, or any portion thereof, on Lessee's behalf (but without assuming any
liability to any Person) and at Lessee's sole cost and expense, with
reimbursement therefor to be made to Lessor upon demand; and/or (c) to sell,
give away, donate or dispose of as trash or refuse any or all of such property
without any responsibility to deliver to Lessee any proceeds therefrom. Lessor
shall have no liability of any kind whatsoever to Lessee in respect of the
exercise or failure to exercise the options set forth in this Section.
Specifically, Lessee shall not have the right to assert against Lessor a claim
either for the value, or the use, of any such property, either as an offset
against any amount of money owing to Lessor or otherwise. The provisions of this
Section shall supersede the provisions of Section 93.002(d) and (e) of the Texas
Property Code, as such may be amended from time to time, and any other law which
purports to restrict the options granted to Lessor herein.
16.3 Holding Over. If Lessee or any Person claiming by, through or
under Lessee remains in possession of the Leased Property after the expiration
or earlier termination of the tenancy created hereunder and without execution of
a new lease or other written agreement, Lessee shall be deemed to be occupying
the Leased Property as a tenant at sufferance and subject to all of the
provisions of this Lease except those relating to term and except that the Lease
Payments shall be one hundred fifty percent (150%) of the amount payable during
the last quarter of the Term (without waiver of Lessor's right to recover
damages as permitted by this Lease or by Law). Said tenancy may be terminated by
Lessor or Lessee by giving written notice to the other at any time. Lessor's
acceptance during any such holdover period of any Rent and/or any other payments
from Lessee of less than the full amounts to which Lessor is entitled under this
Section shall not be deemed to constitute a waiver of Lessor's right to later
collect from Lessee the difference between the amounts actually paid by Lessee
and the full amounts due hereunder. Additionally, Lessee shall pay to Lessor all
damages sustained by Lessor on account of such holding over by Lessee. No
holding over by Lessee, whether with or without consent of Lessor, and without
the execution of a new lease or other written agreement shall operate to extend
the Term or this Lease.
ARTICLE 17
INDEMNIFICATION
17.1 Indemnification by Lessor. From and after the Closing, Lessor
shall indemnify, hold harmless and defend Lessee, Lessee's respective
Affiliates, each of their respective directors, officers, employees, consultants
and agents, and each of the directors, officers, heirs, executors, successors
and assigns of any of the foregoing (collectively, the "Lessee Indemnitees")
from and against (a) the Retained Environmental Claims and the Pre-Closing
Liabilities and (b) all Covered Liabilities resulting from any breach or
nonfulfillment of any representation, warranty, covenant or agreement on the
part of Lessor which is expressly set forth in this Lease. Lessor's
indemnification obligation under clause (a) of this Section shall expressly
include indemnification of the Lessee Indemnitees against ANY LIABILITY BASED IN
WHOLE OR IN PART ON NEGLIGENCE, NEGLIGENCE PER SE, GROSS NEGLIGENCE OR STRICT
LIABILITY OF THE
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LESSEE INDEMNITEE OR ON ANY OTHER THEORY OF LIABILITY, WHETHER IN LAW (WHETHER
COMMON, CIVIL OR STATUTORY) OR EQUITY. THE OBLIGATIONS OF LESSOR IN THIS Article
17 shall survive, without limitation, the expiration or other termination of the
Term of this Lease, and shall continue in full force and effect following the
expiration or other termination of the Term or this Lease.
17.2 Indemnification by Lessee. From and after the Closing, Lessee
shall assume, pay, perform, fulfill, and discharge all Assumed Environmental
Claims and the Post-Closing Liabilities and shall indemnify, hold harmless and
defend Lessor, Lessor's respective Affiliates, each of their respective
directors, officers, employees, consultants and agents, and each of the
directors, officers, heirs, executors, successors and assigns of any of the
foregoing (collectively, the "Lessor Indemnitees") from and against (a) Assumed
Environmental Claims and the Post-Closing Liabilities and (b) all Covered
Liabilities resulting from any breach or nonfulfillment of any representation,
warranty, covenant or agreement on the part of Lessee which is expressly set
forth in this Lease. Lessee's indemnification obligation under clause (a) of
this Section shall expressly include indemnification of the Lessor Indemnitees
against ANY LIABILITY BASED IN WHOLE OR IN PART ON NEGLIGENCE, NEGLIGENCE PER
SE, GROSS NEGLIGENCE OR STRICT LIABILITY OF THE LESSOR INDEMNITEE OR ON ANY
OTHER THEORY OF LIABILITY, WHETHER IN LAW (WHETHER COMMON, CIVIL OR STATUTORY)
OR EQUITY. The obligations of Lessee in this Article 17 shall survive, without
limitation, the expiration or other termination of the Term of this Lease, and
shall continue in full force and effect following the expiration or other
termination of the Term or this Lease.
17.3 Indemnification and Defense Procedures. A Person which is entitled
to be indemnified under Section 17.1 or 17.2 is herein referred to as an
"Indemnitee" and the party which is obligated to indemnify an Indemnitee under
Section 17.1 or 17.2 is herein referred to as the "Indemnitor" with respect to
the matter for which it is obligated to indemnify such Indemnitee. All claims
for indemnification under Sections 17.1 and 17.2 shall be asserted and resolved
as follows:
(a) If a Third Party Claim for which an Indemnitee is entitled
to indemnity under Sections 17.1 and/or 17.2 (an "Indemnified Claim") is made
against an Indemnitee, and if Lessor or Lessee intends to seek indemnity with
respect thereto by or from an Indemnitor pursuant to Sections 17.1 and/or 17.2,
then the party electing to seek indemnity on behalf of such Indemnitee shall
promptly transmit to the Indemnitor a written notice ("Claim Notice") (i)
notifying such Indemnitor of such Indemnified Claim and request indemnity on
behalf of such Indemnitee with respect to such Indemnified Claim under Sections
17.1 and/or 17.2, as the case may be, (ii) setting forth the full name, address
for all notices and the authorized representatives of such Indemnitee with
respect to such Indemnified Claim, and (iii) describing in reasonable detail the
nature of the Indemnified Claim, including a copy of all papers served with
respect to such Indemnified Claim (if any) and the basis of such request for
indemnification under Sections 17.1 and/or 17.2, as the case may be. Failure to
provide such Claim Notice promptly shall not affect the right of the Indemnitee
to indemnification hereunder except to the extent the Indemnitor is prejudiced
thereby; provided that, the Indemnitor shall not be obligated to defend,
indemnify or otherwise hold harmless an Indemnitee with respect to a Third Party
Claim until a Claim Notice meeting the foregoing requirements is furnished to
the Indemnitor by the party seeking indemnity hereunder. Within 10 days after
receipt of any Claim Notice (the "Election Period"), the Indemnitor shall notify
the party who sent the Claim Notice (A) whether the Indemnitor disputes its
potential liability to indemnify the Indemnitee under Sections 17.1 and/or 17.2,
as the case may be, with respect to such Third Party Claim and (B)
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whether the Indemnitor desires to defend the Indemnitee against such Third Party
Claim; provided that, if the Indemnitor fails to so notify the Indemnitee during
the Election Period, the Indemnitor shall be deemed to have elected to dispute
such liability and not to defend against such Third Party Claim. The aforesaid
election or deemed election by the Indemnitor not to assume the defense of the
Indemnitee with respect to such Indemnified Claim, however, shall be subject to
the right of the Indemnitor to subsequently assume the defense of the Indemnitee
with respect to such Indemnified Claim at any time prior to settlement or final
determination thereof.
