UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 1, 2015
VALERO ENERGY PARTNERS LP
(Exact name of registrant as specified in its charter)
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Delaware | | 1-36232 | | 90-1006559 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
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One Valero Way San Antonio, Texas | | 78249 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (210) 345-2000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
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o | | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o | | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o | | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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o | | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement.
Effective March 1, 2015, Valero Energy Partners LP (the Partnership) entered into a contribution agreement (the Contribution Agreement) pursuant to which Valero Energy Corporation, through its wholly owned subsidiaries, Valero Terminaling and Distribution Company (VTDC), Valero Refining-New Orleans, L.L.C. (VR-NO and, together with VTDC, the Contributors) and Valero Energy Partners GP LLC (the General Partner) contributed to the Partnership (the Contribution) all of the outstanding membership interests of Valero Partners Houston, LLC (Valero Houston) and Valero Partners Louisiana, LLC (Valero Louisiana), in exchange for (i) a cash distribution of $571.2 million to VTDC, (ii) the issuance of 399,120 common units representing limited partner interests in the Partnership (Common Units) to VTDC and 1,508,980 Common Units to VR-NO, and (iii) the issuance of 38,941 general partner units representing general partner interests in the Partnership (General Partner Units) to the General Partner. The cash distribution was funded with $211.2 million of the Partnership’s cash on hand, $200.0 million of borrowings under the Partnership’s revolving credit facility, and $160.0 million of proceeds from a subordinated loan agreement (described below in this Item 1.01).
The term “Valero,” when used in this report, may refer to Valero Energy Corporation, to one or more of its subsidiaries, or all of them taken as a whole (other than the Partnership or its subsidiaries or the General Partner) as the context requires.
Valero Houston and Valero Louisiana are engaged in the business of terminaling crude oil, intermediates, and refined petroleum products at terminals in Texas and Louisiana (collectively, the Houston and St. Charles Terminal Services Business), as more fully described below:
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• | Houston Terminal. Valero Houston operates a crude oil, intermediates, and refined petroleum products terminal that supports Valero’s Houston, Texas refinery (the Houston Terminal). The terminal is located on the Houston ship channel and has storage tanks with 3.6 million barrels of storage capacity. |
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• | St. Charles Terminal. Valero Louisiana operates a crude oil, intermediates, and refined petroleum products terminal that supports Valero’s St. Charles Refinery located in Norco, Louisiana (the St. Charles Terminal). The terminal is located on the Mississippi River and has storage tanks with 10 million barrels of storage capacity. |
Valero owns (i) the 2% general partner interest in the Partnership, (ii) all incentive distribution rights in the Partnership, and (iii) a 70% limited partner interest in the Partnership. Certain officers of Valero (including Joseph W. Gorder who is Valero’s Chairman of the Board, President and Chief Executive Officer) also serve as officers and/or directors of the Partnership and its subsidiaries. Additionally, the Partnership and Valero have certain commercial relationships as further described in the Partnership’s Annual Report on Form10-K for the year ended December 31, 2014, which descriptions are incorporated herein by reference.
The terms of the Contribution were determined pursuant to negotiations between the Partnership and the conflicts committee of the board of directors of the General Partner, which is composed solely of independent directors. The conflicts committee retained independent legal and financial advisors to assist in evaluating and negotiating the Contribution. The conflicts committee approved the Contribution and recommended approval of the Contribution to the General Partner’s board of directors, which then approved the Contribution.
Effective March 1, 2015, the following documents were executed in connection with the Contribution.
Contribution Agreement
The Partnership entered into the Contribution Agreement with the Contributors and the General Partner, which provides for, among other things, the contribution by the Contributors and the General Partner of their interests in Valero Houston and Valero Louisiana, in exchange for (i) a cash distribution of $571.2 million to VTDC, (ii) the issuance of 399,120 Common Units to VTDC and 1,508,980 Common Units to VR-NO, and (iii) the issuance of 38,941 General Partner Units to the General Partner. The Contribution Agreement contains customary representations, warranties, covenants, and indemnities.
The foregoing description of the Contribution Agreement is not complete and is qualified in its entirety by reference to the full text of the Contribution Agreement, which is attached as Exhibit 10.01 to this Current Report on Form 8-K and incorporated herein by reference.
Amended and Restated Schedules to Omnibus Agreement
The Partnership entered into amended and restated schedules (the Amended Omnibus Schedules) to the Amended and Restated Omnibus Agreement, dated as of July 1, 2014 (the Omnibus Agreement), among Valero, the General Partner, the Partnership, and certain of their respective subsidiaries. The Amended Omnibus Schedules join Valero Houston and Valero Louisiana as parties to the Omnibus Agreement and include the following modifications, among others:
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• | the indemnification obligations of Valero and the Partnership under the Omnibus Agreement were extended to apply to the Houston Terminal and the St. Charles Terminal in substantially the same manner as the assets acquired by the Partnership in its initial public offering; |
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• | the annual administrative fee payable by the Partnership was increased from $9.3 million per year to $10.4 million per year. The increase in the fee of $1.1 million will be prorated for the remainder of 2015 based on the number of days from March 1, 2015 to December 31, 2015; and |
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• | the grant to Valero of a right of first refusal with respect to the Houston Terminal and the St. Charles Terminal. |
The Amended Omnibus Schedules are governed by the terms of the Omnibus Agreement, which is incorporated by reference to this Current Report on Form 8-K as Exhibit 10.02. The foregoing description of the Amended Omnibus Schedules is not complete and is qualified in its entirety by reference to the Amended Omnibus Schedules, which are filed as Exhibit 10.03 to this Current Report on Form 8-K and incorporated herein by reference.
Amended and Restated Services and Secondment Agreement
The General Partner entered into the Amended and Restated Services and Secondment Agreement (the Amended Services Agreement) with Valero, which amends and restates the Services and Secondment Agreement entered into on December 16, 2013 in connection with the Partnership’s initial public offering, as subsequently amended, to provide for the additional secondment of employees to the General Partner for the provision of services with respect to the Houston and St. Charles Terminal Services Business.
The forgoing description of the Amended Services Agreement is not complete and is qualified in its entirety by reference to the Amended Services Agreement which is filed as Exhibit 10.04 to this Current Report on Form 8-K and incorporated herein by reference.
Terminal Services Schedules
The Partnership and Valero entered into commercial agreements with respect to each of the Houston Terminal and the St. Charles Terminal in the form of additional schedules (the Schedules) to the Master Terminal Services Agreement (together with the schedules thereto, the Terminal Services Agreement) entered into on December 16, 2013 in connection with the Partnership’s initial public offering. The Schedules provide for inflation escalators, have initial terms of 10 years, and, in the case of the Houston Terminal, provide Valero an option to renew for one additional five-year term, and, in the case of the St. Charles Terminal, provide Valero an option to renew for an additional term through January 31, 2030. The Schedules are governed by the terms of the Terminal Services Agreement, which is incorporated by reference to this Current Report on Form 8-K as Exhibit 10.05. The description of the Terminal Services Agreement in the Partnership’s Current Report on Form 8-K filed on December 16, 2013 is incorporated herein by reference.
The Schedules provide for, among other things, the following:
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• | Houston Terminal. The Partnership will charge Valero for terminaling services at the Houston Terminal. Valero will pay a fee of $0.227 per barrel for throughput volumes up to 315,921 barrels per day and $0.05 per barrel for throughput volumes in excess of 315,921 barrels per day. Valero will be obligated to deliver for throughput a quarterly average of at least 300,000 barrels per day at the terminal. |
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• | St. Charles Terminal. The Partnership will charge Valero for terminaling services at the St. Charles Terminal. Valero will pay a fee of $0.516 per barrel for throughput volumes up to 435,695 barrels per day and $0.05 per barrel for throughput volumes in excess of 435,695 barrels per day. Valero will be obligated to deliver for throughput a quarterly average of at least 390,000 barrels per day at the terminal. |
The foregoing description of the Schedules is not complete and is qualified in its entirety by reference to the Schedules which are filed as Exhibits 10.06 and 10.07 to this Current Report on Form 8-K and incorporated herein by reference.
Lease and Access Agreements
Valero Houston entered into a Lease and Access Agreement with Valero, pursuant to which Valero Houston will lease the land on which the Houston Terminal is located. The term of the agreement is for 10 years with four automatic successive renewal periods of five years each. Either party may terminate by providing written notice within 180 days of such period. Initially, Valero Houston will pay $1.7 million per year as base rent, subject to an annual inflation escalator. Valero Houston will also pay customary expense reimbursement for taxes, utilities, and similar costs incurred by Valero related to the leased premises.
Valero Louisiana entered into a Lease and Access Agreement with Valero, pursuant to which Valero Louisiana will lease the land on which the St. Charles Terminal is located. The term of the agreement is for 10 years with four automatic successive renewal periods of five years each, provided that the final renewal period will end on December 31, 2044. Either party may terminate by providing written notice within 180 days of such period. Initially, Valero Louisiana will pay $4.7 million per year as base rent, subject to an annual inflation escalator. Valero Louisiana will also pay customary expense reimbursement for taxes, utilities, and similar costs incurred by Valero related to the leased premises.
Each Lease and Access Agreement contains customary terms regarding the rights and obligations of the parties with respect to maintenance of the leased premises, alterations to the leased premises, and maintenance of certain types of insurance, as well as customary default, remedy, and indemnity provisions.
The foregoing descriptions of the Lease and Access Agreements are not complete and are qualified in their entirety by reference to the Lease and Access Agreements which are filed as Exhibits 10.08 and 10.09 to this Current Report on Form 8-K and incorporated herein by reference.
Subordinated Credit Agreement (Term Loan)
The Partnership (as borrower) and Valero (as lender) entered into a Subordinated Credit Agreement (Loan Agreement) under which the Partnership borrowed cash in the amount of $160.0 million (the Loan). The Partnership used the cash proceeds from the Loan as partial payment of the cash distribution made under the Contribution Agreement. The Loan has a maturity date of March 1, 2020, at which time the borrower promises to pay to the lender the then unpaid principal amount of the Loan. The Loan may be prepaid at any time without penalty; amounts repaid or prepaid may not be reborrowed. The Loan will bear interest, at the Partnership’s option, at either: (a) the LIBO Rate (as defined in the Loan Agreement) plus the applicable margin, or (b) the Prime Rate (as defined in the Loan Agreement) plus the applicable margin. Accrued interest on the outstanding Loan balance is payable in arrears on each Interest Payment Date (as defined in the Loan Agreement) and the maturity date.
The payment of amounts owing under the Loan Agreement are subordinated to the obligations of the Partnership under its revolving credit agreement with third-party lenders. The Loan Agreement contains customary terms regarding covenants, representations, default, and remedies, including covenants that limit the creation of liens, the incurrence of debt by the Partnership or its subsidiaries, the payment of distributions, and the entry into securitization transactions, sale/leaseback transactions, certain restrictive agreements, consolidations, mergers, and the sale of all or substantially all assets. The Loan Agreement also includes a covenant that requires, as of the last day of each fiscal quarter, the Partnership’s ratio of Consolidated Total Debt (as defined in the Loan Agreement) as of such day to Consolidated EBITDA (as defined in the Loan Agreement) for the four-quarter period ending on such day not to exceed 5.0 to 1.0 (or 5.5 to 1.0 during a specified acquisition period). The Loan is subject to acceleration upon the occurrence of an event of default.
The foregoing description of the Loan Agreement is not complete and is qualified in its entirety by reference to the Loan Agreement which is filed as Exhibit 10.10 to this Current Report on Form 8-K and incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On March 1, 2015, the Partnership completed the Contribution pursuant to the terms of the Contribution Agreement. The Partnership, the General Partner, and Valero have various relationships with one another. The information set forth in Item 1.01 regarding the Contribution Agreement and the relationships among the Partnership, the General Partner, and Valero is incorporated by reference into this Item 2.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 regarding the Loan Agreement entered into between the Partnership and Valero in connection with the Contribution is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 regarding the issuance of Common Units to VTDC and VR-NO and the issuance of General Partner Units to the General Partner in connection with the Contribution is incorporated into this Item 3.02 by reference. The issuance of the Common Units and General Partner Units was completed in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended under Section 4(a)(2), as a transaction by an issuer not involving a public offering.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Audited historical combined financial statements of the Houston and St. Charles Terminal Services Business as of and for the years ended December 31, 2014 and 2013, together with the related notes to the combined financial statements, a copy of which is filed as Exhibit 99.1 hereto and incorporated herein by reference.
(b) Pro Forma Financial Information.
Unaudited pro forma consolidated financial statements of Valero Energy Partners LP as of December 31, 2014 and for each of the years in the three-year period ended December 31, 2014, together with the related notes to the unaudited pro forma consolidated financial statements, a copy of which is filed as Exhibit 99.2 hereto and incorporated herein by reference.
(d) Exhibits.