(b) If the Indemnitor notifies the party who sent the Claim
Notice within the Election Period that the Indemnitor (i) does not dispute its
liability to indemnify the Indemnitee under Sections 17.1 and/or 17.2, as the
case may be (or reserves the right to dispute whether such claim is an
Indemnified Claim under Sections 17.1 and/or 17.2) and (ii) elects to assume the
defense of such Indemnitee with respect to such Third Party Claim, then the
Indemnitor shall have the right to defend, at its sole cost and expense, such
Third Party Claim by all appropriate proceedings, which proceedings shall be
prosecuted diligently by the Indemnitor to a final conclusion or settled at the
discretion of the Indemnitor in accordance with this Section 17.3(b). If an
Indemnitor elects pursuant to the foregoing to assume the defense of an
Indemnitee with respect to a Third Party Claim which is subsequently determined
not to be an Indemnified Claim, then, without limiting any action the Indemnitor
may have on account of actual fraud, the Indemnitor shall not be entitled to
recover from the other party or the Indemnitee the costs and expenses incurred
by the Indemnitor in providing such defense. The Indemnitor shall have full
control of such defense and proceedings, including any compromise or settlement
thereof provided, however, the Indemnitor shall not enter into any settlement
agreement (or settle or compromise any such Third Party Claim in a manner) which
provides for or results in any payment by or liability of the Indemnitee of or
for any damages or other amount, any Lien on any property of the Indemnitee, any
finding of responsibility or liability on the part of the Indemnitee or any
sanction or restriction upon the conduct of any business by the Indemnitee or
any obligation or action on the part of the Indemnitee without the Indemnitee's
express written consent, which consent shall not be unreasonably withheld. The
Indemnitee is hereby authorized, at the sole cost and expense of the Indemnitor
(but only if the Indemnitee is actually entitled to indemnification hereunder),
to file, during the Election Period, any motion, answer or other pleadings which
the Indemnitee shall deem necessary or appropriate to protect its interests or
those of the Indemnitor and not reasonably expected to be prejudicial to the
Indemnitor. If requested by the Indemnitor, the Indemnitee agrees, at the sole
cost and expense of the Indemnitor, to cooperate with the Indemnitor and its
counsel in contesting any such Third Party Claim which the Indemnitor elects to
contest, including the making of any related counterclaim or cross-complaint
against any Person (other than a Lessor Indemnitee, if the Indemnitee is a
Lessor Indemnitee, or a Lessee Indemnitee, if the Indemnitee is a Lessee
Indemnitee). The Indemnitee may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnitor pursuant to
this Section 17.3(b), and the Indemnitee shall bear its own costs and expenses
with respect to such participation. The prosecution of the defense of a Third
Party Claim with reasonable diligence shall include the taking of such action
(including the posting of a bond, deposit or other security) as may be necessary
to prevent any action to foreclose a Lien against or attachment of the property
of the Indemnitee for payment of such Third Party Claim.
(c) If the Indemnitor (i) fails to notify the party who sent
the Claim Notice within the Election Period that the Indemnitor elects to defend
the Indemnitee pursuant to Section 17.3(b) or (ii) elects to defend the
Indemnitee pursuant to Section 17.3(b) but fails to prosecute the defense of the
Third Party Claim with reasonable diligence, then the Indemnitee shall have the
right to
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defend, at the sole cost and expense of the Indemnitor (but only if the
Indemnitee is actually entitled to indemnification hereunder), the Third Party
Claim by all appropriate proceedings, which proceedings shall be promptly and
vigorously prosecuted by the Indemnitee to a final conclusion or settled. Unless
and until such defense is assumed by the Indemnitor as permitted in Section
17.3(a), the Indemnitee shall have full control of such defense and proceedings;
provided, however, that the Indemnitor, without assuming the defense of such
Indemnified Claim, may participate in, but not control, any defense or
settlement controlled by the Indemnitee pursuant to this Section 17.3(c), and
the Indemnitor shall bear its own costs and expenses with respect to such
participation. The Indemnitee may not enter into any compromise or settlement of
such Third Party Claim, without the Indemnitor' s express written consent, which
shall not be unreasonably withheld.
(d) If an Indemnitee is entitled to indemnity under Sections
17.1 and/or 17.2 for a claim or other matter which does not involve a Third
Party Claim, and if Lessor or Lessee intends to seek indemnity on behalf of an
Indemnitee with respect thereto by or from an Indemnitor pursuant to Sections
17.1 and/or 17.2, then the party electing to seek indemnity on behalf of an
Indemnitee shall promptly transmit to the Indemnitor a written notice describing
in reasonable detail the nature of such claim or other matter, the Indemnitee's
best estimate of the amount of damages attributable to such claim or other
matter and the basis for the Indemnitee's entitlement to indemnification under
Sections 17.1 and/or 17.2, as the case may be. If the Indemnitor does not notify
the party who sent such notice within 30 days from its receipt of such notice
that the Indemnitor does not dispute such claim for indemnity, the Indemnitor
shall be deemed to have disputed such claim.
(e) To the extent any claim, action, suit or proceeding
includes one or more Indemnified Claims with respect to an Indemnitee and one or
more Third Party Claims which are not Indemnified Claims with respect to such
Indemnitee, any such non-Indemnified Claim insofar as it is with respect to such
Indemnitee shall not be covered by the indemnity in Sections 17.1 and 17.2, the
Indemnitor shall not be obligated to undertake, conduct and control the defense
or settlement of such non-Indemnified Claim insofar as it is with respect to
such Indemnitee, and such Indemnitee shall be responsible for its own defense
and settlement of such non-Indemnified Claim. The seeking by a party of
indemnity hereunder on behalf of any Indemnitee with respect to any Third Party
Claim or other claim or matter shall not prevent such party from then or
thereafter also seeking indemnity hereunder on behalf of any other Indemnitee
with respect to such Third Party Claim or other claim or matter and shall not
prevent the other party from seeking indemnity hereunder on behalf of any
Indemnitee with respect to the same Third Party Claim or other claim or matter.
17.4 Liability Limitations.
(a) Notwithstanding anything herein provided to the contrary,
but subject to the last sentence of this subsection, Lessor shall have no
liability to Lessee or any other Lessee Indemnitee pursuant to Section 17.1 or
for any breach by Lessor of this Lease, unless and until the aggregate amount of
all Covered Liabilities covered by Section 17.1 or attributable to all breaches
by Lessor of this Lease exceeds $250,000. After the aforesaid $250,000 limit is
reached, Lessor shall be liable in accordance with the other terms of this Lease
for those Covered Liabilities in excess of $250,000, subject to the further
provisions of this Section 17.4; provided, however, for purposes of determining
the scope of indemnification under this Section 17.4(a) any qualification as to
materiality or Material Adverse Effect shall be disregarded (it being understood
that such qualifications as to materiality or Material Adverse Effect shall
apply for purposes of determining whether there is a breach in the first place).
The foregoing limitations shall not apply to (i) the
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failure by Lessor to pay any Imposition or (ii) any amounts payable under or
pursuant to Article 9, Article 15, clause (a) of Section 17.2, Section 17.6, or
Section 21.4.
(b) Notwithstanding anything herein provided to the contrary,
but subject to the last sentence of this subsection, Lessee shall have no
liability to Lessor or any other Lessor Indemnitee pursuant to Section 17.2 or
for any breach by Lessee of this Lease, unless and until the aggregate amount of
all Covered Liabilities covered by Section 17.2 or attributable to all breaches
by Lessee of this Lease exceeds $250,000. After the aforesaid $250,000 limit is
reached, Lessee shall be liable in accordance with the other terms of this Lease
for those Covered Liabilities in excess of $250,000; provided, however, for
purposes of determining the scope of indemnification under this Section 17.4(b)
any qualification as to materiality or Material Adverse Effect shall be
disregarded (it being understood that such qualifications as to materiality or
Material Adverse Effect shall apply for purposes of determining whether there is
a breach in the first place). The foregoing limitations shall not apply to (i)
the failure by Lessee to pay any Rent, the Option Closing Payment or any
Imposition or (ii) any amounts payable under or pursuant to Article 9, Article
15, clause (a) of Section 17.2, Section 17.6, or Section 21.4.
(c) Lessor, Lessee, and each other Indemnitee shall cooperate
with the Indemnitor with respect to resolving any Indemnified Claim with respect
to which either Lessor or Lessee is obligated to indemnify an Indemnitee under
this Article 17, including making commercially reasonable efforts to mitigate or
resolve any such Indemnified Claim and providing the others with reasonable
access to such Indemnitee's records (other than those subject to attorney-client
or attorney work product privilege) and personnel having relevant information
with respect to the Indemnified Claim. Without limiting the foregoing, to the
extent it may legally do so each party agrees to assign or cause the assignment
to the Indemnitor with respect to an Indemnified Claim any and all of the rights
and remedies that the Indemnitee may have with respect to such Indemnified Claim
against any Person (other than Lessor, Lessee, or any Affiliate of Lessor or
Lessee or any insurance carrier or bonding or surety company of the Indemnitee)
pursuant to any claims, rights and agreements of or for indemnification,
guarantee, contribution, reimbursement or similar assurances which are the
subject of such Indemnified Claim.
(d) Each party agrees to maintain all records and information
made available to it pursuant to Section 17.4(c) confidential and to cause its
directors, officers, employees, agents, representatives, consultants and
advisors to maintain all records and information made available to them pursuant
to this Section confidential, except (i) as required by Law, administrative
process or any standards or rules of any stock exchange to which such party or
any of its Affiliates is subject, (ii) for information which is available to the
public on the date hereof, or thereafter becomes available to the public other
than as a result of a breach of this Section 17.4(d), and (iii) to the extent
that such party must disclose the same in any court or arbitration proceedings
brought by it to enforce its rights hereunder.
17.5 Exclusive Remedy. After Closing, the indemnity provisions of this
Article 17 (including the obligations under the Affiliate Guarantees with
respect to this Article 17) shall be the sole and exclusive remedy of each
party for or on account of any breach by the other party of any of such other
party's representations and warranties under this Lease except for actual fraud.
THE PARTIES ACKNOWLEDGE AND AGREE THAT THE REMEDIES SET FORTH IN THIS LEASE,
INCLUDING THE DEDUCTIBLES, LIABILITY LIMITS, SURVIVAL PERIODS, DISCLAIMERS AND
LIMITATIONS ON REMEDIES, ARE INTENDED TO BE, AND
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SHALL BE, THE EXCLUSIVE REMEDIES WITH RESPECT TO ANY ASPECT OF THE TRANSACTIONS
CONTEMPLATED BY THIS LEASE EXCEPT FOR THE ACTUAL FRAUD (OTHER THAN ANY FRAUD
UNDER SECTION 27.01 OF THE TEXAS BUSINESS AND COMMERCE CODE). EACH PARTY HEREBY
RELEASES, WAIVES AND DISCHARGES, AND COVENANTS NOT TO ▇▇▇ WITH RESPECT TO, ANY
CAUSE OF ACTION OR CLAIM NOT EXPRESSLY PROVIDED FOR IN THIS LEASE INCLUDING,
WITHOUT LIMITATION, CLAIMS UNDER STATE OR FEDERAL SECURITIES LAWS, AVAILABLE AT
COMMON LAW OR BY STATUTE (EXCEPT FOR ACTUAL FRAUD CLAIMS, OTHER THAN ANY FRAUD
CLAIM UNDER SECTION 27.01 OF THE TEXAS BUSINESS AND COMMERCE CODE).
17.6 Environmental Assistance and Cooperation. Lessee, for itself and
its successors and assigns, covenants and agrees to:
(a) allow Lessor and its designated representatives and
consultants unrestricted access to the Leased Property during normal business
hours subject to Lessee's normal plant rules and access and safety procedures
and as long as no material interference with operation of the Facility is
caused, to fulfill any obligation it may have with respect to Hazardous
Materials on or under the Elementis Property; provided that Lessor may not
install or operate any monitoring or extraction ▇▇▇▇▇ or other Environmental
Activities on the Leased Property required to control any Hazardous Materials
that may be migrating from the Leased Property to the Elementis Property without
Lessee's prior written consent, which shall not be unreasonably withheld or
delayed and which must be provided if necessary to allow compliance by Lessor
with requirements of the Environmental Protection Agency or other applicable
Governmental Body; provided that Lessee shall have the opportunity, after three
days' notice to Lessor and offering Lessor the opportunity to participate, to
discuss the appropriate location and number of monitoring or extraction ▇▇▇▇▇ or
other environmental activity on the Leased Property with the Environmental
Protection Agency or other applicable Governmental Body and seek revisions in
any such requirements as to which Lessee would otherwise reasonably withhold
consent, however, Lessee shall not propose or advocate more monitoring or
extraction ▇▇▇▇▇ or other environmental activities on the Leased Property than
agreed to by Lessor.
(b) use commercial reasonable efforts to receive any recovered
groundwater, to the extent permitted by Law, from existing or new ▇▇▇▇▇ or other
remedial systems placed on or near the Leased Property boundary or on or under
the Elementis Property as part of any Environmental Activities that Lessor may
have to undertake with respect to such groundwater; provided, however, Lessor
shall construct and pay for any additional ▇▇▇▇▇ or remediation systems, pay the
cost of obtaining or modifying any required permits necessary to operate such
▇▇▇▇▇ or remedial systems and reimburse Lessee for all reasonable out-of-pocket
expenses associated with the management of such groundwater, including
modifications to the Facility's wastewater treatment plant and permits to treat
Cr6, Cr3 and total Chromium to comply with future total maximum daily loads.
Lessee agrees to purchase on a commercial basis all commercially useable
petroleum products recovered in connection with the recovery and remedial
systems relating to the Elementis Property.
The foregoing covenants and agreements of Lessee shall be binding upon Lessee
and, without releasing Lessee from its obligations therefor, shall be binding
upon Lessee's successors and assigns as owners or holders of any interest in the
Leased Property, and shall inure to the benefit of and be enforceable by Lessor
and its successors and assigns.