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Exhibit No. | | Description |
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10.01 | | Contribution Agreement, dated March 1, 2015, by and among Valero Refining-New Orleans, L.L.C., Valero Terminaling and Distribution Company, and Valero Energy Partners LP. |
10.02 | | Amended and Restated Omnibus Agreement, dated July 1, 2014, by and among Valero Energy Corporation, Valero Marketing and Supply Company, Valero Terminaling and Distribution Company, The Premcor Refining Group Inc., The Premcor Pipeline Co., Valero Energy Partners LP, Valero Energy Partners GP LLC, Valero Partners Operating Co. LLC, Valero Partners EP, LLC, Valero Partners Lucas, LLC, Valero Partners Memphis, LLC, Valero Partners North Texas, LLC, Valero Partners South Texas, LLC and Valero Partners Wynnewood, LLC - incorporated by reference to Exhibit 10.2 to the Partnership’s Current Report on Form 8-K dated July 1, 2014, and filed July 1, 2014 (SEC File No. 1-36232). |
10.03 | | Amendment and Restatement of Schedules to Amended and Restated Omnibus Agreement, dated March 1, 2015, by and among Valero Energy Corporation, Valero Marketing and Supply Company, Valero Partners Memphis, LLC, Valero Terminaling and Distribution Company, The Premcor Refining Group Inc., The Premcor Pipeline Co., Valero Energy Partners LP, Valero Energy Partners GP LLC, Valero Partners Operating Co. LLC, Valero Partners EP, LLC, Valero Partners Lucas, LLC, Valero Partners North Texas, LLC, Valero Partners South Texas, LLC, Valero Partners Wynnewood, LLC, Valero Partners Houston, LLC and Valero Partners Louisiana, LLC. |
10.04 | | Amended and Restated Services and Secondment Agreement, dated March 1, 2015, by and among Valero Services, Inc., Valero Refining Company-Tennessee, L.L.C., Valero Refining-Texas, L.P., and Valero Energy Partners GP LLC. |
10.05 | | Master Terminal Services Agreement, dated December 16, 2013, by and between Valero Partners Operating Co. LLC and Valero Marketing and Supply Company - incorporated by reference to Exhibit 10.7 to the Partnership’s Current Report on Form 8-K dated December 16, 2013, and filed December 20, 2013 (SEC File No. 1-36232). |
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10.06 | | Terminal Services Schedule (Houston Terminal), dated March 1, 2015, by and between Valero Partners Operating Co. LLC and Valero Marketing and Supply Company. |
10.07 | | Terminal Services Schedule (St. Charles Terminal), dated March 1, 2015, by and between Valero Partners Operating Co. LLC and Valero Marketing and Supply Company. |
10.08 | | Lease and Access Agreement dated as of March 1, 2015, between Valero Refining-Texas, L.P. and Valero Partners Houston, LLC. |
10.09 | | Lease and Access Agreement dated as of March 1, 2015, between Valero Refining-New Orleans, L.L.C. and Valero Partners Louisiana, LLC. |
10.10 | | Subordinated Credit Agreement dated as of March 2, 2015, by and between Valero Energy Partners LP and Valero Energy Corporation and the parties named therein. |
23.1 | | Consent of KPMG LLP, independent registered public accounting firm. |
99.1 | | Audited historical combined financial statements of the Houston and St. Charles Terminal Services Business as of and for the years ended December 31, 2014 and 2013, together with the related notes to the combined financial statements. |
99.2 | | Unaudited pro forma consolidated financial statements of Valero Energy Partners LP as of December 31, 2014 and for each of the years in the three-year period ended December 31, 2014, together with the related notes to the unaudited pro forma consolidated financial statements. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | VALERO ENERGY PARTNERS LP |
| | (Registrant) |
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| | By: | Valero Energy Partners GP LLC, |
| | | its general partner |
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Date: | March 5, 2015 | By: | /s/ Donna M. Titzman |
| | | Donna M. Titzman |
| | | Senior Vice President, Chief Financial Officer, |
| | | and Treasurer |
| | | (Principal Financial and Accounting Officer) |
EXHIBIT 10.01
Execution Version
CONTRIBUTION AGREEMENT
by and among
VALERO REFINING-NEW ORLEANS, L.L.C.,
and
VALERO TERMINALING AND DISTRIBUTION COMPANY,
as Contributors,
and
VALERO ENERGY PARTNERS LP
March 1, 2015
TABLE OF CONTENTS
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ARTICLE I DEFINED TERMS | 1 |
1.1 | Defined Terms | 1 |
ARTICLE II Contributions | 8 |
2.1 | Contributions | 8 |
2.2 | Consideration and General Partner Unit Issuance | 8 |
2.3 | Proration of Certain Taxes | 8 |
2.4 | Certain Adjustments | 9 |
ARTICLE III CLOSING | 10 |
3.1 | Closing | 10 |
3.2 | Deliveries by the Contributors | 10 |
3.3 | Deliveries by the Partnership | 11 |
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS | 11 |
4.1 | Organization; Ownership; Preemptive Rights | 11 |
4.2 | Authorization | 12 |
4.3 | No Conflicts or Violations; No Consents or Approvals Required | 13 |
4.4 | Absence of Litigation; Compliance with Law | 13 |
4.5 | Bankruptcy | 13 |
4.6 | Brokers and Finders | 14 |
4.7 | Tax Matters | 14 |
4.8 | Title to and Condition of Assets | 14 |
4.9 | Financial Matters | 15 |
4.10 | No Adverse Changes | 15 |
4.11 | Environmental Matters | 15 |
4.12 | Contracts | 15 |
4.13 | Employees | 16 |
4.14 | Investment Company Act | 16 |
4.15 | Acquisition as Investment | 16 |
4.16 | Conflicts Committee Matters | 16 |
4.17 | Opportunity for Independent Investigation | 17 |
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP | 17 |
5.1 | Organization | 17 |
5.2 | Authorization | 17 |
5.3 | Validly Issued Units | 17 |
5.4 | No Conflicts or Violations; No Consents or Approvals Required | 18 |
5.5 | Absence of Litigation | 18 |
5.6 | Brokers and Finders | 18 |
5.7 | Opportunity for Independent Investigation | 18 |
5.8 | Acquisition as Investment | 18 |
ARTICLE VI COVENANTS | 19 |
6.1 | Additional Agreements | 19 |
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6.2 | Further Assurances | 19 |
6.3 | Cooperation on Tax Matters | 19 |
6.4 | Cooperation for Litigation and Other Actions | 20 |
6.5 | Retention of and Access to Books and Records | 20 |
6.6 | Tanks Under Construction | 21 |
6.7 | NYSE | 21 |
ARTICLE VII INDEMNIFICATION | 21 |
7.1 | Indemnification | 21 |
7.2 | Defense of Third-Party Claims | 21 |
7.3 | Direct Claims | 22 |
7.4 | Limitations | 23 |
7.5 | Remedies Under Ancillary Documents | 23 |
7.6 | Tax Related Adjustments and Tax Reporting of Transactions | 23 |
7.7 | Express Negligence Rule | 24 |
ARTICLE VIII MISCELLANEOUS | 24 |
8.1 | WAIVERS AND DISCLAIMERS | 24 |
8.2 | Expenses | 25 |
8.3 | Notices | 25 |
8.4 | Severability | 26 |
8.5 | Governing Law | 26 |
8.6 | Confidentiality | 26 |
8.7 | Parties in Interest | 27 |
8.8 | Assignment of Agreement | 27 |
8.9 | Captions | 27 |
8.10 | Counterparts | 27 |
8.11 | Integration | 28 |
8.12 | Amendment; Waiver | 28 |
ARTICLE IX INTERPRETATION | 28 |
9.1 | Interpretation | 28 |
9.2 | References, Gender, Number | 29 |
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Exhibits: | | |
Exhibit A | — | Amended and Restated Omnibus Agreement Schedules |
Exhibit B | — | Terminaling Services Schedule (Houston Terminal) |
Exhibit C | — | Terminaling Services Schedule (St. Charles Terminal) |
Exhibit D-1 | — | Houston Lease Agreement |
Exhibit D-2 | — | St. Charles Lease Agreement |
Exhibit E | — | Assignment Document |
Exhibit F | — | Amended and Restated Services and Secondment Agreement |
Exhibit G | — | Intercompany Loan Agreement |
Exhibit H-1 | — | Houston Assignment |
Exhibit H-2 | — | St. Charles Assignment |
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this “Agreement”), is entered into on March 1, 2015, by and among Valero Refining-New Orleans, L.L.C., a Delaware limited liability company (“VRNO”), Valero Terminaling and Distribution Company, a Delaware corporation (“VTDC” and, together with VRNO, the “Contributors”), and Valero Energy Partners LP, a Delaware limited partnership (the “Partnership”). The above-named entities are sometimes referred to in this Agreement each as a “Party” and collectively as the “Parties.”
WHEREAS, VTDC owns all of the issued and outstanding membership interests (the “Houston Interests”) in Valero Partners Houston, LLC, a Delaware limited liability company (“Valero Houston”), which owns certain tankage and related assets located near Houston, Texas, and VRNO owns all of the issued and outstanding membership interests (the “Louisiana Interests” and, together with the Houston Interests, the “Contributed Interests”) in Valero Partners Louisiana, LLC, a Delaware limited liability company (“Valero Louisiana” and, together with Valero Houston, the “Contributed Entities”), which owns certain tankage and related assets located near Norco, Louisiana;
WHEREAS, (a) VTDC wishes to contribute (i) a portion of the Houston Interests to Valero Energy Partners GP LLC, a Delaware limited liability company and general partner of the Partnership (the “General Partner”), which Houston Interests will be contributed by the General Partner to the Partnership; and (ii) the remaining portion of the Houston Interests to the Partnership; (b) VRNO wishes to contribute all of the issued and outstanding Louisiana Interests to the Partnership, and (c) subsequent to such contributions, the Partnership wishes to contribute the Contributed Interests to Valero Partners Operating Co. LLC, a Delaware limited liability company and wholly owned subsidiary of the Partnership (“Valero Operating”);
WHEREAS, the Parties wish to enter into, or cause to be entered into, amended and restated schedules (the “Restated Schedules”) to that certain Amended and Restated Omnibus Agreement, executed as of July 1, 2014, among Valero, Valero Marketing and Supply Company, a Delaware corporation (“VMSC”), VTDC, The Premcor Refining Group Inc., The Premcor Pipeline Co., the Partnership, the General Partner, Valero Operating, Valero Partners EP, LLC, Valero Partners Lucas, LLC, Valero Partners Memphis, LLC, Valero Partners North Texas, LLC, Valero Partners South Texas, LLC and Valero Partners Wynnewood, LLC (the “Omnibus Agreement”).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set forth herein and in the Omnibus Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINED TERMS
1.1 Defined Terms. Unless the context expressly requires otherwise, the respective terms defined in this Section 1.1 shall, when used in this Agreement, have the respective meanings herein
specified, with each such definition to be equally applicable both to the singular and the plural forms of the term so defined.
“Affiliate” has the meaning set forth in the Partnership Agreement; provided that, for purposes of this Agreement, Valero and its subsidiaries (other than the General Partner and the Partnership and its subsidiaries), including the Contributors, on the one hand, and the General Partner and the Partnership and its subsidiaries, on the other hand, shall not be considered Affiliates of each other.
“Agreement” has the meaning set forth in the preamble.
“Amended Services and Secondment Agreement” has the meaning set forth in Section 3.2(f).
“Ancillary Documents” means, collectively, the Partnership Ancillary Documents and the Contributor Ancillary Documents.
“Applicable Law” means any applicable statute, law, regulation, ordinance, rule, judgment, rule of law, decree, Permit, requirement, or other governmental restriction or any similar form of decision of, or any provision or condition issued under any of the foregoing by, or any determination by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect and in each case as amended (including all of the terms and provisions of the common law of such Governmental Authority), as interpreted and enforced at the time in question, including Environmental Law.
“Assignment Document” has the meaning set forth in Section 3.2(e).
“Books and Records” means all of the records and files primarily related to the Contributed Entities or the ownership and operation of the assets owned by the Contributed Entities as of the Closing Date, including the minutes books and other corporate records of the Contributed Entities and any plans, drawings, instruction manuals, operating and technical data and records, whether computerized or hard copy, tax files, books, records, tax returns and tax work papers, supplier lists, surveys, engineering records, maintenance records and studies, environmental records, environmental reporting information, emission data, testing and sampling data and procedures, construction, inspection and operating records, and any and all information necessary to meet compliance obligations with respect to Applicable Law, in each case only to the extent primarily related to Contributed Entities or the assets owned by the Contributed Entities and existing as of the Closing Date.
“Business” means the assets and operations that are owned by the Contributed Entities as of immediately prior to the Effective Time, including the Houston Terminal Assets and the St. Charles Terminal Assets.
“Business Day” has the meaning set forth in the Omnibus Agreement.
“Cash Distribution” has the meaning set forth in Section 2.2(a).
“Claim” means any existing or threatened future claim, demand, suit, action, investigation, proceeding, inquiry, condemnation, audit or cause of action of any kind or character (in each case, whether civil, criminal, investigative or administrative) before any court or other Governmental Authority or any arbitration proceeding, known or unknown, under any theory, including those based on theories of contract, tort, statutory liability, strict liability, employer liability, premises liability, products liability, breach of warranty or malpractice.
“Closing” has the meaning set forth in Section 3.1.
“Closing Date” has the meaning set forth in Section 3.1.
“Common Units” means common units representing limited partner interests in the Partnership.
“Confidential Information” means any proprietary or confidential information that is competitively sensitive material or otherwise of value to a Party or its Affiliates and not generally known to the public, including trade secrets, scientific or technical information, design, invention, process, procedure, formula, improvements, product planning information, marketing strategies, financial information, information regarding operations, consumer and/or customer relationships, consumer and/or customer identities and profiles, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of a Party or its Affiliates and the consumers, customers, clients and suppliers of any of the foregoing. Confidential Information includes such information as may be contained in or embodied by documents, substances, engineering and laboratory notebooks, reports, data, specifications, computer source code and object code, flow charts, databases, drawings, pilot plants or demonstration or operating facilities, diagrams, specifications, bills of material, equipment, prototypes and models, and any other tangible manifestation (including data in computer or other digital format) of the foregoing; provided, however, that Confidential Information does not include information that a receiving Party can show (a) has been published or has otherwise become available to the general public as part of the public domain without breach of this Agreement, (b) has been furnished or made known to the receiving Party without any obligation to keep it confidential by a third party under circumstances which are not known to the receiving Party to involve a breach of the third party’s obligations to a Party or (c) was developed independently of information furnished or made available to the receiving Party as contemplated under this Agreement. From and after the Closing Date, Confidential Information disclosed by the Contributors to the Partnership that relates to the Contributed Entities shall become, and be treated as, Confidential Information of the Partnership disclosed to the Contributors.
“Conflicts Committee” has the meaning set forth in the Partnership Agreement.
“Consents” means all notices to, authorizations, consents, orders or approvals of, or registrations, declarations or filings with, or expiration of waiting periods imposed by, any Governmental Authority, and any notices to, consents or approvals of any other third party.
“Contract” means any written contract, agreement, indenture, instrument, note, bond, loan, lease, easement, mortgage, franchise, license agreement, purchase order, binding bid or offer,
binding term sheet or letter of intent or memorandum, commitment, letter of credit or any other legally binding arrangement, including any amendments or modifications thereof and waivers relating thereto.
“Contributed Entities” has the meaning set forth in the recitals.
“Contributed Interests” has the meaning set forth in the recitals.
“Contributor Ancillary Documents” means each agreement, document, instrument or certificate to be delivered by the Contributors, or their Affiliates, at the Closing pursuant to Section 3.2 hereof and each other document or Contract entered into by the Contributors, or their Affiliates, contemplated by this Agreement.
“Contributor Indemnified Costs” means any and all Losses that any of the Contributor Indemnified Parties incurs and that arise out of or relate to any breach of a representation, warranty or covenant of the Partnership hereunder. Notwithstanding anything in the foregoing to the contrary, Contributor Indemnified Costs shall exclude any and all Special Damages (other than those that are a result of (a) a third-party Claim for Special Damages or (b) the gross negligence or willful misconduct of the Partnership).
“Contributor Indemnified Parties” means the Contributors and their Affiliates, including Valero, and their respective officers, directors, partners, managers, employees, consultants and equity holders.
“Contributor Tax Obligation” has the meaning set forth in Section 2.3(c).
“Contributors” has the meaning set forth in the preamble.
“Effective Time” has the meaning set forth in Section 3.1.
“Encumbrance” means any mortgage, pledge, charge, hypothecation, easement, right of purchase, security interest, deed of trust, conditional sales agreement, encumbrance, interest, option, lien, right of first refusal, right of way, defect in title, encroachments or other restriction, whether or not imposed by operation of Applicable Law, any voting trust or voting agreement, stockholder agreement or proxy.
“Environmental Laws” has the meaning set forth in the Omnibus Agreement.
“Environmental Permit” has the meaning set forth in the Omnibus Agreement.
“Financial Statements” has the meaning set forth in Section 4.9.
“Fundamental Representations” has the meaning set forth in Section 7.4(a).
“GAAP” means generally accepted accounting principles in the United States of America.
“General Partner” has the meaning set forth in the recitals.
“Governmental Authority” has the meaning set forth in the Omnibus Agreement.
“Hazardous Substance” has the meaning set forth in the Omnibus Agreement.
“Houston Assignment” means that certain Bill of Sale and Assignment Agreement effective as of March 1, 2015, by and between Valero Refining-Texas, L.P. and Valero Houston attached hereto as Exhibit H-1.
“Houston Interests” has the meaning set forth in the recitals.
“Houston Terminal Assets” means those crude oil, refined products and intermediates storage tanks and other “Transferred Interests,” each as more particularly described in the Houston Assignment.
“Indemnified Costs” means the Partnership Indemnified Costs and the Contributor Indemnified Costs, as applicable.
“Indemnified Party” means the Partnership Indemnified Parties and the Contributor Indemnified Parties.
“Indemnifying Party” has the meaning set forth in Section 7.2.
“Intercompany Loan Agreement” has the meaning set forth in Section 3.2(g).
“Lease Agreements” has the meaning set forth in Section 3.2(d).
“Losses” has the meaning set forth in the Omnibus Agreement.
“Louisiana Interests” has the meaning set forth in the recitals.
“Material Adverse Effect” means, with respect to any Person, any material adverse change, circumstance, effect or condition in or relating to the assets, financial condition, results of operations, or business of such Person, or that materially impedes the ability of such Person to consummate the transactions contemplated hereby, other than any change, circumstance, effect or condition in the refining, pipeline transportation or terminaling industries generally (including any change in the prices of crude oil, natural gas, natural gas liquids, feedstocks or refined products or other hydrocarbon products, industry margins or any regulatory changes or changes in Applicable Law) or in United States or global economic conditions or financial markets in general. Any determination as to whether any change, circumstance, effect or condition has a Material Adverse Effect shall be made only after taking into account all effective insurance coverages and effective third-party indemnifications with respect to such change, circumstance, effect or condition.
“Material Contracts” has the meaning set forth in Section 4.12(a).
“New General Partner Units” has the meaning set forth in Section 2.2(a).
“Omnibus Agreement” has the meaning set forth in the recitals.
“Partnership” means Valero Energy Partners LP, a Delaware limited partnership.
“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of December 16, 2013, as the same may be amended from time to time.
“Partnership Ancillary Documents” means each agreement, document, instrument or certificate to be delivered by the Partnership, or its Affiliates, at the Closing pursuant to Section 3.3 hereof and each other document or Contract entered into by the Partnership, or its Affiliates, contemplated by this Agreement.
“Partnership Indemnified Costs” means any and all Losses that any of the Partnership Indemnified Parties incurs and that arise out of or relate to any breach of a representation, warranty or covenant of the Contributors hereunder. Notwithstanding anything in the foregoing to the contrary, Partnership Indemnified Costs shall exclude any and all Special Damages (other than those that are a result of (i) a third-party Claim for Special Damages or (ii) the gross negligence or willful misconduct of the Contributors.
“Partnership Indemnified Parties” means the Partnership and its Affiliates, including the their respective officers, directors, partners, managers, employees, consultants and equity holders.
“Party” and “Parties” have the meanings set forth in the preamble.
“Permits” means permits, licenses, sublicenses, certificates, approvals, Consents, notices, waivers, variances, franchises, registrations, orders, filings, accreditations, or other similar authorizations, including pending applications or filings therefor and renewals thereof, required by any Applicable Law or Governmental Authority or granted by any Governmental Authority.
“Permitted Encumbrances” means with respect to a Person (a) Encumbrances for taxes, impositions, assessments, fees, rents or other governmental charges not yet due and payable or being diligently contested in good faith and which will be paid, if payable, by such Person; (b) Encumbrances of mechanics, laborers, suppliers, workers and materialmen incurred in the ordinary course of business for sums not yet due or being diligently contested in good faith and which will be paid, if payable, by such Person; (c) statutory and contractual Encumbrances incurred in the ordinary course of business securing rental, storage, throughput, handling or other fees, charges or obligations owing from time to time to landlords, warehousemen, common carriers and other third parties; (d) easements, restrictive covenants, reservations and exceptions to title, and any defects, imperfections or irregularities of title that do not and could not reasonably be expected to materially interfere with the use of such Person’s assets, as applicable, in a manner consistent with their use by such Person in the ordinary course of business on the day immediately prior to Closing; (e) terms of Contracts and Permits being assigned or transferred in connection with this Agreement or any Ancillary Document; and (f) the terms of the Partnership Ancillary Documents.
“Person” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, association, Governmental Authority or other entity.
“Receiving Party Personnel” has the meaning set forth in Section 8.6(d).
“Restated Schedules” has the meaning set forth in the recitals.
“Right-of-Way Consents” has the meaning set forth in the Omnibus Agreement.
“Securities Act” mean the Securities Act of 1933, as amended.
“Special Damages” means any consequential, indirect, incidental, punitive, exemplary, special or similar damages or lost profits (including any diminution in nature of any investments) suffered directly or indirectly.
“St. Charles Assignment” means that certain Bill of Sale and Assignment Agreement effective as of March 1, 2015, by and between VRNO and Valero Louisiana attached hereto as Exhibit H-2.
“St. Charles Services Schedule” has the meaning set forth in Section 3.2(c).
“St. Charles Terminal Assets” means those crude oil, refined products and intermediates storage tanks and other “Transferred Interests,” each as more particularly described in the St. Charles Assignment.
“third-party action” has the meaning set forth in Section 7.2.
“Total Consideration” has the meaning set forth in Section 2.2(a).
“Under Construction Tanks” has the meaning set forth in Section 6.6.
“Unit Consideration” has the meaning set forth in Section 2.2(a).
“Valero” means Valero Energy Corporation, a Delaware corporation.
“Valero Operating” has the meaning set forth in the recitals.
“Valero Houston” has the meaning set forth in the recitals.
“Valero Louisiana” has the meaning set forth in the recitals.
“VMSC” has the meaning set forth in the recitals.
“VRNO” has the meaning set forth in the preamble.
“VTDC” has the meaning set forth in the preamble.
ARTICLE II
CONTRIBUTIONS
2.1 Contributions. Subject to all of the terms and conditions of this Agreement and the Assignment Document:
(a) VTDC hereby contributes, assigns, transfers and conveys (i) 1.425% of the issued and outstanding Houston Interests to the General Partner and (ii) 98.575% of the issued and outstanding Houston Interests to the Partnership, and the Partnership hereby accepts from VTDC and the General Partner all of such Houston Interests;
(b) VTDC shall cause the General Partner to contribute, assign, transfer and convey such 1.425% of the issued and outstanding Houston Interests to the Partnership; and
(c) VRNO hereby contributes, assigns, transfers and conveys to the Partnership, and the Partnership hereby accepts from VRNO, the Louisiana Interests;
in each case free and clear of all Encumbrances, other than transfer restrictions under applicable federal and state securities laws.
2.2 Consideration and General Partner Unit Issuance.
(a) In exchange for the contribution of the Contributed Interests, the Partnership shall (i) (A) make a cash distribution to VTDC of $571,220,000 (the “Cash Distribution”) and (B) issue 1,508,980 Common Units to VRNO and 399,120 Common Units to VTDC (collectively, the “Unit Consideration” and, together with the Cash Distribution, the “Total Consideration”) and (ii) issue 38,941 general partner units representing general partner interests in the Partnership (the “New General Partner Units”) to the General Partner.
(b) The Cash Distribution shall be paid by wire transfer(s) of immediately available funds to the account(s) specified by the Contributors and the Unit Consideration shall be issued to the Contributors in book-entry form, in each case within three (3) Business Days of Closing.
2.3 Proration of Certain Taxes.
(a) On the Closing Date, or as promptly as practicable following the Closing Date, but in no event later than 120 calendar days thereafter, the real and personal property taxes with respect to the Contributed Entities shall be prorated between the Partnership, on the one hand, and the Contributors, on the other hand, effective as of the Effective Time, with the Contributors being responsible for amounts related to the period prior to but excluding the Effective Time and the Partnership being responsible for amounts related to the period at and after the Effective Time. If the final property tax rate or final assessed value for the current tax year is not established by the Closing Date, the prorations shall be made on the basis of the rate or assessed value in effect for the preceding tax year and shall be adjusted when the exact amounts are determined. All such prorations shall be based upon the most recent available assessed value available prior to the Closing Date.
(b) With respect to any tax return covering a taxable period ending on or before the Closing Date that is required to be filed after the Closing Date with respect to any Contributed Entity that is not described in Section 2.3(a), the Contributors shall cause such tax return to be prepared, shall cause to be included in such tax return all tax items required to be included therein, shall furnish a copy of such tax return to the Partnership, shall cause such tax return to be filed timely with the appropriate taxing authority, and shall be responsible for the timely payment (and entitled to any refund) of all taxes due with respect to the period covered by such tax return.
(c) With respect to any tax return covering a taxable period beginning on or before the Closing Date and ending after the Closing Date that is required to be filed after the Closing Date with respect to any Contributed Entity, the Partnership shall cause such tax return to be prepared, shall cause to be included in such tax return all tax items required to be included therein, shall furnish a copy of such tax return to the Contributors, shall file timely such tax return with the appropriate taxing authority, and shall be responsible for the timely payment of all taxes due with respect to the period covered by such tax return. The Partnership shall determine the amount of tax due that is not described in Section 2.3(a) with respect to the portion of the period ending on the Closing Date based on a closing of the books method with respect to the applicable Contributed Entity (the “Contributor Tax Obligation”), and shall notify the Contributors of its determination of the Contributor Tax Obligation. The applicable Contributor(s) shall pay to the Partnership an amount equal to the Contributor Tax Obligation not later than five (5) days after the filing of such tax return. Any refund attributable to tax returns filed pursuant to this Section 2.3(c) shall be apportioned between the Partnership and the Contributors in a manner consistent with calculation of the Contributor Tax Obligation.
(d) If the Partnership, on the one hand, or the Contributors, on the other hand, pay any tax agreed to be borne by another Party hereunder, such other Party shall promptly reimburse the paying Party for the amounts so paid. If any Party receives any tax refund or credit applicable to a tax paid by another Party hereunder, the receiving Party shall promptly pay such amounts to the Party entitled thereto.
2.4 Certain Adjustments. On the Closing Date, or as promptly as practicable following the Closing Date, but in no event later than 60 calendar days thereafter, the following items shall be prorated between the Partnership, on the one hand, and the Contributors, on the other hand, effective as of the Effective Time, with the Contributors being responsible for amounts that relate to the period prior to but excluding the Effective Time, and the Partnership being responsible for amounts that relate to the period at and after the Effective Time: (i) rents and other amounts payable under any Contracts to which the Contributed Entities are a party or which are otherwise being assigned to the Partnership or its Affiliates by the Contributors in connection herewith, (ii) fees and charges paid or payable to any Governmental Authority exclusively with respect to any Contributed Entity or its assets or operations (including under any Permits assigned to the Partnership or its Affiliates hereunder), and (iii) charges for water, sewer, telephone, electricity, natural gas and other utilities serving any assets or operations of the Contributed Entities. If any such amounts are not known at Closing, then such proration shall be made based on the applicable the Contributor’s good faith estimate, with a true-up payment to be made from the applicable Contributor to the Partnership, or vice-versa, as promptly as practicable after exact amounts are determined.
ARTICLE III
CLOSING
3.1 Closing. The closing of the transactions contemplated hereby (the “Closing”) shall take place on March 1, 2015 (the “Closing Date”), and the Closing is deemed to be effective as of 12:01 a.m., San Antonio, Texas time, on the Closing Date (the “Effective Time”).
3.2 Deliveries by the Contributors. At the Closing, the Contributors shall deliver, or cause to be delivered, to the Partnership the following:
(a) Counterparts of the Restated Schedules substantially in the form attached hereto as Exhibit A, duly executed by Valero and each applicable subsidiary of Valero (excluding the General Partner and the Partnership and its subsidiaries);
(b) a counterpart of the Terminal Services Schedule (Houston Terminal) substantially in the form attached hereto as Exhibit B (the “Houston Services Schedule”), duly executed by VMSC;
(c) a counterpart of the Terminal Services Schedule (St. Charles Terminal) substantially in the form attached hereto as Exhibit C (the “St. Charles Services Schedule”), duly executed by VMSC;
(d) counterparts of the lease agreements substantially in the forms attached hereto as Exhibits D-1 and D-2 (the “Lease Agreements”), duly executed by the Contributors or the Affiliates of the Contributors that are parties thereto;
(e) a counterpart of the Assignment of Membership Interests, substantially in the form attached hereto as Exhibit E (the “Assignment Document”), duly executed by the Contributors and the General Partner;
(f) counterparts of the Amended and Restated Services and Secondment Agreement substantially in the form attached hereto as Exhibit F (the “Amended Services and Secondment Agreement”), duly executed by Valero Services, Inc. and Valero Refining Company-Tennessee, L.L.C.; and
(g) counterparts of the Subordinated Credit Agreement substantially in the form attached hereto as Exhibit G (the “Intercompany Loan Agreement”), duly executed by Valero; and
(h) an executed statement described in Treasury Regulation § 1.1445-2(b)(2) certifying that such Contributor is not a foreign person within the meaning of the Internal Revenue Code and the Treasury Regulations promulgated thereunder.
3.3 Deliveries by the Partnership. At the Closing, the Partnership shall deliver, or cause to be delivered, to the Contributors the following:
(a) counterparts of the Restated Schedules, duly executed by the General Partner, the Partnership and its applicable subsidiaries;
(b) a counterpart of the Houston Services Schedule, duly executed by Valero Operating;
(c) a counterpart of the St. Charles Services Schedule, duly executed by Valero Operating;
(d) counterparts of the Lease Agreements, each duly executed by the Partnership or the Affiliates of the Partnership that are parties thereto;
(e) a counterpart of the Assignment Document, duly executed by the Partnership;
(f) a counterpart of the Amended Services and Secondment Agreement, duly executed by the General Partner; and
(g) a counterpart of the Intercompany Loan Agreement, duly executed by the Partnership.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS
Each Contributor hereby represents and warrants, jointly and severally, to the Partnership that, as of the date of this Agreement:
4.1 Organization; Ownership; Preemptive Rights.
(a) VTDC is a corporation duly incorporated and validly existing, under the Applicable Laws of the State of Delaware. VTDC has full corporate power and authority to carry on its business and to own and use the assets owned or operated by it and is in good standing under the Applicable Laws of each jurisdiction where such qualification is required, except where the lack of such qualification, individually or in the aggregate, would not have a Material Adverse Effect with respect to VTDC, the Business or the Contributed Entities, taken as a whole.
(b) VRNO is a limited liability company duly formed and validly existing, under the Applicable Laws of the State of Delaware. VRNO has full limited liability company power and authority to carry on its business and to own and use the assets owned or operated by it and is in good standing under the Applicable Laws of each jurisdiction where such qualification is required, except where the lack of such qualification, individually or in the aggregate, would not have a Material Adverse Effect with respect to VRNO, the Business or the Contributed Entities, taken as a whole.
(c) Valero Houston is a limited liability company duly formed and validly existing, under the Applicable Laws of the State of Delaware. Valero Houston has full limited liability company power and authority to carry on its business and to own and use the assets owned or operated by it and is in good standing under the Applicable Laws of each jurisdiction where such qualification is required, except where the lack of such qualification, individually or in the aggregate, would not have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole. Valero Houston does not own or hold an ownership interest in any other entities. The Contributors have heretofore delivered to the Partnership true, complete and correct copies of the certificate of formation and limited liability company agreement of Valero Houston, and no breach or violation thereof has occurred and is continuing.
(d) Valero Louisiana is a limited liability company duly formed and validly existing, under the Applicable Laws of the State of Delaware. Valero Louisiana has full limited liability company power and authority to carry on its business and to own and use the assets owned or operated by it and is in good standing under the Applicable Laws of each jurisdiction where such qualification is required, except where the lack of such qualification, individually or in the aggregate, would not have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole. Valero Louisiana does not own or hold an ownership interest in any other entities. The Contributors have heretofore delivered to the Partnership true, complete and correct copies of the certificate of formation and limited liability company agreement of Valero Louisiana, and no breach or violation thereof has occurred and is continuing.
(e) The Contributed Interests have been duly authorized and validly issued in accordance with the respective limited liability company agreements of Contributed Entities, and are fully paid (to the extent required under the respective limited liability company agreements of the Contributed Entities) and nonassessable (except as such nonassessability may be affected by matters described in Sections 18-607 and 18-804 of the Delaware Limited Liability Company Act). VRNO owns the Louisiana Interests and VTDC owns the Houston Interests, in each case free and clear of all Encumbrances, other than transfer restrictions under applicable federal and state securities laws. There is no other membership or equity interest (or any interest convertible into or exchangeable or exercisable for any membership or equity interest) in any of the Contributed Entities that is outstanding.
(f) No Person (other than the Partnership and its subsidiaries) has any statutory or contractual preemptive or other right of any kind (including any right of first offer or refusal) to acquire any securities of the Contributed Entities.
4.2 Authorization. Each Contributor and Affiliate thereof party to a Contributor Ancillary Document has full corporate, limited partnership or limited liability company power and authority, as the case may be, to execute, deliver, and perform this Agreement and any Contributor Ancillary Documents to which it is a party. The execution, delivery, and performance by each Contributor of this Agreement and by each Contributor and Affiliate thereof party to a Contributor Ancillary Document of the Contributor Ancillary Documents to which it is a party and the consummation by each Contributor and Affiliate thereof party to a Contributor Ancillary Document of the transactions contemplated hereby and thereby, have been duly authorized by all necessary
corporate, limited partnership or limited liability company action, as the case may be. This Agreement has been duly executed and delivered by each Contributor and constitutes, and each Contributor Ancillary Document executed or to be executed by each Contributor (or Affiliate thereof) party thereto has been, or when executed will be, duly executed and delivered by each Contributor (or Affiliate thereof) party thereto and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of each such party thereto, enforceable against each such party thereto in accordance with their terms, except to the extent that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Applicable Laws affecting creditors’ rights and remedies generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.
4.3 No Conflicts or Violations; No Consents or Approvals Required. Except with respect to Right-of-Way Consents, the execution, delivery and performance of this Agreement and each Contributor Ancillary Document by the Contributors and their Affiliates party thereto does not, and the consummation of the transactions contemplated hereby and thereby will not, (a) violate, conflict with, or result in any breach of any provision of the certificates of incorporation or bylaws or similar governing documents of the Contributors or such Affiliates, (b) violate in any material respect any Applicable Law to which any of the Contributors or such Affiliates is subject or to which any of their respective assets are subject or (c) result in a breach of, constitute a default under, result in the acceleration of, result in the loss of a material benefit under, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice or trigger any rights to payment or other compensation under (in each case, with or without notice or lapse of time or both) any Contract to which any of the Contributors or the Contributed Entities is a party or by which any such entity is bound, or that could prevent or materially delay the consummation of the transactions contemplated by this Agreement. Except with respect to Right-of-Way Consents and Environmental Permits, no Consent of any Governmental Authority or third party is required in connection with the execution, delivery and performance of this Agreement or any Contributor Ancillary Document by the Contributors and their Affiliates party thereto or the consummation of the transactions contemplated hereby or thereby.
4.4 Absence of Litigation; Compliance with Law. Except with respect to any Claims under any Environmental Laws which are addressed exclusively in Section 4.11, there is no Claim pending or, to the knowledge of the Contributors, threatened against any of the Contributors, the Contributed Entities or any of their Affiliates or relating to any of their respective assets which, if adversely determined, would, individually or in the aggregate, have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole. To the knowledge of the Contributors, the operations and business of each of the Contributed Entities have been conducted by the Contributed Entities in substantial compliance with all Applicable Laws except (i) as would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole, and (ii) with respect to Environmental Laws, which are addressed exclusively in Section 4.11.