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17.7 OSHA Fines. Notwithstanding Section 17.2(a), if, within one year
after the Effective Time, any fine or penalty is imposed on or levied against
Lessee pursuant to any OSHA rules or regulations existing on the Effective Time
as a result of any non-compliance of the Leased Property or operations conducted
thereon, both before and after the Effective Time, the payment of such fine or
penalty shall be shared by Lessee and Lessor as follows:
(a) if such fine or penalty is specifically determined and
calculated on the basis of the time the violation existed, then such fine or
penalty shall be apportioned between Lessor and Lessee on the basis of the
number of days such violation existed before the Effective Time and the number
of days such violation existed after the Effective Time, with Lessor being
liable for the portion thereof attributable to the period before the Effective
Time and Lessee being liable for the portion thereof attributable to the period
after the Effective Time;
(b) if such fine or penalty is not specifically determined and
calculated on the basis of the time the violation existed, then Lessee shall be
responsible for one-half of such fine or penalty and Lessor shall be responsible
for one-half of such fine or penalty; and
(c) if such fine or penalty is imposed after the Effective
time but solely based on an inspection by OSHA before the Effective Time and is
not specifically determined and calculated based in part on a period after the
Effective Time, Lessor shall be responsible for all of such fine or penalty.
Any fine or penalty for which Lessor would any have responsibility pursuant to
this Section 17.7 shall be an Indemnified Claim to the extent of Lessor's
responsibility therefor pursuant to this Section 17.7, and Lessee shall be
required to comply with the provisions of Section 17.3 in regard to such
Indemnified Claim, including the sending of a Claim Notice to Lessor with
respect thereto.
ARTICLE 18
ASSIGNMENT AND SUBLEASE
18.1 Assignment by Lessee. Lessee shall not be entitled to sublease the
Leased Property or assign this Lease or its rights, duties or obligations
hereunder without the prior written consent of Lessor. Lessee shall have the
right to assign this Lease or sublease the Leased Property or any part thereof
to any Affiliate of Lessee without Lessor's prior consent in a transaction which
is not entered into or made in contemplation of directly or indirectly
transferring ownership or control of such Affiliate. All assignments or
subleases (i) shall be, and by their terms shall expressly provide that they
are, subject to the rights of Lessor under or in connection with this Lease and
the Related Agreements, (ii) shall require that the assignee or sublessee agree
to be bound by and perform all obligations of Lessee hereunder with respect to
the interest so assigned or subleased, and (iii) shall be covered by the
Affiliate Guaranty delivered pursuant to Section 2.11(c) which shall continue to
cover and guarantee all obligations of such assignee or sublessee. Any purported
assignment of this Lease without Lessor's prior written consent where required
by the provisions of this Section shall be void. Lessee shall remain primarily
liable in the event of permitted assignments hereunder.
18.2 Assignment by Lessor. Lessor shall not be entitled to assign this
Lease and/or any of its rights, duties or obligations hereunder without the
prior written consent of Lessee. All assignments (i) shall be, and by their
terms shall expressly provide that they are, subject to the rights of Lessee
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under or in connection with this Lease and the Related Agreements, (ii) shall
require that the assignee agree to be bound by and perform all obligations of
Lessor hereunder with respect to the interest so assigned, and (iii) shall be
covered by the Affiliate Guaranty delivered pursuant to Section 2.11(b) which
shall continue to cover and guarantee all obligations of such assignee. Lessor
shall remain primarily liable in the event of assignments hereunder.
18.3 Successors and Assigns. Subject to the requirements of this
Article, this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
18.4 Surviving Rights and Obligations. Lessor's rights, duties and
obligations hereunder that survive the earlier of the closing of the Option or
termination of this Lease may not be assigned without the prior written consent
of Lessee, except to an Affiliate of Lessor as provided in this Section, and
Lessee's rights, duties and obligations hereunder that survive the earlier of
the closing of the Option or termination of this Lease may not be assigned
without the prior written consent of Lessor, except to an Affiliate of Lessee as
provided in this Section. Lessor may assign all or any part of such surviving
rights, duties and obligations of Lessor to an Affiliate of Lessor, and Lessee
may assign all or any part of such surviving rights, duties and obligations of
Lessee to an Affiliate of Lessee; in each case only in a transaction which is
not entered into or made in contemplation of directly or indirectly transferring
ownership or control of such Affiliate. All assignments under this Section (i)
shall be, and by their terms shall expressly provide that they are, subject to
the rights of the non-assigning party and its successors and assigns, under or
in connection with this Lease and the Related Agreements, (ii) shall require
that the assignee agree to be bound by and perform all obligations of assigning
party hereunder with respect to the rights, duties and obligations so assigned,
and (iii) shall be covered by the applicable Affiliate Guaranty delivered
pursuant to Section 2.11 which shall continue to cover and guarantee all
obligations of such assignee. Any purported assignment of such surviving rights,
duties and obligations without prior written consent where required by the
provisions of this Section shall be void. Lessor shall remain primarily liable
in the event of permitted assignments of the Lessor's surviving rights, duties
and obligations hereunder and Lessee shall remain primarily liable in the event
of permitted assignments of the Lessee's surviving rights, duties and
obligations hereunder.
ARTICLE 19
DEFAULT AFTER CLOSING
19.1 Events of Default. For purposes hereof, the term "Event of
Default" shall mean any of the following with respect to a party (such party
being referred to as the "Affected Party"):
(a) The failure by Lessee to make, when due, any Lease Payment
required under this Lease if such failure is not remedied within ten (10)
Business Days after written notice of such failure is given to the Affected
Party;
(b) The failure by the Affected Party or its Affiliate to pay
any payment obligation under this Lease (other than its obligation to make any
Lease Payment) or any Related Agreement (other than the Other Lease) or to
perform in any material respect (unless such failure is caused by the wrongful
or negligent act or omission of, or the breach of lease or contract by, the
other party or its Affiliate) any covenant or agreement set forth in this Lease
or any Related
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Agreement (other than the Other Lease), and such failure remains unexcused and
uncured 30 days after the other party has given written notice thereof to the
Affected Party (or to its Affiliate under the Related Agreement, as the case may
be) or if subject to a good faith dispute such failure remains unexcused and
uncured 30 days after the resolution of such dispute, or, if such failure cannot
reasonably be cured or remedied within said 30-day period, the Affected Party
(or to its Affiliate under the Related Agreement, as the case may be) shall fail
to commence action in good faith to cure or remedy such failure within said
30-day period or shall fail thereafter to complete curing or remedying such
failure as promptly as it is reasonably possible;
(c) The occurrence of a Bankruptcy Event with respect to the
Affected Party. "Bankruptcy Event" with respect to the Affected Party means the
occurrence of any of the following events with respect to such Affected Party:
(i) the filing of a petition by it seeking relief as debtor under any bankruptcy
or similar law; (ii) the filing of a petition against it as debtor by a creditor
under any bankruptcy or similar law, and such petition is consented to by such
debtor or, if contested, is not withdrawn or dismissed within sixty (60) days
after such filing; (iii) it is insolvent or unable to pay its debts as they
become due or admits such in writing; (iv) a trustee, conservator or receiver is
appointed for it or all or a material part of its property; or (v) the Affected
Party shall take any corporate action to authorize any of the actions set forth
in this Section 19.1(c); or
(d) The occurrence of an "Event of Default" by the Other
Lessee under the Other Lease shall constitute an Event of Default by the Lessee
under this Lease, and the occurrence of an "Event of Default" by the Other
Lessor under the Other Lease shall constitute an Event of Default by the Lessor
under this Lease.