4.5 Bankruptcy. There are no bankruptcy, reorganization or rearrangement proceedings under any bankruptcy, insolvency, reorganization, moratorium or other similar Applicable Laws
with respect to creditors pending against, being contemplated by, or, to the knowledge of the Contributors, threatened, against any of the Contributors or the Contributed Entities.
4.6 Brokers and Finders. No investment banker, broker, finder, financial advisor or other intermediary has been (directly or indirectly) retained by or is authorized to act on behalf of any of the Contributors or their Affiliates who is entitled to receive from the Partnership any fee or commission in connection with the transactions contemplated by this Agreement.
4.7 Tax Matters.
(a) Except as would not result in a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole, (i) all tax returns required to be filed by or with respect to the Contributed Entities and their respective assets and operations have been duly filed on a timely basis (taking into account all extensions of due dates) and such tax returns are true, correct and complete; (ii) all taxes owed by the Contributed Entities or with respect to their respective assets and operations which are or have become due have been timely paid in full; (iii) there are no Encumbrances for taxes on any of the assets of the Contributed Entities, other than those not yet due and payable and which will, if payable, be paid by the Contributors; (iv) there is not in force any extension of time with respect to the due date for the filing of any tax return of or with respect to the Contributed Entities nor is there any outstanding agreement or waiver by or with respect to the Contributed Entities extending the period for assessment or collection of any tax; and (v) there is no pending or, to the knowledge of the Contributors, threatened action, audit, required for ruling, proceeding or investigation for assessment or collection of tax and no tax assessment, deficiency or adjustment has been asserted or proposed in writing with respect to Contributed Entities or their respective assets that has not been resolved.
(b) None of the Contributed Entities is a party to any tax allocation or tax sharing agreement that will be binding on such entity after Closing.
(c) Immediately prior to Closing, the Contributed Entities will be partnerships or disregarded entities for federal income tax purposes.
4.8 Title to and Condition of Assets.
(a) The Contributed Entities have good and valid title to their respective assets (including those comprising the Business), free and clear of all Encumbrances other than Permitted Encumbrances. The assets of the Contributed Entities, when considered together with the services to be provided pursuant to the Ancillary Documents, are sufficient to conduct the operations and business historically conducted by Valero and its Affiliates with respect to the Business.
(b) Except as would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole, to the knowledge of the Contributors, the assets owned or operated by the Contributed Entities are, in the aggregate, in good operating condition and repair (normal wear and tear excepted), free from any material defects (other than Permitted Encumbrances) and suitable for the purposes for which they are currently used.
4.9 Financial Matters.
(a) The Contributors have made available to the Partnership true, complete and correct copies of the unaudited annual combined balance sheet of the Business as of December 31, 2014, and the related unaudited statement of income for the year then ended (collectively, the “Financial Statements”). Except as noted in the Financial Statements (including any notes thereto), the Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and present fairly the financial condition of the Business as of such dates and the results of operations of the Business for such periods (other than for changes in accounting principles disclosed therein and, with respect to the unaudited financial statements, for normal and recurring year-end adjustments and the absence of general and administrative expense allocations and financial footnotes).
(b) There are no liabilities or obligations of the Contributed Entities (whether accrued, absolute, contingent or otherwise) and there are no facts or circumstances that would result in any such liabilities or obligations, other than (i) liabilities or obligations reflected or reserved against in the Financial Statements, (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practices since December 31, 2014, (iii) liabilities or obligations arising under executory Contracts entered into in the ordinary course of business consistent with past practices, (iv) liabilities not required to be presented by GAAP in unaudited financial statements, (v) liabilities or obligations under this Agreement and (vi) other liabilities or obligations which, in the aggregate, would not have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole.
4.10 No Adverse Changes. Since December 31, 2014, except as disclosed in Valero’s public filings with the Securities and Exchange Commission, there has not been any Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole.
4.11 Environmental Matters. Except as do not (individually or in the aggregate) have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole, the Business and the Contributed Entities (a) are in substantial compliance with all applicable Environmental Laws and Environmental Permits, (b) are not the subject of any outstanding administrative or judicial order, judgment, agreement or arbitration award from any Governmental Authority under any Environmental Law relating to the Contributed Entities or their assets and requiring remediation or the payment of a fine or penalty, (c) have all Environmental Permits needed to operate the assets of the Contributed Entities as they have been operated immediately prior to Closing and (d) are not subject to any pending Claims under any Environmental Laws with respect to which any of the Contributors or the Contributed Entities have been notified in writing by or on behalf of a plaintiff or claimant.
4.12 Contracts.
(a) The Contributors have made available to the Partnership a correct and complete copy of (i) each Contract (other than any Contract granting any Permits, servitudes, easements or rights-of-way) materially affecting the Contributed Entities and their assets, the loss of which could have a Material Adverse Effect with respect to the Business or the Contributed
Entities, taken as a whole, and (ii) each other Contract to which any Contributor or Contributed Entity is a party that provides for revenues to or commitments of a Contributed Entity or with respect to its assets in an amount greater than $100,000 during a calendar year. The contracts described in clauses (i) and (ii) are referred to herein as the “Material Contracts.”
(b) Each Material Contract is in full force and effect, and none of the Contributors, the Contributed Entities or, to the knowledge of the Contributors, any other party, is in breach or default thereunder and no event has occurred that upon receipt of notice or lapse of time or both would constitute any breach or default thereunder, except for such breaches or defaults as would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole.
4.13 Employees. The Contributed Entities have no employees.
4.14 Investment Company Act. None of the Contributors or the Contributed Entities is subject to regulation under the Investment Company Act of 1940, as amended.
4.15 Acquisition as Investment. The Contributors are acquiring the Unit Consideration for their own account as an investment without the present intent to sell or offer the same to any other Person or effect a distribution of the Unit Consideration. The Contributors acknowledge that the Unit Consideration has not been registered pursuant to the Securities Act or any state securities laws, and that none of the Unit Consideration may be transferred except pursuant to registration or an applicable exemption thereunder. Each of the Contributors is an “accredited investor” as defined under Rule 501 promulgated under the Securities Act.
4.16 Conflicts Committee Matters.
(a) No representation or warranty or other statement made by the Contributors in this Agreement, the Contributor Ancillary Documents, the certificates delivered pursuant to this Agreement or otherwise in connection with the transactions contemplated by this Agreement contains any untrue statement of material fact or omits to state a material fact necessary to make the statements in this Agreement or therein, in light of the circumstances in which they were made, not misleading.
(b) No Contributor has intentionally withheld disclosure from the Conflicts Committee or its advisors of any fact that would, individually or in the aggregate, have a Material Adverse Effect with respect to the Business or the Contributed Entities, taken as a whole.
(c) The projections and budgets provided in writing to the Conflicts Committee (including those provided to any financial advisor to the Conflicts Committee) as part of the Conflicts Committee’s review in connection with this Agreement have a reasonable basis and are consistent with the Contributors’ management’s current expectations with respect to the Business and the Contributed Entities. All other financial and operational information provided in writing to the Conflicts Committee (including to any financial advisor to the Conflicts Committee) as part of its review of the proposed transaction is derived from and is consistent with the Contributors’, and the Contributed Entities’ books and records, as applicable.
4.17 Opportunity for Independent Investigation. Each of the Contributors, together with its Affiliates, has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the transactions contemplated herein and in the Ancillary Documents. Each of the Contributors has conducted its own independent review and analysis of the Partnership and the Unit Consideration, including with respect to the Partnership’s liabilities, results of operations, financial condition and prospects, and acknowledges that it has been provided access to personnel, properties, premises and records of the Partnership. In entering into this Agreement, each of the Contributors has relied solely upon the representations, warranties and covenants contained herein and in the Ancillary Documents and upon its own investigation and analysis of the Partnership and the Unit Consideration (such investigation and analysis having been performed by such Contributor).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership hereby represents and warrants to the Contributors that, as of the date of this Agreement:
5.1 Organization. The Partnership is a limited partnership, duly formed and validly existing and in good standing under the Applicable Laws of the State of Delaware.
5.2 Authorization. The Partnership and each Affiliate thereof party to a Partnership Ancillary Document has full limited partnership or limited liability company power and authority to execute, deliver, and perform this Agreement and any Partnership Ancillary Documents to which it is a party. The execution, delivery, and performance by the Partnership of this Agreement and by the Partnership and each Affiliate thereof party to a Partnership Ancillary Document of the Partnership Ancillary Documents to which it is a party and the consummation by the Partnership of the transactions contemplated hereby and thereby, have been duly authorized by all necessary limited partnership or limited liability company action as the case may be. This Agreement has been duly executed and delivered by the Partnership and constitutes, and each Partnership Ancillary Document executed or to be executed by the Partnership (or Affiliate thereof party thereto) has been, or when executed will be, duly executed and delivered by the Partnership (or Affiliate thereof party thereto) and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of the Partnership (or Affiliate thereof party thereto), enforceable against such party in accordance with their terms, except to the extent that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Applicable Laws affecting creditors’ rights and remedies generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.
5.3 Validly Issued Units. Upon issuance in connection with the Closing, the Unit Consideration and the New General Partner Units will be validly issued, fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware Revised Limited Partnership Act) and free of any preemptive or similar rights.
5.4 No Conflicts or Violations; No Consents or Approvals Required. The execution, delivery and performance by the Partnership of this Agreement and by the Partnership and each Affiliate thereof party to a Partnership Ancillary Document of the Partnership Ancillary Documents to which it is a party does not, and the consummation of the transactions contemplated hereby and thereby will not, (a) violate, conflict with, or result in any breach of any provision of the certificate of limited partnership or the agreement of the limited partnership or other similar governing documents of the Partnership or such Affiliates, (b) violate in any material respect any Applicable Law to which the Partnership or such Affiliates is subject or (c) result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice or trigger any rights to payment or other compensation under any Contract to which the Partnership is a party or by which the Partnership is bound that could prevent or materially delay the consummation of the transactions contemplated by this Agreement. Except with respect to Right-of-Way Consents and Environmental Permits, no Consent of any Governmental Authority is required in connection with the execution, delivery and performance by the Partnership of this Agreement and by the Partnership and each Affiliate thereof party to a Partnership Ancillary Document of the Partnership Ancillary Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby.
5.5 Absence of Litigation. There is no Claim pending or, to the knowledge of the Partnership, threatened against the Partnership or its Affiliates relating to the transactions contemplated by this Agreement or the Ancillary Documents or which, if adversely determined, would reasonably be expected to materially impair the ability of the Partnership to perform its obligations and agreements under this Agreement or the Partnership Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby.
5.6 Brokers and Finders. No investment banker, broker, finder, financial advisor or other intermediary has been (directly or indirectly) retained by or is authorized to act on behalf of the Partnership or its Affiliates who is entitled to receive from the Contributors any fee or commission in connection with the transactions contemplated by this Agreement.
5.7 Opportunity for Independent Investigation. The Partnership, together with its Affiliates, has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the transactions contemplated herein and in the Ancillary Documents. The Partnership has conducted its own independent review and analysis of the Contributed Entities, including with respect to their liabilities, results of operations, financial condition and prospects, and acknowledges that the Partnership has been provided access to personnel, properties, premises and records of the Contributors and the Contributed Entities for such purpose. In entering into this Agreement, the Partnership has relied solely upon the representations, warranties and covenants contained herein and in the Ancillary Documents and upon its own investigation and analysis of the Contributed Entities (such investigation and analysis having been performed by the Partnership).
5.8 Acquisition as Investment. The Partnership is acquiring the Contributed Interests for its own account as an investment without the present intent to sell or offer the same to any other Person or effect a distribution of the Contributed Interests, other than the conveyance of the
Contributed Interests to Valero Operating. The Partnership acknowledges that the Contributed Interests are not registered pursuant to the Securities Act or any state securities laws, and that none of the Contributed Interests may be transferred except pursuant to registration or an applicable exemption thereunder. The Partnership is an “accredited investor” as defined under Rule 501 promulgated under the Securities Act.
ARTICLE VI
COVENANTS
6.1 Additional Agreements. Subject to the terms and conditions of this Agreement, the Ancillary Documents and the Omnibus Agreement, each of the Parties shall use its commercially reasonable efforts to do, or cause to be taken all action and to do, or cause to be done, all things necessary, proper or advisable under Applicable Laws to consummate and make effective the transactions contemplated by this Agreement. If at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, the Parties and their duly authorized representatives shall use commercially reasonable efforts to promptly take all such action.
6.2 Further Assurances. After the Closing, each Party shall use its commercially reasonable efforts to take such further actions, including obtaining or transferring to the other Party all necessary Permits, Consents, orders and Contracts, and executing and causing its Affiliates to execute such further documents, as may be necessary or reasonably requested by another Party in order to effectuate the intent of this Agreement and the Ancillary Documents and to provide such other Party with the intended benefits of this Agreement and the Ancillary Documents. Without limiting the generality of the foregoing, the Parties acknowledge that the Parties have used their good faith efforts to identify all of the assets and operations to be contributed to the Partnership in connection with this Agreement. However, due to the age of some of the assets or operations and the difficulties in locating appropriate data with respect to some of the assets included in these operations, it is possible that some of the assets intended to be contributed ultimately to the Partnership were not identified and therefore are not transferred (directly or indirectly) to the Partnership as of the Effective Time. To the extent that any assets were not identified but form an integral part of the assets and operations of the Contributed Entities and are not needed for the conduct of any of the businesses conducted by Valero and its Affiliates, then the intent of the Parties is that all such unidentified assets are intended to be conveyed to the Partnership pursuant to this Agreement. To the extent any such assets are identified at a later date, the Parties shall take all appropriate action required in order to convey such assets to the Partnership. Likewise, to the extent that any assets or operations that are indirectly conveyed to the Partnership hereunder are later identified by the Parties as assets and operations that the Parties did not intend to convey to the Partnership, the Parties shall take all appropriate action required to convey such assets and operations to the appropriate Contributor.
6.3 Cooperation on Tax Matters. Following the Closing Date, the Parties shall cooperate fully with each other and shall make available to the other, as reasonably requested and at the expense of the requesting Party, and to any Governmental Authority responsible for the administration of any tax, all information, records or documents relating to tax liabilities or potential tax liabilities of the Contributed Entities for all periods at or prior to the Effective Time and any information
which may be relevant to determining the amount payable hereunder, and shall preserve all such information, records and documents at least until the expiration of any applicable statute of limitations or extensions thereof.
6.4 Cooperation for Litigation and Other Actions. Each Party shall cooperate reasonably with each other Party, at the requesting Party’s expense (but including only out-of-pocket expenses to unaffiliated third parties, photocopying and delivery costs and not the costs incurred by any Party for the wages or other benefits paid to its officers, directors or employees), in furnishing reasonably available information, testimony and other assistance in connection with any Claims or other disputes involving any of the Parties hereto (other than in connection with disputes between the Parties).
6.5 Retention of and Access to Books and Records.
(a) As promptly as practicable and in any event before 90 days after the Closing Date, the Contributors will deliver or cause to be delivered to the Partnership, the Books and Records that are in the possession or control of the Contributors or their Affiliates.
(b) The Partnership agrees to afford the Contributors and their Affiliates and their respective accountants, counsel and other designated individuals, during normal business hours, upon reasonable request, at a mutually agreeable time, full access to and the right to make copies of the Books and Records at no cost to the Contributors or their Affiliates (other than for reasonable out-of-pocket expenses); provided that such access will not be construed to require the disclosure of Books and Records that would cause the waiver of any attorney-client, work product or like privilege; provided, further, that in the event of any litigation, nothing herein shall limit any Party’s rights of discovery under Applicable Law. Without limiting the generality of the preceding sentences, the Partnership agrees to provide the Contributors and their Affiliates reasonable access to and the right to make copies of the Books and Records after the Closing for the purposes of assisting the Contributors and their Affiliates (i) in complying with the Contributors’ obligations under this Agreement and any Ancillary Document, (ii) in adjusting, prorating and settling the charges and credits provided for under this Agreement and any Ancillary Document, (iii) in preparing tax returns, (iv) in responding to or disputing any tax audit, (v) in asserting, defending or otherwise dealing with any Claim or dispute, known or unknown, under this Agreement, (vi) in asserting, defending or otherwise dealing with any third-party Claim or dispute by or against the Contributors or their Affiliates relating to the Contributed Entities or (vii) in performing their obligations under the Omnibus Agreement.
(c) Notwithstanding the foregoing provisions of this Section or anything else to the contrary in this Agreement, with respect to any Books and Records the transfer or other disclosure of which to the Partnership would waive (or would reasonably risk the waiver of) any attorney/client, work product, tax practitioner, audit or other privilege relating to the Retained Liabilities, neither Contributor shall be required to transfer such Books and Records (or any copies thereof) to the Partnership until the appropriate Parties enter into a mutually-agreed joint defense agreement to allow for the sharing of common defense privileged materials.
6.6 Tanks Under Construction. Following the Closing, VTDC agrees that it will complete or cause to be completed, the construction of tanks 211 and 212 that are owned by Valero Houston (the “Under Construction Tanks”) in an expeditious, diligent and good and workmanlike manner and at VTDC’s sole cost and expense, and the Partnership shall be entitled to participate in all stages of planning, scheduling, implementing and oversight of construction. Any Losses, Claims and Encumbrances that may arise out of the performance of such work on the Under Construction Tanks shall constitute Partnership Indemnified Costs, except to the extent they (a) arise out of the acts, omissions or negligence of any of the Partnership Indemnified Parties or (b) constitute Special Damages (other than Special Damages of the types identified in clauses (a) and (b) of the definition of Partnership Indemnified Costs). Neither the Contributors nor their Affiliates shall be entitled to any additional consideration by reason of VTDC’s undertakings in this Section 6.6, other than the Total Consideration, nor shall VTDC’s undertakings in this Section 6.6 affect the Contributors’ or their Affiliates’ obligations under the Houston Services Schedule.
6.7 NYSE. Prior to the issuance of the Unit Consideration, the Partnership shall cause the Unit Consideration to be approved for listing on the New York Stock Exchange.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification. From and after the Closing and subject to the provisions of this Article VII, (i) the Contributors, jointly and severally, agree to indemnify and hold harmless the Partnership Indemnified Parties from and against any and all Partnership Indemnified Costs and (ii) the Partnership agrees to indemnify and hold harmless the Contributor Indemnified Parties from and against any and all Contributor Indemnified Costs. For the avoidance of doubt, but subject to Section 7.5, the foregoing indemnification is intended to be in addition to and not in limitation of any indemnification to which the Parties may be entitled under the Ancillary Documents. For purposes of calculating Indemnified Costs (but not determining whether a breach has occurred), no effect shall be given to any qualifications of representations or warranties as to materiality or Material Adverse Effect.
7.2 Defense of Third-Party Claims. An Indemnified Party shall give prompt written notice to the Contributors or the Partnership, as applicable (the “Indemnifying Party”), of the commencement or assertion of any Claim by a third party (collectively, a “third-party action”) in respect of which such Indemnified Party seeks indemnification hereunder. Any failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability that it, he, or she may have to such Indemnified Party under this Article VII unless the failure to give such notice materially and adversely prejudices the Indemnifying Party. The Indemnifying Party shall have the right to assume control of the defense of, settle, or otherwise dispose of such third-party action on such terms as it deems appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at its own expense, to participate in the defense of such third-party action (provided, however, that the Indemnifying Party shall pay the attorneys’ fees of the Indemnified Party if (i) the employment of separate counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such third-party
action, (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to have charge of such third-party action, (iii) the Indemnified Party shall have reasonably concluded that there may be defenses available to such Indemnified Party that are different from or additional to those available to the Indemnifying Party, or (iv) the Indemnified Party’s counsel shall have advised the Indemnified Party in writing, with a copy delivered to the Indemnifying Party, that there is a material conflict of interest that could violate applicable standards of professional conduct to have common counsel);
(b) The Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into or making any settlement, compromise, admission, or acknowledgment of the validity of such third-party action or any liability in respect thereof if, pursuant to or as a result of such settlement, compromise, admission, or acknowledgment, injunctive or other equitable relief would be imposed against the Indemnified Party or if, in the opinion of the Indemnified Party, such settlement, compromise, admission, or acknowledgment could have a Material Adverse Effect with respect to the Indemnified Party;
(c) The Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement without the consent of the Indemnified Party that does not include as an unconditional term thereof the giving by each claimant or plaintiff to the Indemnified Party of a release from all liability in respect of such third-party action; and
(d) The Indemnifying Party shall not be entitled to control (but shall be entitled to participate at its own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, the defense or settlement, compromise, admission, or acknowledgment of any third-party action (i) as to which the Indemnifying Party fails to assume the defense within a reasonable length of time or (ii) to the extent the third-party action seeks an order, injunction, or other equitable relief against the Indemnified Party which, if successful, would materially adversely affect the business, operations, assets, or financial condition of the Indemnified Party; provided, however, that the Indemnified Party shall make no settlement, compromise, admission, or acknowledgment that would give rise to liability on the part of any Indemnifying Party without the prior written consent of such Indemnifying Party.
The Parties shall extend reasonable cooperation in connection with the defense of any third-party action pursuant to this Article VII and, in connection therewith, shall furnish such records, information, and testimony and attend such conferences, discovery proceedings, hearings, trials, and appeals as may be reasonably requested.
7.3 Direct Claims. In any case in which an Indemnified Party seeks indemnification hereunder which is not subject to Section 7.2 because no third-party action is involved, the Indemnified Party shall notify the Indemnifying Party in writing of any Indemnified Costs which such Indemnified Party claims are subject to indemnification under the terms hereof. Subject to the limitations set forth in Section 7.4(a), the failure of the Indemnified Party to exercise promptness in such notification shall not amount to a waiver of such claim unless the resulting delay materially prejudices the position of the Indemnifying Party with respect to such claim.
7.4 Limitations. The following provisions of this Section 7.4 shall limit the indemnification obligations hereunder:
(a) The Indemnifying Party shall not be liable for any Indemnified Costs pursuant to this Article VII unless a written claim for indemnification in accordance with Section 7.2 or Section 7.3 is given by the Indemnified Party to the Indemnifying Party with respect thereto on or before 5:00 p.m., San Antonio, Texas time, on or prior to the date that is 18 months after of the Closing Date; provided, however, that written claims for indemnification (i) for Indemnified Costs arising out of a breach of any representation or warranty contained in Sections 4.1, 4.2, 4.6, 5.1, 5.2 and 5.6 (the “Fundamental Representations”) may be made at any time and (ii) for Indemnified Costs arising out of a breach of any covenant may be made at any time prior to the expiration of such covenant according to its terms.
(b) An Indemnifying Party shall not be obligated to pay for any Indemnified Costs under this Article VII until the amount of all such Indemnified Costs exceeds, in the aggregate, $5,034,150 (with the Indemnifying Party only being responsible for Indemnified Costs in excess of such amount). The aggregate liability of an Indemnifying Party under this Article VII shall not exceed $100,683,000. The limitations in the previous two sentences shall not apply to Indemnified Costs to the extent such costs arise out of a breach of any Fundamental Representations.
(c) Each Party acknowledges and agrees that, after the Closing Date, notwithstanding any other provision of this Agreement to the contrary, the Partnership’s and the other Partnership Indemnified Parties’ and the Contributors’ and the other Contributor Indemnified Parties’ sole and exclusive remedy with respect to the Indemnified Costs shall be in accordance with, and limited by, the provisions set forth in this Article VII.
7.5 Remedies Under Ancillary Documents. Each Party acknowledges and agrees that this Article VII is not the remedy for and does not limit the Parties’ remedies for matters covered by the indemnification provisions contained in the Ancillary Documents. Any indemnification obligation of the Contributors to the Partnership Indemnified Parties, on the one hand, or the Partnership to the Contributor Indemnified Parties, on the other hand, pursuant to this Article VII shall be reduced by an amount equal to any indemnification recovery by such Indemnified Parties pursuant to the other Ancillary Documents between the Parties to the extent that such other indemnification recovery arises out of the same event or circumstance giving rise to the indemnification obligation of the Contributors or the Partnership, respectively, hereunder.
7.6 Tax Related Adjustments and Tax Reporting of Transactions.
(a) The Contributors and the Partnership agree that any payment of Indemnified Costs made hereunder will be treated by the Parties on their tax returns as an adjustment to the Total Consideration.
(b) Except as otherwise provided in clause (iii) of this Section 7.6(b), the Contributors and the Partnership further acknowledge and agree that the transactions described in this Agreement are properly characterized as transactions described in Sections 721(a) and 731 of the Code and agree to file all tax returns in a manner consistent with such treatment. In this regard,
the Contributors and the Partnership agree that the Cash Distribution shall be treated (i) as a “debt-financed transfer” to VTDC under Treasury Regulation Section 1.707-5(b) to the extent the cash is traceable under the principles of Treasury Regulation Section 1.163-8T to VTDC’s allocable share, determined under Treasury Regulation Section 1.707‑5(b)(2), of indebtedness of the Partnership, (ii) as a reimbursement of VRNO’s and VTDC’s capital expenditures (within the meaning of Treasury Regulation Section 1.707‑4(d)) with respect to the tankage and related assets owned by Valero Louisiana and/or Valero Houston, to the extent that VTDC provides to the Partnership on or before January 15, 2016 a statement that states the amount of qualifying capital expenditures and evidence satisfactory to the Partnership documenting the capital expenditures and their qualification, and (iii) as the proceeds of a sale by assets by VTDC to the Partnership to the extent clause (i), clause (ii), or any other exception to the “disguised sale” rules under Section 707 and the Treasury Regulations thereunder, are inapplicable. The parties acknowledge that VRNO, Valero Houston and Valero Louisiana are disregarded for federal income tax purposes as entities apart from VTDC; accordingly, references to VTDC in this Section include VRNO, Valero Houston or Valero Louisiana as the context requires. Except with the prior written consent of VTDC, the Partnership agrees to act at all times in a manner consistent with the foregoing intended treatment of the Cash Distribution, including, if required, disclosing the distribution of the Cash Distribution in accordance with the requirements of Treasury Regulation Section 1.707-3(c)(2).
7.7 Express Negligence Rule. THE FOREGOING INDEMNITIES ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING ANY EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE SOLE, CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE, STRICT LIABILITY OR FAULT OF ANY OF THE INDEMNIFIED PARTIES.
ARTICLE VIII
MISCELLANEOUS
8.1 WAIVERS AND DISCLAIMERS. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES AND OTHER COVENANTS AND AGREEMENTS MADE BY THE PARTIES IN THIS AGREEMENT, THE ANCILLARY DOCUMENTS AND THE OMNIBUS AGREEMENT, THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT NONE OF THE PARTIES HAS MADE, DOES NOT MAKE, AND EACH SUCH PARTY SPECIFICALLY NEGATES AND DISCLAIMS, ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT, REGARDING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE CONTRIBUTED ENTITIES OR THEIR ASSETS, INCLUDING THE WATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION OF THE ASSETS OF THE CONTRIBUTED ENTITIES GENERALLY, THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON THE ASSETS OF THE CONTRIBUTED ENTITIES, (B) THE INCOME TO BE DERIVED FROM THE CONTRIBUTED ENTITIES OR THEIR
ASSETS, (C) THE SUITABILITY OF THE ASSETS OF THE CONTRIBUTED ENTITIES FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED THEREON, (D) THE COMPLIANCE OF OR BY THE ASSETS OF THE CONTRIBUTED ENTITIES OR THEIR OPERATION WITH ANY APPLICABLE LAWS (INCLUDING ANY ZONING, ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS) OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE ASSETS OF THE CONTRIBUTED ENTITIES. EXCEPT TO THE EXTENT PROVIDED IN THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE OMNIBUS AGREEMENT, NONE OF THE PARTIES IS LIABLE OR BOUND IN ANY MANNER BY ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE CONTRIBUTED ENTITIES OR THEIR ASSETS FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. THIS SECTION 8.1 SHALL SURVIVE THE CONTRIBUTION OF THE CONTRIBUTED INTERESTS OR THE TERMINATION OF THIS AGREEMENT. THE PROVISIONS OF THIS SECTION 8.1 HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE CONTRIBUTED ENTITIES OR THEIR ASSETS THAT MAY ARISE PURSUANT TO APPLICABLE LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS SET FORTH IN THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE OMNIBUS AGREEMENT.
8.2 Expenses. Except as expressly provided in this Agreement, or as provided in the Ancillary Documents or the Omnibus Agreement, all costs and expenses incurred by the Parties in connection with the consummation of the transactions contemplated hereby shall be borne solely and entirely by the Party which has incurred such expense. For the avoidance of doubt, the Partnership shall be responsible for all costs and expenses (including attorneys’ fees and expenses) incurred by the conflicts committee of the General Partner in connection with this Agreement and the transactions contemplated herein.
8.3 Notices. All notices, requests, demands and other communications hereunder will be in writing and will be deemed to have been duly given: (a) if by transmission by facsimile or hand delivery, when delivered; (b) if mailed via the official governmental mail system, five (5) Business Days after mailing, provided that said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (c) if mailed by an internationally recognized overnight express mail service such as FedEx, UPS, or DHL Worldwide when delivery is confirmed by the carrier; or (d) if by e-mail, one (1) Business Day after delivery with receipt is confirmed. All notices will be addressed to the Parties at the respective addresses as follows:
if to the Contributors:
Valero Refining-New Orleans, L.L.C. and
Valero Terminaling and Distribution Company
c/o Valero Energy Corporation
One Valero Way
San Antonio, Texas 78249
Attn: President
Facsimile: (210) 345-2413
if to the Partnership:
Valero Energy Partners LP
c/o Valero Energy Partners GP LLC
One Valero Way
San Antonio, Texas 78249
Attn: President
Facsimile: (210) 370-5161
or to such other address or to such other person as any Party will have last designated by notice to the other Parties.
8.4 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be valid and effective under Applicable Law, but if any provision of this Agreement or the application of any such provision to any person or circumstance will be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith with a view to substitute for such provision a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.
8.5 Governing Law. This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.
8.6 Confidentiality.
(a) Obligations. Each Party shall use commercially reasonable efforts to retain the other Party’s Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 8.6. Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care.
(b) Required Disclosure. Notwithstanding Section 8.6(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, including the rules and regulations of the Securities and Exchange Commission, or is required to disclose pursuant to the rules and regulations of any national securities exchange upon which the receiving Party or its parent entity is listed, any of the disclosing Party’s Confidential Information, the receiving Party shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing
Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.
(c) Return of Information. Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party upon termination of this Agreement or destroyed with destruction certified by the receiving Party, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department for purposes of resolving any dispute that may arise hereunder or for complying with Applicable Law or the rules of any securities exchange applicable to the Party, and the receiving Party shall be entitled to retain any Confidential Information in electronic form stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies; provided, however, that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 8.6, and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.
(d) Receiving Party Personnel. The receiving Party will limit access to the Confidential Information of the disclosing Party to those of its employees, attorneys, representatives and contractors that have a need to know such information in order for the receiving Party to exercise or perform its rights and obligations under this Agreement and any Ancillary Document (the “Receiving Party Personnel”). The Receiving Party Personnel who have access to any Confidential Information of the disclosing Party will be made aware of the confidentiality provision of this Agreement, and will be required to abide by the terms thereof.
(e) Survival. The obligation of confidentiality under this Section 8.6 shall survive until the second anniversary the Closing Date.
8.7 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each Party hereto and their successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other Person (other than the Indemnified Parties with respect to Article VII and the Parties’ respective Affiliates with respect to Section 8.1) any rights or remedies of any nature whatsoever under or by reason of this Agreement.
8.8 Assignment of Agreement. Neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned by any Party without the prior written consent of the other Party hereto.
8.9 Captions. The captions in this Agreement are for purposes of reference only and shall not limit or otherwise affect the interpretation hereof.
8.10 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or portable document format (pdf)) for the convenience of the Parties hereto,
each of which counterparts will be deemed an original, but all of which counterparts together will constitute one and the same agreement.
8.11 Integration. This Agreement, the Ancillary Documents and the Omnibus Agreement supersede any previous understandings or agreements among the Parties, whether oral or written, with respect to their subject matter. This Agreement, the Ancillary Documents and the Omnibus Agreement contain the entire understanding of the Parties with respect to the subject matter hereof and thereof. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or form part of this Agreement, the Ancillary Documents or the Omnibus Agreement unless it is contained in a written amendment hereto or thereto and executed by the Parties hereto or thereto after the date of this Agreement, the Ancillary Documents or the Omnibus Agreement.
8.12 Amendment; Waiver. This Agreement may be amended only in a writing signed by all Parties. Any waiver of rights hereunder must be set forth in writing. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect, limit or waive any Party’s rights at any time to enforce strict compliance thereafter with every term or condition of this Agreement.