19.2 Early Termination.
(a) If an Event of Default occurs as a result of the failure
by Lessee to pay any Lease Payment (or by the Other Lessee to pay any "Lease
Payment" under the Other Lease) at any time during the Term, then regardless of
and notwithstanding the fact that Lessor (or Other Lessor) has or may have some
other remedy under this Lease (or the Other Lease) by virtue thereof, or in law
or in equity, Lessor may give to Lessee a notice (herein called the "second
notice") of intention to end the Term of this Lease specifying a day not less
than thirty (30) days thereafter and, upon the giving of the second notice, this
Lease and the Term and estate hereby granted shall expire and terminate upon the
day so specified in the second notice if such Event of Default be still then
continuing, as fully and completely and with the same force and effect as if the
day so specified were the date hereinbefore fixed for the expiration of the Term
of this Lease, and all rights of Lessee under this Lease shall expire and
terminate, but Lessee shall remain liable for damages as hereinafter provided;
provided, however, that notwithstanding the time limitation for exercising the
Option pursuant to Article 6, Lessee may exercise the Option pursuant to Article
6 so long as the scheduled closing under Article 6 shall occur prior to the end
of the Term of the Lease specified in Lessor's second notice and Lessee shall
comply with the other requirements of Article 6, including the contemporaneous
exercise and closing of the Other Lease Option. If the Other Lessor gives the
Other Lessee a "second notice" under Section 19.2(a) of the Other Lease, then
notwithstanding the time limitation for exercising the Option pursuant to
Article 6, Lessee may exercise the Option pursuant to Article 6 so long as the
scheduled closing under Article 6 shall occur prior to the end of the "Term" of
the Other Lease specified in Other Lessor's second notice and Lessee shall
comply with the other requirements of Article 6, including the contemporaneous
exercise and closing of the Other Lease Option. If the Option is exercised as
provided in this Section 19.2(a) prior to the 30
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days preceding the commencement of the third Lease Year, the Purchase Price
under Section 6.2 shall be the sum of (i) the amount the Purchase Price would
have been if the Option had been exercised during the 30 days preceding the
commencement of the third Lease Year, plus (ii) the positive amount, if any,
obtained by subtracting (A) the aggregate amount of all Lease Payments paid by
Lessee through the date the Option is exercised as provided in this Section
19.2(a) from (B) $28,000,000.
(b) Upon the occurrence of any Event of Default listed in
Section 1 9.1(c) with respect to Lessee, this Lease and the Term and estate
hereby granted shall automatically expire and terminate, without notice, as
fully and completely and with the same force and effect as if the day of the
occurrence of such Event of Default were the date hereinbefore fixed for the
expiration of the Term of this Lease, and all rights of Lessee under this Lease
shall expire and terminate, but Lessee shall remain liable for damages as
hereinafter provided.
(c) In the event that Lessor elects to terminate this Lease
pursuant to Section 19.2(a) and the Option is not exercised and closed as
provided in Section 19.2(a) or this Lease automatically terminates pursuant to
Section 19.2(b), then Lessor may recover from Lessee:
(1) any unpaid Rent which had been earned at the time
of such termination, together with interest thereon at the Default Rate
from the date such Rent was due until paid; plus
(2) the (i) amount by which the unpaid Rent which
would have been earned after termination until the time of award
exceeds the amount of such rental loss that Lessee proves could have
been reasonably avoided plus (ii) interest on the net amount in clause
(i) at the Default Rate from the date such net amount would have been
due until paid; plus
(3) the worth at the time of award of the amount by
which (i) the unpaid Lease Payments and other amounts payable hereunder
by Lessee for the balance of the Term after the time of award exceeds
(ii) the amount of such rental loss that Lessee proves could be
reasonably avoided; plus
(4) any other amount necessary to compensate Lessor
for all the detriment proximately caused by Lessee's failure to perform
Lessee's obligations under this Lease or which in the ordinary course
of things would be likely to result therefrom.
(d) As used in Section 19.2(c)(3) above, the "worth at the
time of award" is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of Dallas at the time of award plus one percent (1%).
(e) Except as expressly provided in this Section 19.2, no
Event of Default with respect to Lessee or Lessor under this Lease shall give
rise to any right to terminate or rescind this Lease and, except as expressly
provided in this Section 19.2, all such rights of early termination or
rescission are hereby expressly waived and released.
19.3 Additional Remedies. Upon the occurrence of any Event of Default
with respect to Lessee, Lessor shall have the right and option, by written
notice to Valero Energy Corporation in
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accordance with its Guaranty Agreement, to put the Leased Property to Valero
Energy Corporation for the Option Closing Payment and on the other terms set
forth in Article 6 as if Valero Energy Corporation were Lessee and Lessee had
properly exercised the Option upon the occurrence of the Event of Default. Upon
giving of such notice to Valero Energy Corporation in accordance with its
Guaranty Agreement, Valero Energy Corporation shall be obligated to purchase the
Leased Property in accordance with Article 6 as if Valero Energy Corporation
were the Lessee hereunder.
19.4 Other Remedies. With respect to any Event of Default by the
Affected Party, the other party (the "Other Party") shall be entitled to all
rights and remedies which the Other Party may have under law or equity,
including, without limitation, the right of setoff, but subject to the express
limitations contained in this Lease, including Sections 3.3, 5.1, 17.4, 17.5,
19.2(e), and 20.2. All amounts payable under this Lease which are not paid when
due shall bear interest at the Default Rate from the due date of such payment
until paid. To the extent permitted by, and subject to the requirements of all
Law, and except as otherwise expressly provided herein, all rights and remedies
of the Other Party hereunder with respect to any Event of Default by the
Affected Party shall be cumulative, and the exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy. Neither failure
nor delay by the Other Party in exercising any of its rights, powers or
privileges herein with respect to any Event of Default by the Affected Party
shall operate as a waiver nor shall any single or partial exercise preclude any
other or further exercise of any such right, power or privilege of the Other
Party.