ARTICLE IX
INTERPRETATION
9.1 Interpretation. It is expressly agreed that this Agreement shall not be construed against any Party, and no consideration shall be given or presumption made, on the basis of who drafted this Agreement or any particular provision hereof or who supplied the form of Agreement. Each Party agrees that this Agreement has been purposefully drawn and correctly reflects its understanding of the transaction that this Agreement contemplates. In construing this Agreement:
(a) examples shall not be construed to limit, expressly or by implication, the matter they illustrate;
(b) the word “includes” and its derivatives means “includes, but is not limited to” and corresponding derivative expressions;
(c) a defined term has its defined meaning throughout this Agreement and each Exhibit to this Agreement, regardless of whether it appears before or after the place where it is defined;
(d) each Exhibit to this Agreement is a part of this Agreement, but if there is any conflict or inconsistency between the main body of this Agreement and any Exhibit, the provisions of the main body of this Agreement shall prevail;
(e) the term “cost” includes expense and the term “expense” includes cost;
(f) the headings and titles herein are for convenience only and shall have no significance in the interpretation hereof;
(g) currency amounts referenced herein, unless otherwise specified, are in U.S. Dollars;
(h) unless the context otherwise requires, all references to time shall mean time in San Antonio, Texas;
(i) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified; and
(j) if a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).
9.2 References, Gender, Number. All references in this Agreement to an “Article,” “Section,” “subsection” or “Exhibit” shall be to an Article, Section, subsection or Exhibit of this Agreement, unless the context requires otherwise. Unless the context clearly requires otherwise, the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer to this Agreement as a whole and not to a particular Article, Section, subsection, clause or other subdivision hereof. Cross references in this Agreement to a subsection or a clause within a Section may be made by reference to the number or other subdivision reference of such subsection or clause preceded by the word “Section.” Whenever the context requires, the words used herein shall include the masculine, feminine and neuter gender, and the singular and the plural.
[Signature page follows.]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.
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VALERO REFINING-NEW ORLEANS, L.L.C. | | | VALERO TERMINALING AND DISTRIBUTION COMPANY |
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By: | /s/ R. Lane Riggs | | | By: | /s/ R. Lane Riggs |
Name: R. Lane Riggs Title: Executive Vice President | | | Name: R. Lane Riggs Title: Executive Vice President |
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VALERO ENERGY PARTNERS LP | | | | | |
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By: Valero Energy Partners GP LLC, as the General Partner of Valero Energy Partners LP | |
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By: | /s/ Richard F. Lashway | | | | | |
Name: Richard F. Lashway Title: President and Chief Operating Officer | | | |
[Signature Page to Contribution Agreement]
EXHIBIT A
Amended and Restated Omnibus Agreement Schedules
EXHIBIT B
Terminal Services Schedule (Houston)
EXHIBIT C
Terminal Services Schedule (St. Charles)
EXHIBIT D-1
Houston Lease Agreement
EXHIBIT D-2
St. Charles Lease Agreement
EXHIBIT E
Assignment Document
ASSIGNMENT OF MEMBERSHIP INTERESTS
This ASSIGNMENT OF LIMITED LIABILITY COMPANY INTERESTS (the “Assignment”) in Valero Partners Louisiana, LLC, a Delaware limited liability company (“Valero Louisiana”), and Valero Partners Houston, LLC, a Delaware limited liability company (“Valero Houston” and, together with Valero Louisiana, the “Assigned Entities”), is effective as of the Effective Time on March 1, 2015, by and between Valero Refining-New Orleans, L.L.C., a Delaware limited liability company (“VRNO”), Valero Terminaling and Distribution Company, a Delaware corporation (“VTDC” and, together with VRNO, the “Assignors”), Valero Energy Partners GP LLC (the “General Partner”) and Valero Energy Partners LP, a Delaware limited partnership (the “Assignee”).
WHEREAS, VRNO owns 100% of the membership interests of Valero Louisiana (the “Louisiana Interests”) and VTDC owns 100% of the membership interests of Valero Houston (the “Houston Interests” and, together with the Louisiana Interests, the “Contributed LLC Interests”)), and each desires to assign, transfer, contribute and convey, directly or indirectly, to Assignee all of such Assignor’s right, title and interest in and to the Contributed LLC Interests, in accordance with that certain Contribution Agreement, dated as of March 1, 2015, among the Assignors and the Assignee (the “Contribution Agreement” and capitalized terms that are used but not defined herein having the meanings ascribed to them in the Contribution Agreement);
NOW, THEREFORE, for good and valuable consideration, as detailed in the Contribution Agreement, the receipt and sufficiency of which are hereby acknowledged and confessed by Assignor, the undersigned do hereby agree as follows:
1. Assignment and Assumption.
(a) VTDC does hereby BARGAIN, CONTRIBUTE, ASSIGN, TRANSFER, CONVEY, SET OVER and DELIVER 1.425% of the Houston Interests in accordance with the Contribution Agreement to the General Partner, its successors and assigns, forever. The General Partner hereby accepts VTDC’s assignment and hereby assumes all obligations attributable to such Houston Interests.
(b) The Assignors and the General Partner do hereby BARGAIN, CONTRIBUTE, ASSIGN, TRANSFER, CONVEY, SET OVER and DELIVER the Contributed LLC Interests in accordance with the Contribution Agreement to Assignee, its successors and assigns, forever. Assignee hereby accepts Assignors’ and the General Partner’s assignment and hereby assumes all obligations attributable to the Contributed LLC Interests.
2. Admission as Member. The Assignors and the General Partner hereby consent to the admission of the Assignee as a member of each of the Assigned Entities. Immediately following the admission of Assignee as a member of each Assigned Entity, each of the Assignors and the General Partner, as applicable, shall and does hereby withdraw from such Assigned Entity as a member of such Assigned Entity, and shall thereupon cease to be a member of such Assigned Entity, and shall thereupon cease to have or exercise any right or power as a member of such Assigned Entity.
3. General. THIS ASSIGNMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS. This Assignment is binding on and shall inure to the benefit of the signatories hereto and their respective successors and assigns. This Assignment may be executed in counterparts, including faxed counterparts.
4. Notwithstanding anything in this Assignment, this Assignment is being executed solely for the purpose of implementing, and carrying out the intentions of the parties under, the Contribution Agreement, and is not intended to enlarge, limit or alter the rights or obligations of any party under the Contribution Agreement. In the event that any provision of this Assignment conflicts with, or is inconsistent with, any provision of the Contribution Agreement, the provisions of the Contribution Agreement shall control.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have executed this Assignment effective as of the Effective Time on the Closing Date.
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ASSIGNORS:
VALERO REFINING-NEW ORLEANS, L.L.C.
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By: | /s/ J. Stephen Gilbert |
Name: | J. Stephen Gilbert |
Title: | Senior Vice President and Secretary |
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VALERO TERMINALING AND DISTRIBUTION COMPANY
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By: | /s/ J. Stephen Gilbert |
Name: | J. Stephen Gilbert |
Title: | Senior Vice President and Secretary |
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GENERAL PARTNER:
VALERO ENERGY PARTNERS GP LLC
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By: | /s/ Richard F. Lashway |
Name: | Richard F. Lashway |
Title: | President and Chief Operating Officer |
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ASSIGNEE:
VALERO ENERGY PARTNERS LP
By: VALERO ENERGY PARTNERS GP LLC, as general partner of Valero Energy Partners LP
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By: | /s/ Donna M. Titzman |
Name: | Donna M. Titzman |
Title: | Senior Vice President, CFO and Treasurer |
EXHIBIT F
Amended and Restated Services and Secondment Agreement
EXHIBIT G
Intercompany Loan Agreement
EXHIBIT H-1
Houston Assignment
EXHIBIT H-2
St. Charles Assignment
Amendment and Restatement of
Schedules to Amended and Restated Omnibus Agreement
March 1, 2015
An Amended and Restated Omnibus Agreement was executed as of July 1, 2014 (as the same may be amended, supplemented or modified from time to time, the “Omnibus Agreement”), among Valero Energy Corporation, Valero Marketing and Supply Company, Valero Partners Memphis, LLC, Valero Terminaling and Distribution Company, The Premcor Refining Group Inc., The Premcor Pipeline Co., Valero Energy Partners LP, Valero Energy Partners GP LLC, Valero Partners Operating Co. LLC, Valero Partners EP, LLC, Valero Partners Lucas, LLC, Valero Partners North Texas, LLC, Valero Partners South Texas, LLC and Valero Partners Wynnewood, LLC. Capitalized terms not otherwise defined in this document shall have the terms set forth in the Omnibus Agreement.
The Parties agree that, as of the date first written above, the Schedules are hereby amended and restated in their entirety to be as attached hereto (the “Amended Schedules”). Pursuant to Section 8.12 of the Omnibus Agreement, such amended and restated Schedules shall replace the prior Schedules as of the date hereof and shall be incorporated by reference into the Omnibus Agreement for all purposes. Each of Valero Partners Louisiana, LLC and Valero Partners Houston, LLC hereby agree to be bound by all of the terms and provisions of the Omnibus Agreement with the same force and effect as if it were originally a Party to the Omnibus Agreement. For the avoidance of doubt, any terms or definitions used in the Omnibus Agreement which refer to a Party referenced in the schedules thereto shall include Valero Partners Louisiana, LLC and Valero Partners Houston, LLC, as applicable, as set forth in the Amended Schedules. As amended hereby, the Omnibus Agreement is hereby ratified and affirmed and shall continue in full force and effect.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, each of the undersigned has executed this Amendment and Restatement of Schedules to Amended and Restated Omnibus Agreement on, and effective as of, the date first written above.
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VALERO ENERGY CORPORATION
By: /s/ R. Lane Riggs Name: R. Lane Riggs Title: Executive Vice President - Refining Operations and Engineering
| VALERO MARKETING AND SUPPLY COMPANY
By: /s/ R. Lane Riggs Name: R. Lane Riggs Title: Executive Vice President |
VALERO TERMINALING AND DISTRIBUTION COMPANY
By: /s/ R. Lane Riggs Name: R. Lane Riggs Title: Executive Vice President | THE PREMCOR REFINING GROUP INC.
By: /s/ R. Lane Riggs Name: R. Lane Riggs Title: Executive Vice President |
THE PREMCOR PIPELINE CO.
By: /s/ R. Lane Riggs Name: R. Lane Riggs Title: Executive Vice President
| VALERO ENERGY PARTNERS LP By: Valero Energy Partners GP LLC, its general partner
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer |
VALERO ENERGY PARTNERS GP LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer | VALERO PARTNERS OPERATING CO. LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer |
VALERO PARTNERS EP, LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer | VALERO PARTNERS LUCAS, LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer |
VALERO PARTNERS MEMPHIS, LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer | VALERO PARTNERS NORTH TEXAS, LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer |
Signature Page to Amendment and Restatement of Schedules
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VALERO PARTNERS SOUTH TEXAS, LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer | VALERO PARTNERS WYNNEWOOD, LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer |
VALERO PARTNERS LOUISIANA, LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer | VALERO PARTNERS HOUSTON, LLC
By: /s/ Richard F. Lashway Name: Richard F. Lashway Title: President and Chief Operating Officer |
Signature Page to Amendment and Restatement of Schedules
Schedule A
Environmental Matters
Notwithstanding any other provision in this Agreement or in any other Transaction Agreement to the contrary, and subject to the conditions set forth below:
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1. | As it relates to the Lucas Terminal and the West Memphis Terminal: |
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(a) | Valero shall indemnify the Partnership Group for the remediation of, other corrective actions required with respect to, and other Losses (if any) arising out of any Hazardous Substances on, under, about or migrating from the Lucas Terminal or the West Memphis Terminal prior to December 16, 2013 (collectively, “Existing Contamination Liabilities”) with respect to which Valero, prior to December 16, 2013 (i) received indemnification from a third party pursuant to a written agreement (an “Indemnification Agreement”), or (ii) placed a third party on notice that Valero believes such third party is legally liable (whether such liability arises by contract, statute, common law or otherwise); provided that such indemnification of the Partnership by Valero shall apply only if and to the extent that Valero is actually able to secure payment or performance by the third party with respect to the Existing Contamination Liabilities; and |
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(b) | As between Valero and the Partnership Group, Valero shall retain responsibility for Existing Contamination Liabilities to the extent, and only to the extent that Valero is actually able to secure payment or performance by a third party with respect to the Existing Contamination Liabilities as provided in paragraph (a) above. |
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(c) | The obligations of Valero under paragraphs (a) and (b) above are subject to the satisfaction of each of the following conditions, the failure of any one or more of which shall excuse Valero from its obligations, to the extent it is prejudiced thereby: |
(i)The Partnership Group shall fully cooperate with Valero and its designees in facilitating any remediation or other corrective action activities at the Lucas Terminal or West Memphis Terminal, as applicable, and in seeking to recover from third parties for any Existing Contamination Liabilities;
(ii)The Partnership Group shall comply with all applicable requirements of any Indemnification Agreement that requires the cooperation or involvement of the owner of the Lucas Terminal or the West Memphis Terminal, as applicable, including any notifications or filings that must be made by the owner of the Lucas Terminal or the West Memphis Terminal, as applicable; provided that the Partnership Group has been made aware of the relevant requirements in such Indemnification Agreement; and
(iii)No member of the Partnership Group shall take any actions or omit to act in any manner that would (1) violate or cause a violation of any of Valero’s obligations, or a waiver or release of any third party’s obligations, under any Indemnification Agreement, or
(2) otherwise relieve a third party of any of its legal obligations; in each case provided that the Partnership Group has been made aware of the relevant obligations.
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2. | As it relates to the Houston Terminal Assets and St. Charles Terminal Assets: |
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(a) | For the following Houston Tanks and St. Charles Tanks (the “Scheduled A Tanks”): |
St. Charles Tanks: T-78, T-55-5, T-55-6, T-425-2, T-425-3, T-425-4, T-150-4, T-150-5, T-150-8, T-130-1, T-150-17, T-55-1, T-130-8, T-150-7, T-325-1, T-425-1, T-625-1, T-130-2, T-130-5
Houston Tanks: Either T-3 or T-5, at the Partnership Group’s election.
Valero and its Subsidiaries, Valero Refining–New Orleans, L.L.C. (“VRNO”), with respect to the St. Charles Tanks that are Scheduled A Tanks, and Valero Refining–Texas, L.P. (“VRT”), with respect to the Houston Tanks that are Scheduled A Tanks, acknowledge and agree that there currently exist obligations to complete the removal from service, cleaning, waste disposal, initial inspection and repairs to have the Scheduled A Tanks ready for final API 653 inspection and fitness for duty. Partnership Group shall control the completion of, and cooperate with VRNO and VRT on the logistics for completing these obligations and shall undertake the final inspection and return the Scheduled A Tanks to service. Until completion of these obligations, Valero shall retain any environmental liability that arises from the pre-API 653 inspection conditions of the Schedule A Tanks and shall indemnify, defend and hold harmless each Group Member from Losses related to such retained environmental liability and any costs and expenses incurred by the Partnership Group in connection with the removal from service, cleaning, waste disposal, initial inspection and repairs to have the Scheduled A Tanks ready for final API 653 inspection and fitness for duty. Without limitation to the other indemnification provisions of Section 2.1 of the Agreement, following the final API 653 inspection and written determination of fitness of duty, Partnership Group shall assume any environmental liabilities related to the Scheduled A Tanks arising thereafter.
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(b) | For the following St. Charles Tanks (the “Scheduled B Tanks”): |
T-80-1, T-77, T-150-22, T-150-24
Valero, (i) by and through VRNO with respect to the St. Charles Tanks that are Scheduled B Tanks, represents and warrants that the Scheduled B Tanks completed inspection on the date noted in the relevant inspection documentation and that the Schedule B Tanks are in good working order and (ii) agrees to indemnify, defend and hold harmless each Group Member from any Losses that arise from a breach of such representation and warranty. Valero’s representations and warranties set forth in this Section 2(b) shall expire when the Scheduled B Tanks are pulled from service for inspection, or the Identification Deadline, whichever comes first.
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(c) | For purposes of this Schedule, the following terms shall have the means set forth below: |
“API 653” means American Petroleum Institute (API) Standard 653 for Aboveground Storage Tanks.
“Houston Lease” means the Lease and Access Agreement (Houston Terminal) dated March 1, 2015, by and between Valero Refining–Texas, L.P., as Lessor and Valero Partners Houston, LLC, as Lessee in connection with the land on which the Houston Terminal Assets are located as more particularly described therein.
“Houston Tanks” means the crude oil, intermediates and refined product storage tanks which are included in the Houston Terminal Assets.
“St. Charles Lease” means the Lease and Access Agreement (St. Charles Terminal) dated March 1, 2015 by and between Valero Refining–New Orleans, L.L.C., as Lessor and Valero Partners Louisiana, LLC, as Lessee in connection with the land on which the St. Charles Terminal Assets are located as more particularly described therein.
“St. Charles Tanks” means the crude oil, intermediates and refined product storage tanks which are included in the Houston Terminal Assets.
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3. | As it relates to the St. Charles Terminal Assets and the Houston Terminal Assets, |
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(a) | The Parties acknowledge that certain Facility Pipelines and Refinery Pipelines (as those terms are defined in the St. Charles Lease and the Houston Lease) may be buried below ground. Valero by and through its Subsidiaries as the property owner or for other logistical or environmental reasons may, in its or their sole discretion, desire to relocate all or portions of those buried Facility Pipelines and Refinery Pipelines above ground. If Valero by and through its Subsidiaries desires to relocate all or portions of any buried Facility Pipelines or Refinery Pipelines above ground, Valero by and through its Subsidiaries shall give the Partnership Group written notice that it desires to raise certain sections of the Facility Pipelines and Refinery Pipelines and the Partnership Group and Valero by and through its Subsidiaries shall work together to set a schedule for such work. The cost of raising the Facility Pipelines and Refinery Pipelines shall be borne exclusively by Valero or its applicable Subsidiary performing the work. |
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(b) | Partnership Group may also desire that certain of the buried Facility Pipelines be brought above ground. In its sole discretion, Partnership Group may give notice to Valero or its applicable Subsidiary that it intends to raise certain sections of the Facility Pipelines and the Partnership Group and Valero by and through its Subsidiaries shall work together to set a schedule for such work and all such work shall be performed in compliance with the terms of the St. Charles Lease or the Houston Lease, as applicable. In this case, the cost of raising the Facility Pipelines shall be borne exclusively by the Partnership Group or its applicable Subsidiary performing the work. |
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(c) | Until such time as the buried Facility Pipelines and Refinery Pipelines are raised above grade, there shall be a rebuttable presumption that any contamination found in connection with such buried Facility Pipelines and Refinery Pipelines occurred prior to the Closing Date and the liability for such contamination will remain with Valero and Valero shall indemnify, defend and hold harmless each Group Member from any Losses related to such retained liability. Valero may rebut this presumption by establishing by clear and convincing evidence that the contamination resulted from the Partnership Group operations. |
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4. | As it relates to the St. Charles Terminal Assets and the Houston Terminal Assets, Valero, by and through its applicable Subsidiary, operates groundwater monitoring and remedial systems at the St. Charles Refinery and the Houston Refinery and will retain the liability for contamination existing as of the Closing Date remediated through these systems and the obligation to maintain these existing systems until such time as the relevant Governmental Authority grants closure in writing or the Partnership Group and Valero mutually agree that further operation is not necessary. Valero shall indemnify, defend and hold harmless each Group Member from any Losses related to such retained liability; provided, however, in the event that the Partnership Group has a release to the environment after the Closing Date and this release has a material adverse impact on the existing remedial system or triggers new remedial obligations, the Partnership Group shall reimburse Valero for the additional costs incurred as a result of the post-closure release. |
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5. | From time to time environmental and safety obligations may arise that the parties had not anticipated. The Partnership Group and Valero agree to cooperate and in good faith to fairly allocate the liabilities and to work cooperatively to minimize the cost of addressing any such environmental and safety obligations. |
Schedule B
Other Indemnification
None.
Schedule C
General and Administrative Services
Administrative Fee
$10,352,500 per year
The Administrative Fee for the remainder of the 2015 fiscal year will be prorated based on the number of days from March 1, 2015 to December 31, 2015.
General and Administrative Services
Ad Valorem Tax Services
Accounting Services, including:
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• | Internal and External Reporting |
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• | Federal income tax services |
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• | State and local tax services |
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• | Transactional tax services |
Business Development
Corporate Aviation and Travel Services
Corporate Communications and Public Relations
Corporate Development
Data Processing and Information Technology Services
Engineering and Project Management
Executive Oversight
Financial Accounting and Reporting
Foreign Trade Zone Reporting and Accounting (if applicable)
Governmental Affairs
Group Accounting
Health, Safety & Environmental Services
Human Resources Services
Internal Audit
Legal, including:
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• | Acquisitions & Divestitures |
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• | Procurement / General Contracting |
Office Services, including:
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• | Mail Center/ Mail Services |
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• | Office Space including building maintenance |
Pipeline Control Center services*
Purchasing / Supply Chain Management
Records Management
Real Estate Management
Risk and Claims Management Services
Shareholder and Investor Relations
Treasury & Banking, including:
* When performing operational services with respect to Partnership facilities, personnel working in the Pipeline Control Center shall act at the direction of, and be subject to exclusive supervision
by, the General Partner (acting in its capacity as the general partner of, and on behalf of, the Partnership)
Schedule D
ROFO Assets
Set forth below is a list of each ROFO Asset and the corresponding ROFO Asset Owner. Please refer to the Registration Statement for a further description of each ROFO Asset.
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ROFO Asset | ROFO Asset Owner |
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Parkway Products Pipeline* | Valero Terminaling and Distribution Company |
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Hartford Crude Terminal | The Premcor Refining Group Inc. |
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Fannett Storage Facility | The Premcor Pipeline Co. |
* As described in the Registration Statement, the Parkway Products Pipeline is owned by a 50/50 joint venture between Valero Terminaling and Distribution Company and Kinder Morgan. The right of first offer granted in Section 4.1 applies only to Valero Terminaling and Distribution Company’s 50% interest.
Schedule E
Certain ROFR Assets
Set forth below is a list of each ROFR Asset and the corresponding ROFR Asset Owner.
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ROFR Asset | ROFT Asset Owner |
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McKee Products System*† | Valero Partner EP, LLC |
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Memphis truck rack* | Valero Partners Memphis, LLC |
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Lucas Crude System* | Valero Partners Lucas, LLC |
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McKee Crude System** | Valero Partners North Texas, LLC |
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Three Rivers Crude System** | Valero Partners South Texas, LLC |
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Wynnewood Products System** | Valero Partners Wynnewood, LLC |
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Houston Terminal Assets*** | Valero Partners Houston, LLC |
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St. Charles Terminal Assets*** | Valero Partners Louisiana, LLC |
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* Please refer to the Registration Statement for a further description of each such ROFR Asset.
** Please refer to the Purchase and Sale Agreement, dated as of July 1, 2014, by and among The Shamrock Pipe Line Corporation, Valero Plains Company LLC, VTDC, Valero Partners North Texas, LLC, Valero Partners South Texas, LLC and OLLC for a further description of the McKee Crude System and the Three Rivers Crude System. The Wynnewood Products System means the assets and operations of Valero Partners Wynnewood, LLC as of the Closing Date with respect to such Purchase and Sale Agreement.
*** The Houston Terminal Assets means the assets and operations of Valero Partners Houston, LLC, and the St. Charles Terminal Assets means the assets and operations of Valero Partners Louisiana, LLC, each as of the Closing Date with respect to the Contribution Agreement, dated as of March 1, 2015, by and among Valero Terminaling and Distribution Company, Valero Refining-New Orleans, L.L.C. and Valero Energy Partners LP.
† As described in the Registration Statement, Valero Partners EP, LLC owns a 33⅓% undivided interest in the McKee Products System, and the remainder of the system is owned by NuStar. The right of first refusal granted in Section 5.1 applies only to Valero Partners EP, LLC’s 33⅓% interest.
Schedule F
Valero Marks
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Depiction
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| Goods/Services | Status | Application Number | Reg. Number | Reg. Date | Applicant |
| V Valero Energy Partners LP & Design | Storage, distribution, transportation, shipping and delivery of oil, products derived from oil, renewable fuels such as ethanol and bio-diesel, and other hydrocarbon-based products via pipelines, trucks, railcars, and marine vessels (IC 39)
| Application – Intent to Use, filing date August 9, 2013 | Serial Number 86033483 | 4594277 | 8/26/14 | Valero Energy Partners GP LLC |
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Depiction
| Mark
| Goods/Services | Status | Application Number | Reg. Number | Reg. Date | Applicant |
VALERO | VALERO (word mark) | Storage, distribution, transportation, shipping and delivery of oil, products derived from oil, renewable fuels such as ethanol and bio-diesel, and other hydrocarbon-based products via pipelines, trucks, railcars, and marine vessels (IC 39)
| Application – Use in commerce, filing date August 1, 2013
| Serial Number 86026506 | 4494828 | 3/11/14 | Valero Marketing and Supply Company |
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Depiction
| Mark
| Goods/Services | Status | Application Number | Reg. Number | Reg. Date | Applicant |
| V Valero & Design | Storage, distribution, transportation, shipping and delivery of oil, products derived from oil, renewable fuels such as ethanol and bio-diesel, and other hydrocarbon-based products via pipelines, trucks, railcars, and marine vessels (IC 39)
| Application – Use in commerce, filing date August 7, 2013
| Serial Number 86031469 | 4494933 | 3/11/14 | Valero Marketing and Supply Company |
| V & Design | Storage, distribution, transportation, shipping and delivery of oil, products derived from oil, renewable fuels such as ethanol and bio-diesel, and other hydrocarbon-based products via pipelines, trucks, railcars, and marine vessels (IC 39)
| Application – Use in commerce, filing date August 5, 2013 | Serial Number 86028938 | 4494906 | 3/11/14 | Valero Marketing and Supply Company |
Schedule G
Prefunded Projects
Install new meters and line balance on Collierville crude pipeline
Install New Tank Mixers on Tanks 78 & 79 at Collierville
Collierville to Memphis P/L Guard Rails
Collierville Pipeline Integration
Lucas Tank Mixer Upgrades
Lucas Terminal Spare Motor
Lucas Install tank overfill protection
Memphis Truck Rack Additive Blending Install
Memphis Truck Rack Upgrade Oil/Water Separator
Memphis SCADA Network Integration
West Memphis Barge Additive Injection System
West Memphis Install Lab Building
West Memphis Install concrete under barge and receipt manifolds
West Memphis Tank Level Integration
Install debris deflector on Shorthorn pipeline at MM5
Schedule H
Transaction Agreements and Applicable Terms
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1. | Contribution, Conveyance and Assumption Agreement, dated as of December 16, 2013, by and among the General Partner, the Partnership, Valero, OLLC, VTDC, Premcor Pipeline, Premcor Refining and Valero Refining Company-Tennessee, L.L.C. |
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Closing Date | Identification Deadline | Environmental De Minimis Loss | Environmental Deductible | Right-of-Way Deductible | Other Losses Deductible |
December 16, 2013 | December 16, 2018 | $10,000 | $100,000 | $200,000 | $200,000 |
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2. | Purchase and Sale Agreement, dated as of July 1, 2014, by and among The Shamrock Pipe Line Corporation, Valero Plains Company LLC, VTDC, Valero Partners North Texas, LLC, Valero Partners South Texas, LLC and Valero Partners Operating Co. LLC. |
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Closing Date | Identification Deadline | Environmental De Minimis Loss | Environmental Deductible | Right-of-Way Deductible | Other Losses Deductible |
July 1, 2014 | July 1, 2019 | $10,000 | $100,000 | $200,000 | $200,000 |
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3. | Contribution Agreement, dated as of March 1, 2015, by and among Valero Terminaling and Distribution Company, Valero Refining-New Orleans, L.L.C. and Valero Energy Partners LP. |
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Closing Date | Identification Deadline | Environmental De Minimis Loss | Environmental Deductible | Right-of-Way Deductible | Other Losses Deductible |
March 1, 2015 | March 1, 2020 | $10,000 | $100,000 | $200,000 | $200,000 |
AMENDED AND RESTATED
SERVICES AND SECONDMENT AGREEMENT
This Amended and Restated Services and Secondment Agreement (this “Agreement”), is entered into on March 1, 2015 (the “Amendment Effective Date”), among Valero Services, Inc., a Delaware corporation (“VSI”), Valero Refining Company-Tennessee, L.L.C., a Delaware limited liability company (“VRCT”), Valero Refining-Texas, L.P., a Texas limited partnership (“VRT”), and Valero Energy Partners GP LLC, a Delaware limited liability company (“GP”) for the purpose of amending and restating, in its entirety, the terms and conditions set out in the Prior Agreement (as defined below). VSI, VRCT and VRT are sometimes herein referred to individually as an “Operator” and collectively as the “Operators.” VSI, VRCT, VRT and GP are sometimes herein referred to individually as a “Party” and collectively as the “Parties.”
RECITALS:
1.Certain of the Parties entered into that certain Services and Secondment Agreement (the “Original Agreement”) dated December 16, 2013 (the “Effective Date”). The Original Agreement was amended by that certain Amendment Number One to Services and Secondment Agreement entered into by certain of the Parties effective as of July 1, 2014 (the “Amendment” and, together with the Original Agreement, collectively, the “Prior Agreement”).
2.GP is the general partner of Valero Energy Partners LP, a Delaware limited partnership (the “Partnership”), which is engaged in the business of owning and operating crude oil and refined petroleum products transportation and logistics assets, including pipelines and terminals;
3.The Operators have expertise in the maintenance and operation of transportation and logistics assets, including crude oil and refined petroleum products pipelines and terminals, and can make available to GP the personnel necessary to perform such maintenance and operation functions with respect to assets owned by the Partnership; and
4.The Parties desired by their execution of the Prior Agreement to evidence their agreement that the Operators provide maintenance and operation resources to the Partnership and, in connection therewith, that the Operators second certain of their personnel to GP.
5.The Parties now desire to amend and restate the Prior Agreement to, among other things, add an additional Operator, add additional Assets (as defined herein) and modify certain provisions relating to the Services Reimbursement (as defined herein).
NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS; INTERPRETATION
1.1 Definitions. Capitalized terms used and not otherwise defined in this Agreement shall have the following respective meanings, unless context clearly requires otherwise:
“Affiliate” means, with respect to any Person, (a) any other Person directly or indirectly controlling, controlled by or under common control with such Person, (b) any Person owning or controlling fifty percent (50%) or more of the voting interests of such Person, (c) any officer or director of such Person, or (d) any Person who is the officer, director, trustee, or holder of fifty percent (50%) or more of the voting interests of any Person described in clauses (a) through (c). For purposes of this definition, the term “controls,” “is controlled by” or “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this Agreement, none of the Partnership Entities shall be deemed to be an Affiliate of either of the Operators nor shall either of the Operators be deemed to be an Affiliate of any of the Partnership Entities.
“Agreement” shall mean this Amended and Restated Services and Secondment Agreement, together with all Exhibits attached hereto, as the same may be amended, supplemented or restated from time to time in accordance with the provisions hereof.
“Allocation Percentage” has the meaning set forth in Section 3.5.
“Assets” means the assets of the Partnership Entities set forth in Exhibit A, as the same may be amended, supplemented or restated from time to time in accordance with the provisions hereof.
“Benefit Plans” means each employee benefit plan, as defined in Section 3(3) of ERISA, and any other material plan, policy, program, practice, agreement, understanding or arrangement (whether written or oral) providing compensation or other benefits to any Seconded Employee (or to any dependent or beneficiary thereof), including, without limitation, any stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock, restricted stock or other equity-based compensation plans, policies, programs, practices or arrangements, and any bonus or incentive compensation plan, deferred compensation, profit sharing, holiday, cafeteria, medical, disability or other employee benefit plan, program, policy, agreement or arrangement sponsored, maintained, or contributed to by the Operators or any of their ERISA Affiliates, or under which either the Operator or any ERISA Affiliate may have any obligation or liability, whether actual or contingent, in respect of or for the benefit of any Seconded Employee (but excluding workers’ compensation benefits (whether through insured or self-insured arrangements) and directors and officers liability insurance).
“Business Day” means each calendar day other than a Saturday, Sunday or a day that is an official holiday in the State of Texas.
“Effective Date” has the meaning set forth in the recitals to this Agreement and “Amendment Effective Date” has the meaning set forth in the preamble to this Agreement.
“Employing Operator” means, with respect to each Seconded Employee, the Operator for whom such Seconded Employee works, when not seconded to GP hereunder. Exhibit A identifies each Employing Operator that is providing Seconded Employees to provide Operational Services with respect to each of the Assets.
“End Date” has the meaning set forth in Section 2.2(b).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any entity that would be treated as a single employer with an Operator under Sections 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA.