ARTICLE 20
DISCLAIMERS AND LIMITATIONS
20.1 Disclaimers.
(a) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY
OTHER PROVISION OF THIS LEASE, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO
THAT LESSOR IS NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE, BEYOND THOSE REPRESENTATIONS OR WARRANTIES
EXPRESSLY GIVEN IN THIS LEASE AND ANY RELATED AGREEMENT. WITHOUT LIMITING THE
GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE AND WITHOUT LIMITING THE
EXPRESS REPRESENTATIONS AND WARRANTIES OF LESSOR CONTAINED IN THIS LEASE AND ANY
RELATED AGREEMENT, LESSOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE, RELATING OR WITH RESPECT TO:
(1) THE CONDITION, VALUE OR QUALITY OF THE FACILITY, SITE,
INVENTORY, EQUIPMENT OR ANY OTHER ASSETS;
(2) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT
TO THE ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT
OR
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PATENT, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, IT
BEING UNDERSTOOD THAT ALL OF THE ASSETS ARE BEING LEASED OR
ACQUIRED, AS THE CASE MAY BE, "AS IS, WHERE IS" ON THE DATE OF
THIS LEASE, AND IN THEIR PRESENT CONDITION, WITH ALL FAULTS,
AND THAT LESSEE SHALL RELY ON ITS OWN EXAMINATION AND
INVESTIGATION THEREOF;
(3) ANY INFRINGEMENT BY LESSOR OR ANY OF ITS AFFILIATES OF ANY
PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY;
(4) THE ACCURACY OR COMPLETENESS OF THE INFORMATION, RECORDS, DATA
AND INTERPRETATIONS NOW, HERETOFORE OR HEREAFTER MADE
AVAILABLE TO LESSEE IN CONNECTION WITH THIS LEASE BY LESSOR,
ANY AFFILIATE OF LESSOR OR ANY DIRECTOR, OFFICER, EMPLOYEE,
AGENT, REPRESENTATIVE, INVESTMENT BANKER, COUNSEL, CONSULTANT
OR ADVISOR OF LESSOR OR ANY AFFILIATE OF LESSOR; OR
(5) LESSOR'S TITLE TO ANY OF THE ASSETS.
(b) LESSEE ACKNOWLEDGES AND AGREES THAT EXCEPT AS EXPLICITLY
PROVIDED IN SECTIONS 7.3(b), 7.10, AND 7.11 NO REPRESENTATIONS OR WARRANTIES OF
ANY KIND, EXPRESS OR IMPLIED, EITHER ORAL OR WRITTEN, ARE MADE BY LESSOR, ANY
AFFILIATE OF LESSOR OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT, REPRESENTATIVE,
INVESTMENT BANKER, COUNSEL, CONSULTANT OR ADVISOR OF LESSOR OR ANY AFFILIATE OF
LESSOR WITH RESPECT TO: (1) THE EXISTENCE OR ABSENCE OF HAZARDOUS MATERIALS IN,
ON, UNDER OR OTHERWISE AFFECTING THE ASSETS OR THE SOIL, SEDIMENTS, AIR OR
GROUND WATER; (2) COMPLIANCE AT THE ASSETS OR THEIR OPERATION OR USE WITH ANY
ENVIRONMENTAL LAW; OR (3) THE COST OR TIME NECESSARY OR ADVISABLE TO CONDUCT OR
COMPLETE ENVIRONMENTAL ACTIVITIES AT THE ASSETS.
20.2 Limitation of Damages. NOTWITHSTANDING ANYTHING CONTAINED TO THE
CONTRARY IN ANY OTHER PROVISION OF THIS LEASE, THE PARTIES AGREE THAT THE
INDEMNIFICATION OBLIGATIONS OF EACH PARTY, AND THE RECOVERY BY ANY PARTY OR
INDEMNITEE OF ANY COVERED LIABILITIES SUFFERED OR INCURRED BY IT AS A RESULT
OF ANY BREACH OR NONFULFILLMENT BY A PARTY OF ANY OF ITS REPRESENTATIONS,
WARRANTIES, COVENANTS, AGREEMENTS OR OTHER OBLIGATIONS UNDER THIS LEASE, SHALL
BE LIMITED TO ACTUAL DAMAGES AND SHALL NOT INCLUDE OR APPLY TO, NOR SHALL ANY
PARTY OR INDEMNITEE BE ENTITLED TO RECOVER, ANY INDIRECT, CONSEQUENTIAL,
SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY
DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES OR BUSINESS INTERRUPTION)
SUFFERED OR INCURRED BY ANY PARTY OR INDEMNITEE. FOR purposes of the foregoing,
actual damages may, however, include indirect, consequential, special, exemplary
or punitive damages to the extent (i) the injuries or losses resulting in or
giving rise to such damages are incurred or
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suffered by a third party who is not an Affiliate of Lessor or Lessee and (ii)
such damages are recovered against an Indemnitee by a Person which is a third
party who is not an Affiliate of Lessor or Lessee. This Section 20.2 shall
operate only to limit a party's liability and shall not operate to increase or
expand any contractual obligation of a party hereunder.
20.3 Environmental Release. From and after the Closing and except for
Lessor's indemnity obligations under clause (a) of Section 17.1, the Lessee
Indemnitees shall have no rights to recovery or indemnification for
Environmental Claims or any environmental matters under this Lease or Law
(including any Environmental Law) relating to the Assets, and all rights or
remedies which any Lessee Indemnitee may have at or under Law (including any
Environmental Law) with respect to any Environmental Claims or environmental
matters relating to the Assets are expressly waived. FROM AND AFTER CLOSING, BUT
WITHOUT LIMITING OR RELEASING LESSOR'S INDEMNITY OBLIGATIONS UNDER CLAUSE (a) OF
SECTION 17.1 OR LESSOR'S INDEMNITY OBLIGATIONS UNDER CLAUSE (b) OF SECTION 17.1
WITH RESPECT TO SECTIONS 7.3(b), 7.10 OR 7.11, LESSEE FOR ITSELF AND ALL OTHER
LESSEE INDEMNITEES DOES HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE LESSOR AND
ALL LESSOR INDEMNITEES FROM ANY AND ALL CLAIMS, DEMANDS AND CAUSES OF ACTION OF
WHATSOEVER NATURE, INCLUDING WITHOUT LIMITATION ALL CLAIMS, DEMANDS AND CAUSES
OF ACTION FOR CONTRIBUTION AND INDEMNITY UNDER STATUTE, COMMON OR CIVIL LAW,
WHICH COULD BE ASSERTED NOW OR IN THE FUTURE AND THAT RELATE TO OR IN ANY WAY
ARISE OUT OF ENVIRONMENTAL CLAIMS OR COSTS OF COMPLIANCE RELATING TO THE ASSETS.
FROM AND AFTER CLOSING AND EXCEPT FOR THE RIGHTS AND REMEDIES EXPRESSLY PROVIDED
UNDER CLAUSE (a) OF SECTION 17.1 OR LESSOR'S INDEMNITY OBLIGATIONS UNDER CLAUSE
(b) OF SECTION 17.1 WITH RESPECT TO SECTIONS 7.3(b), 7.10 OR 7.11, LESSEE FOR
ITSELF AND ALL OTHER LESSEE INDEMNITEES WARRANTS, AGREES AND COVENANTS NOT TO
▇▇▇ OR INSTITUTE ARBITRATION AGAINST LESSOR OR ANY LESSOR INDEMNITEES UPON ANY
CLAIM, DEMAND OR CAUSE OF ACTION FOR INDEMNITY AND CONTRIBUTION THAT HAVE BEEN
ASSERTED OR COULD BE ASSERTED FOR ANY ENVIRONMENTAL CLAIMS COSTS OF COMPLIANCE.
ARTICLE 21
MISCELLANEOUS
21.1 Counterparts. This Lease may be executed in one or more
counterparts, all of which shall be considered one and the same Lease, and shall
become effective when one or more counterparts have been signed by each of the
parties and delivered to the other party.
21.2 Governing Law. THIS LEASE AND THE TRANSACTIONS CONTEMPLATED HEREBY
SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW
RULES THAT WOULD DIRECT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
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21.3 Entire Agreement. This Lease and the Appendices, Schedules and
Exhibits hereto (together with the Other Lease and other Related Agreements)
contain the entire agreement between the parties with respect to the subject
matter hereof and there are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to herein.
21.4 Expenses. Lessee shall be responsible for (i) any sales or use
Taxes which may become due and owing by reason of the rent of the Leased
Property and any other property to Lessee contemplated pursuant to this Lease or
the sale of the Inventory, the Equipment, the Leased Property (pursuant to the
Option), and any other property to Lessee contemplated pursuant to this Lease,
(ii) all transfer, stamp, documentary and similar Taxes imposed on the parties
hereto with respect to all transfers of property to Lessee contemplated pursuant
to this Lease, and (iii) all recording, filing or registration fees relating to
the filing, recording or registration of this Lease or a memorandum hereof,
Lessor's Special Warranty Conveyance, and any other instruments or documents
transferring title in or to any assets from Lessor to Lessee pursuant to this
Lease. The Taxes and fees referred to in the preceding sentence shall be paid by
Lessee when due and Lessee, at Lessee's expense, shall file all necessary Tax
returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
Law, Lessor will, and will cause its Affiliates to, join in the execution of any
such Tax returns and other documentation with respect thereto. Lessee and Lessor
shall each be responsible for one-half of the HSR filing fee. Lessor shall be
responsible for up to $100,000 of the aggregate base costs of the Title Policy
under this Lease and the "Title Policy" under the Other Lease (excluding any
cost for modification of the survey exception or other endorsements to the
policy which Lessee may at its sole cost obtain, but which shall not be a
condition to the Option Closing). All costs of the Title Policy under this Lease
and the "Title Policy" under the Other Lease that exceed $100,000, in the
aggregate, shall be paid by Lessee. All other costs and expenses incurred by
each party hereto in connection with all things required to be done by it
hereunder, including attorney's fees and accountant fees, shall be borne by the
party incurring same. At Closing (and in connection with any assignment of this
Lease by Lessee pursuant to Section 18.1), Lessee (or such assignee, as the case
may be) shall execute and deliver to Lessor (i) a Texas Resale Certificate with
respect to the Inventory in form reasonably satisfactory to Lessor and (ii) a
State of Texas Direct Payment Exemption Certificate covering any sales, excise
or use Tax with respect to the matters covered by this Lease in the form
attached hereto as Exhibit 21.4.
21.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed sufficiently given for all purposes hereof if (i)
delivered in person, by courier or by registered or certified United States Mail
to the Person to be notified, with receipt obtained, or (ii) sent by telecopy,
telefax or other facsimile or electronic transmission, with "answer back" or
other "evidence of receipt" obtained, in each case to the appropriate address or
number as set forth below (or at such other address or number for a party as
shall be specified by like notice). Each notice shall be deemed effective on
receipt by the addressee as aforesaid; provided that, notice received by telex,
telecopy, telefax or other facsimile or electronic transmission after 5:00 p.m.
at the location of the addressee of such notice shall be deemed received on the
first Business Day following the date of such electronic receipt or such earlier
time confirmed by the receiving party. Until changed pursuant to the foregoing,
notices to the parties shall be addressed as follows:
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If to Lessor: Coastal Refining & Marketing, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Operating Officer - El Paso Merchant
Energy Group
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: El Paso Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Division - Refining, Marketing &
Marine Department
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lessee: Valero Refining Company-Texas
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇ ▇▇▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
21.6 Attorneys' Fees. The prevailing party in any legal proceeding
brought under or to enforce this Lease shall be additionally entitled to recover
court costs and reasonable attorneys' fees from the nonprevailing party.
21.7 Amendments and Waivers. This Lease may not be modified or amended
except by an instrument or instruments in writing signed by the party against
whom enforcement of any such modification or amendment is sought. Any party
hereto may, only by an instrument in writing, waive compliance by another party
hereto with any term or provision of this Lease on the part of such other party
hereto to be performed or complied with. The waiver by any party hereto of a
breach of any term or provision of this Lease shall not be construed as a waiver
of any subsequent breach.
21.8 Appendices, Schedules and Exhibits. All Appendices, Schedules and
Exhibits hereto which are referred to herein are hereby made a part hereof and
incorporated herein by such reference.
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21.9 Interpretation. It is expressly agreed that this Lease shall not
be construed against any party, and no consideration shall be given or
presumption made, on the basis of who drafted this Lease or any particular
provision hereof or who supplied the form of Lease. Each party agrees that this
Lease has been purposefully drawn and correctly reflects its understanding of
the transaction that this Lease contemplates. In construing this Lease:
(a) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(b) the word "includes" and its derivatives mean "includes,
but is not limited to" and corresponding derivative expressions;
(c) a defined term has its defined meaning throughout this
Lease and each Appendix, Exhibit and Schedule to this Lease, regardless of
whether it appears before or after the place where it is defined;
(d) each Exhibit and Schedule to this Lease is a part of this
Lease, but if there is any conflict or inconsistency between the main body of
this Lease (including Appendix A which shall be considered part of the main body
of this Lease) and any Exhibit or Schedule, the provisions of the main body of
this Lease shall prevail;
(e) the headings and titles herein are for convenience only
and shall have no significance in the interpretation hereof; and
(f) the inclusion of a matter on a Schedule in relation to a
representation or warranty shall not be deemed an indication that such matter
necessarily would, or may, breach such representation or warranty absent its
inclusion on such Schedule.
21.10 Arbitration.
(a) It is agreed, as a severable and independent arbitration
agreement separately enforceable from the remainder of this Lease, that if the
parties hereto, the Indemnitees or the respective successors, assigns, heirs or
legal representatives of any of the foregoing are unable to amicably resolve any
dispute or difference arising under or out of, in relation to or in any way
connected with this Lease (whether contractual, tortious, equitable, statutory
or otherwise), such matter shall be finally and exclusively referred to and
settled by arbitration under the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"). In the event of any conflict between the
Commercial Arbitration Rules of the AAA and the provisions of this Section
21.10, the provisions of this Section 21.10 shall govern and control.
(b) The arbitration shall be heard and determined by three (3)
arbitrators. Each side shall appoint an arbitrator of its choice within fifteen
(15) days of the submission of a notice of arbitration. The party-appointed
arbitrators shall in turn appoint a presiding arbitrator of the tribunal within
fifteen (15) days following the appointment of both party-appointed arbitrators.
If the party-appointed arbitrators cannot reach agreement on a presiding
arbitrator of the tribunal and/or one party fails or refuses to appoint its
party-appointed arbitrator within the prescribed period, the
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appointing authority for the presiding arbitrator and/or such party-appointed
arbitrator shall be the AAA, who, in each case, shall appoint an independent
arbitrator who does not have any financial interest in the dispute, controversy
or claim or bear any relationship to either party. If an arbitrator should die,
withdraw or otherwise become incapable of serving, or refuse to serve, a
successor arbitrator shall be selected and appointed in the same manner as the
original arbitrator.
(c) Unless otherwise expressly agreed in writing by the
parties to the arbitration proceedings:
(1) The arbitration proceedings shall be held in
Houston, Texas;
(2) The arbitrators shall be and remain at all times
wholly independent and impartial;
(3) The arbitration proceedings shall be conducted
under the Commercial Arbitration Rules of the AAA, as amended from time
to time;
(4) Any procedural issues not determined under the
arbitration rules selected pursuant to Section 21.10(c)(3) shall be
determined by the arbitration act and any other Laws of the State of
Texas, other than those laws which would refer the matter to another
jurisdiction;
(5) All decisions and awards by the arbitration
tribunal shall be made by majority vote;
(6) The decision of a majority of the arbitrators
shall be reduced to writing; shall be final and binding without the
right of appeal; and shall be the sole and exclusive remedy regarding
any claims, counterclaims, issues or accountings presented to the
arbitrators; any damage awards by the arbitrators shall be promptly
paid free of any deduction or offset; and any costs or fees incident to
enforcing the award shall to the maximum extent permitted by law be
charged against the party resisting such enforcement;
(7) Consequential, indirect, special, exemplary,
punitive or other similar damages shall not be allowed except those
payable to third parties (and permitted under Section 20.2) for which
liability is allocated among the parties by the arbitration award;
(8) Any award of damages shall include interest from
the date of any breach or violation of this Lease, as determined by the
arbitration award, and from the date of the award until paid in full,
at the Agreed Rate in effect at the end of the first trading day of
each month during which such amount was owed;
(9) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the manner
determined by the arbitrator(s);
(10) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the party
owing the judgment, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the
case may be;
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(11) The arbitration shall proceed in the absence of
a party who, after due notice, fails to answer or appear; an award
shall not be made solely on the default of a party, but the
arbitrator(s) shall require the party who is present to submit such
evidence as the arbitrator(s) may determine is reasonably required to
make an award.
21.11 Lease for the Parties' Benefit Only. This Lease is for the sole
benefit of Lessee, Lessor and their respective successors and assigns as
permitted herein and no other Person shall be entitled to enforce this Lease,
rely on any representation, warranty, covenant or agreement contained herein,
receive any rights hereunder or be a third party beneficiary of this Lease. Any
Indemnitee which is a third party shall be indemnified and held harmless under
the terms of this Lease only to the extent that a party expressly elects to
exercise such right of indemnity and hold harmless on behalf of such third party
Indemnitee pursuant to Section 17.3; and no party shall have any direct
liability or obligation to any third party or be liable to any third party for
any election or non-election or any act or failure to act under or in regard to
any term of this Lease. Any claim for indemnity or hold harmless hereunder on
behalf of an Indemnitee must be made and administered by a party to this Lease.
21.12 Severability. If any term, provision or condition of this Lease,
or any application thereof, is held invalid, illegal or unenforceable in any
respect under any Law, this Lease shall be reformed to the extent necessary to
conform, in each case consistent with the intention of the parties, to such Law,
and to the extent such term, provision or condition cannot be so reformed, then
such term, provision or condition (or such invalid, illegal or unenforceable
application thereof) shall be deemed deleted from (or prohibited under) this
Lease, as the case may be, and the validity, legality and enforceability of the
remaining terms, provisions and conditions contained herein (and any other
application such term, provision or condition) shall not in any way be affected
or impaired thereby. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Lease so as to effect the original intent
of the parties as closely as possible in an acceptable manner to the end that
the transactions contemplated hereby are fulfilled to the extent possible.
21.13 Time of Essence. Time is of the essence in this Lease, including
the Closing Date, the dates for payment of Rent, and the Option. If the date
specified in this Lease for giving any notice or taking any action is not a
Business Day (or if the period during which any notice is required to be given
or any action taken expires on a date which is not a Business Day), then the
date for giving such notice or taking such action (and the expiration date of
such period during which notice is required to be given or action taken) shall
be the next day which is a Business Day.
21.14 Other Covenants.
(a) The parties recognize and agree that while the transaction
contemplated hereby is described as a lease, for federal income tax purposes, it
will be treated as a sale of the Leased Property.
(b) Upon Lessor's request to Lessee, Lessee agrees to
cooperate with Lessor so that Lessor's lease and, upon exercise of the Purchase
Option, the transfer, of the Leased Property to Lessee shall, at Lessor's
election, be accomplished in a manner enabling the lease and subsequent transfer
to qualify as part of a like-kind exchange of property by Lessor within the
meaning of
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Section 1031 of the Tax Code (a "Like-Kind Exchange"). If Lessor so elects,
Lessee shall reasonably cooperate with Lessor to effect such Like-Kind Exchange,
which cooperation shall include, without limitation, taking such actions as
Lessor reasonably requests in order to pay the Rent due hereunder and, upon
exercise of the Purchase Option, the Purchase Price, in a manner which enables
such transfer to qualify as part of a Like-Kind Exchange. Lessee agrees that
Lessor may assign its rights under this Agreement to payment of Rent and, upon
exercise of the Purchase Option, the Purchase Price, (all other rights,
remedies, liabilities and obligations arising under this Lease are retained by
Lessor) to an escrow agent acting as a qualified intermediary under United
States Treasury Regulations in order to qualify the payment of amounts due
hereunder as part of a Like-Kind Exchange. At the Closing, Lessee agrees to
execute and deliver to Lessor the form of Transferee's Consent attached hereto
as Exhibit 21.14. Lessor and Lessee agree that (1) neither party's obligations
hereunder shall be increased as a result of the agreements provided in this
Section 21.14(b); (2) the Rent and the Purchase Price paid to the qualified
intermediary will not be different from that which Lessee would have otherwise
been obligated to pay under this Lease; (3) Lessee will not incur any additional
cost, expense or liability as a result of Lessee's cooperation with Lessor in a
Like-Kind Exchange; and (4) Lessor will indemnify and hold harmless Lessee for
additional expenses, including, without limitation, taxes, closing costs and
reasonable attorneys' fees, that Lessee may sustain or become subject to as a
result of the Rent and subsequently the Purchase Price being paid to an
intermediary party rather than to Lessor and the intermediary's subsequent use
of the Rent and Purchase Price.
(c) Lessor and Lessee agree that the Purchase Price will be
allocated among the properties for tax purposes as may be jointly agreed between
them within 180 days after the Closing Date. In the event that the parties
agree to an allocation of the Purchase Price for tax purposes within such
180-day period, Lessor and Lessee will file all Tax returns (including amended
Tax returns and claims for refund) and information reports in a manner
consistent with such allocation. In the event the parties do not agree on the
allocation, each shall be entitled to report the allocation as it determines is
appropriate.
(d) Lessee agrees to comply with the terms and provisions of
(i) that certain Tax Abatement Agreement between Lessor and the County of
Nueces, approved by the Commissioners Court of the County of Nueces, Texas on
July 14, 1993, and (ii) that certain Industrial District Agreement between
Lessor and the City of Corpus Christi respectively acknowledged by Lessor on
November 16, 1995 and by the City of Corpus Christi on November 22, 1995, in
each case which are applicable to the owner of the Leased Property from and
after the Effective Time until the earlier of (i) the expiration of all
requirements of such agreements or (ii) the termination of this Lease other than
as a result of the closing of the Option.
IN WITNESS WHEREOF, this Lease has been signed by or on behalf
of each of the parties as of the day first above written.
LESSOR:
Coastal Refining & Marketing, Inc.
LESSEE:
Valero Refining Company-Texas
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