“Losses” means any and all costs, expenses (including reasonable attorneys’ fees), claims, demands, losses, liabilities, obligations, actions, lawsuits and other proceedings, judgments and awards.
“GP” has the meaning set forth in the preamble to this Agreement.
“Interest Rate” means the lesser of (i) two percent (2%) over the one month London Interbank Offered Rate (LIBOR) prevailing during the period in question, and (ii) the maximum rate permitted by applicable law.
“Omnibus Agreement” means that certain Amended and Restated Omnibus Agreement dated July 1, 2014, among Valero Energy Corporation, a Delaware corporation, Valero Marketing and Supply Company, a Delaware corporation, Valero Terminaling and Distribution Company, a Delaware corporation, The Premcor Refining Group Inc., a Delaware corporation, The Premcor Pipeline Co., a Delaware corporation, Valero Energy Partners LP, a Delaware limited partnership, Valero Energy Partners GP LLC, a Delaware limited liability company, Valero Partners Operating Co. LLC, a Delaware limited liability company, Valero Partners EP, LLC, a Delaware limited liability company, Valero Partners Lucas, LLC, a Delaware limited liability company, Valero Partners Memphis, LLC, a Delaware limited liability company, Valero Partners North Texas, LLC, a Delaware limited liability company, Valero Partners South Texas, LLC, a Delaware limited liability company, and Valero Partners Wynnewood, LLC, a Delaware limited liability company, as the same has been amended by that certain Amendment and Restatement of Schedules to Amended and Restated Omnibus Agreement dated as of the Amendment Effective Date, and as the same may be further amended and supplemented from time to time.
“Operational Services” has the meaning set forth in Section 2.1.
“Operator” and “Operators” have the meanings set forth in the preamble to this Agreement.
“Partnership” has the meaning set forth in the recitals to this Agreement.
“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of December 16, 2013, as the same may be amended, supplemented or restated from time to time.
“Partnership Entities” means the Partnership and all of its direct and indirect subsidiaries.
“Period of Secondment” has the meaning set forth in Section 2.2.
“Person” means any individual or any partnership, corporation, limited liability company, trust, or other legal entity.
“Seconded Employees” has the meaning set forth in Section 2.1.
“Seconded Employee Expenses” has the meaning set forth in Section 3.2.
“Secondment” means each assignment of any Seconded Employees to GP from the Operators in accordance with the terms of this Agreement.
“Services Reimbursement” has the meaning set forth in Section 3.1.
“Shared Seconded Employees” has the meaning set forth in Section 2.2.
“Termination Costs” means all liabilities incurred in connection with or arising out of the withdrawal, departure, resignation or termination of employment (whether actual or alleged constructive termination) of any Seconded Employee, including, without limitation, liabilities relating to or arising out of any claim of discrimination or other illegality in connection with such withdrawal, departure, resignation or termination, including cost of defense of such claims, and also including severance payments and benefits paid to a Seconded Employee in return for a release of claims.
1.2 Interpretation. In this Agreement, unless a clear contrary intention appears: (a) the singular includes the plural and vice versa; (b) reference to any Person includes such Person’s successors and assigns but, in the case of a Party, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement), document or instrument means such agreement, document, or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of this Agreement; (e) reference to any Section or Article means such Section or Article of this Agreement, and references in any Section or definition to any clause means such clause of such Section or definition; (f) “hereunder,” “hereof,” “hereto” and words of similar import will be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof or thereof; (g) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (h) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including;” and (i) all Exhibits referenced herein are attached hereto and incorporated herein for all purposes.
1.3 Legal Representation of Parties. This Agreement was negotiated by the Parties with the benefit of legal representation, and any rule of construction or interpretation requiring this
Agreement to be construed or interpreted against any Party merely because such Party drafted all or a part of such Agreement will not apply to any construction or interpretation hereof or thereof.
1.4 Titles and Headings. Section titles and headings in this Agreement are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement.
ARTICLE 2
SECONDMENT
2.1 Seconded Employees. Subject to the terms of this Agreement, the Operators agree to second the Seconded Employees to GP, and GP agrees to accept the Secondment of the Seconded Employees, for the purpose of performing the operational and maintenance activities that are described in Exhibit B (the “Operational Services”) which relate to those Assets set forth on Exhibit A (including the Secondment of such Seconded Employees as are needed to provide the Operational Services related to the Assets). When used herein, the term “Seconded Employees” means those employees of the Operators who are engaged in providing the Operational Services to GP from time to time. The Seconded Employees will remain at all times the employees of their respective Employing Operators, in addition they will also be temporary co-employees of GP during the Period of Secondment and shall, at all times during the Period of Secondment, work under the direction, supervision and control of GP. Seconded Employees shall have no authority or apparent authority to act on behalf of the Operators during the Period of Secondment. Those rights and obligations of the Parties under this Agreement that relate to individuals that were Seconded Employees but then later ceased to be Seconded Employees, which rights and obligations accrued during the Period of Secondment, will survive the removal of such individuals from the group of Seconded Employees to the extent necessary to enforce such rights and obligations.
2.2 Period of Secondment. The Operators have seconded the Seconded Employees to GP starting on the ”Service Date” that is set forth next to each of the Assets listed in Exhibit A and continuing, during the period (and only during the period) that the Seconded Employees are performing services for GP, until the earliest of:
(a) the end of the term of this Agreement;
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(b) | such end date for any Seconded Employees as may be mutually agreed by the Parties (the “End Date”); |
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(c) | a withdrawal, departure, resignation or termination of such Seconded Employees under Section 2.3; and |
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(d) | a termination of Secondment of such Seconded Employees under Section 2.4. |
The period of time that any Seconded Employee is provided by the Employing Operator to GP is referred to in this Agreement as the “Period of Secondment.” At the end of the Period of Secondment for any Seconded Employee, such Seconded Employee will no longer be subject to the direction by GP of the Seconded Employee’s day-to-day activities. The Parties acknowledge
that certain of the Seconded Employees may also provide services to their Employing Operators in connection with operations conducted by the Operators (“Shared Seconded Employees”) and the Parties intend that such Shared Seconded Employees shall only be seconded to GP during those times that the Shared Seconded Employees are performing services for GP hereunder.
2.3 Withdrawal, Departure or Resignation. If any Seconded Employee tenders his or her resignation to an Employing Operator as an employee of such Employing Operator, or if the employment of any Seconded Employee is terminated by an Employing Operator, the Employing Operator will promptly notify GP. During the Period of Secondment of any Seconded Employee, the Employing Operator will not voluntarily withdraw or terminate such Seconded Employee except with the consent of GP, which consent shall not be unreasonably withheld, conditioned or delayed.
2.4 Termination of Secondment. Subject to any restrictions contained in any collective bargaining agreement to which the Employing Operator is a party, GP will have the right to terminate the Secondment to GP of any Seconded Employee for any reason at any time. The Employing Operator will not, without GP’s express consent, agree to any future amendments to any collective bargaining agreement that would increase the type or degree of any limitations on GP’s ability to terminate the Secondment of any Seconded Employee. Upon the termination of any Seconded Employee’s Period of Secondment, the Employing Operator of such Seconded Employee will be solely liable for any costs or expenses associated with the termination of the Secondment, except as otherwise specifically set forth in this Agreement.
2.5 Supervision. During the Period of Secondment, GP shall:
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(a) | be ultimately and fully responsible for the daily work assignments of the Seconded Employees (and with respect to Shared Seconded Employees, during those times that the Shared Seconded Employees are performing services for GP hereunder), including supervision of their day-to-day work activities and performance consistent with the job functions associated with the Operational Services; |
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(b) | set the hours of work and the holidays and vacation schedules (other than with respect to Shared Seconded Employees, as to which GP and the Operators shall jointly determine) for Seconded Employees; and |
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(c) | have the right to determine training that will be received by the Seconded Employees. |
In the course and scope of performing any Seconded Employee’s job functions, the Seconded Employees will be integrated into the organization of GP, will report into GP’s management structure, and will be under the direct management and supervision of GP (acting in its capacity as the general partner of, and on behalf of, the Partnership). GP agrees that with respect to any Seconded Employee who is otherwise represented by a union while working for any Employing Operator, GP will be assigned Employing Operator’s rights and responsibilities of any applicable collective bargaining agreement for the Period of Secondment as to any such employee, subject to any changes agreed to between any Employing Operator and any applicable union or as may be allowed by law. GP is not, hereby, agreeing to recognize any union or assume any bargaining obligation. Any and
all recognition and bargaining obligations, to the extent that they exist, will remain with the applicable Employing Operator.
2.6 Seconded Employees Qualifications; Approval. The Employing Operators will provide such suitably qualified and experienced Seconded Employees as the Employing Operators are reasonably able to make available to GP, and GP will have the right to approve such Seconded Employees. All Seconded Employees identified as of the Effective Date have been approved and accepted by GP as suitable for performing job functions related to the Operational Services.
2.7 Workers Compensation. At all times, the Operators will maintain workers’ compensation or similar insurance (either through an insurance company or self-insured arrangement) applicable to the Seconded Employees, as required by applicable state and federal workers’ compensation and similar laws, and will name GP as an additional named insured under each such insurance policy.
2.8 Benefit Plans. Neither GP nor any of the Partnership Entities shall be deemed to be a participating employer in any Benefit Plan during the Period of Secondment. Subject to GP’s reimbursement obligations hereunder, the Operators shall remain solely responsible for all obligations and liabilities arising under the express terms of the Benefit Plans, and the Seconded Employees will be covered under the Benefit Plans subject to and in accordance with their respective terms and conditions, as they may be amended from time to time. The Operators and their ERISA Affiliates may amend or terminate any Benefit Plan in whole or in part at any time (subject to the applicable provisions of any collective bargaining agreement covering Seconded Employees, if any). During the Period of Secondment, neither GP nor any of the Partnership Entities shall assume any Benefit Plan or have any obligations, liabilities or rights arising under the express terms of the Benefit Plans, in each case except for cost reimbursement pursuant to this Agreement.
ARTICLE 3
SERVICES REIMBURSEMENT
3.1 Operational Expenses. On or before the tenth (10th) Business Day after the end of each month during the Period of Secondment, the Operators shall send an itemized invoice (in a form mutually agreed upon by GP and the Operators) to GP detailing all amounts payable to each Operator with respect to the Seconded Employees in connection with the performance of the Operational Services during the preceding month (the “Services Reimbursement”). Except where a Flat Fee arrangement is in place pursuant to Section 3.3, the Services Reimbursement will based on actual Seconded Employee Expenses in accordance with Section 3.2. GP shall, within ten (10) calendar days of receipt, pay such invoice, except for any amounts therein being disputed in good faith by GP. For ease of administration, the Operators may permit GP to make payment of the full invoice amount to a single Operator, in which case such Operator shall be responsible for paying over any amounts due to the other Operators. Any amounts that GP has disputed in good faith and that are later determined by any court or other competent authority having jurisdiction, or by agreement of the Parties, to be owing from GP to an Operator shall be paid in full within ten days of such determination, together with interest thereon at the Interest Rate from the date due under the original invoice until the date of payment.
3.2 Services Reimbursement. Subject to Sections 3.3, 3.4 and 3.5, the Services Reimbursement for each month during the Period of Secondment shall include all costs and expenses incurred for such month by the Operators for the Seconded Employees, including the following (collectively, the “Seconded Employee Expenses”):
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(a) | salary and wages (including payroll and withholding taxes associated therewith); |
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(c) | costs of matching and other employer 401(k) contributions; |
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(d) | costs of pension benefit accruals; |
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(e) | any cash expense associated with any deferred compensation plan; |
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(f) | vacation, sick leave, personal leave, maternity leave and any other federal or state mandated leave; |
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(g) | healthcare coverage, including medical, dental, vision and prescription drug coverage; |
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(h) | flexible benefits plan, including medical care and dependent care expense reimbursement programs; |
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(i) | short-term disability benefits and long-term disability insurance premiums; |
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(j) | workers’ compensation insurance; |
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(k) | premiums for life insurance, accidental death and dismemberment insurance and any other insurance provided to the Seconded Employees by the Operators; |
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(l) | the vesting of any long-term incentive awards, whether granted before or during the Period of Secondment; |
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(n) | business travel expenses and other business expenses reimbursed in the normal course by the Operators, such as subscriptions to business-related periodicals and dues to professional business organizations; |
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(o) | any other employee benefit or compensation arrangement customarily provided to all employees by the Operators for which the Operators incur costs with respect to Seconded Employees; and |
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(p) | any sales taxes imposed upon the provision of any taxable services provided under this Agreement; provided, however, that, GP and the Operators contemplate that the |
services provided pursuant to this Agreement are not taxable services for sales and use tax purposes.
Where it is not reasonably practicable to determine the amount of any such cost or expense described above, the Operators and GP shall mutually agree on the method of determining or estimating such cost or expense, which may include the application of an agreed percentage benefit load to a Seconded Employee’s salary and wages in order to value certain of the benefits listed above. If the actual amount of any cost or expense, once known, varies from the estimate used for billing purposes hereunder, the difference, once determined, shall be reflected as either a credit or additional charge in the next monthly invoice issued by the affected Operator, or in such manner as may otherwise be agreed between the affected Operator and GP.
3.3 Flat Rate Billing Option. As more particularly set forth in Exhibit A, in some cases GP and the applicable Operator have agreed on a flat annual fee to be paid in equal monthly installments as the Services Reimbursement for Operational Services associated with a specific Asset (a “Flat Fee”). Each such Flat Fee is based on the Operator’s good faith estimate of the annual aggregate Seconded Employee Expenses attributable to the Seconded Employees who will be providing the relevant Operational Services. The GP and the applicable Operator acknowledge and agree that the Flat Fee may change each calendar year, as determined by the applicable Operator in good faith, to accurately reflect the degree and extent of the Operational Services and/or any change in the cost of providing Operational Services to GP (including changes due to inflation and to changes in any applicable law, rule or regulation including any interpretation of such laws, rules or regulations).
At the end of each calendar year, GP will have the right to submit to the applicable Operator a proposal to reduce the amount of any Flat Fee for that year if GP believes, in good faith, that the relevant Operational Services for the year in question do not justify payment of the full Flat Fee for that year. If GP submits such a proposal to an Operator, such Operator agrees that it will negotiate in good faith with GP to determine if the Flat Fee for that year should be reduced and, if so, the amount of such reduction. If GP and the Operator agree that the Flat Fee for that year should be reduced, then the Operator shall promptly pay to GP the amount of any reduction for that year.
3.4 Adjustments Based on Period of Secondment. It is understood and agreed that GP shall be liable for Seconded Employee Expenses (whether being paid on a reimbursable or Flat Fee basis) to the extent, and only to the extent, they are attributable to the Period of Secondment. As such, if the Period of Secondment begins on other than the first day of a month or ends on other than the last day of a month, the Services Reimbursement for such month shall be prorated based on the number of days during such month that the Period of Secondment was in effect.
3.5 Adjustments for Shared Services. With respect to each Shared Seconded Employee, the appropriate Employing Operator will determine in good faith the percentage of such Shared Seconded Employee’s time spent providing services to GP (the “Allocation Percentage”). For each month during the Period of Secondment, the amount of the Services Reimbursement payable by GP with respect to each Shared Seconded Employee shall be calculated by multiplying the Seconded Employee Expenses for such Shared Seconded Employee times the Allocation Percentage for such
Shared Seconded Employee; provided, however, that (i) since Flat Fees are established taking the Allocation Percentage into account, they shall not be subject to such monthly adjustment, and (ii) certain Seconded Employee Expenses shall not be allocated based on the Allocation Percentage or included in any applicable Flat Fee, but rather shall be allocated as follows:
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(a) | Termination Costs with respect to any Shared Seconded Employee shall be allocated between the Parties based upon the Allocation Percentage, provided that the Parties agree in advance to terminate such Shared Seconded Employee; otherwise, a Party who terminates a Shared Seconded Employee without first consulting with the other Party (including an actual or alleged constructive termination) shall be solely responsible for all Termination Costs related to such termination, other than any Termination Costs arising solely out of the gross negligence or willful misconduct of the other Party; |
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(b) | travel expenses and other expenses incurred with respect to and/or reimbursable to a Shared Seconded Employee shall be paid by the Party for whom the Shared Seconded Employee was working at the time they were incurred, except that expenses related to activities that benefit both GP and the Employing Operator (e.g. some types of training) shall be shared by the affected Parties in accordance with the Allocation Percentage (or such other allocation as may be agreed between the affected Parties); and |
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(c) | the taxes described in Section 3.2(p) shall be reimbursable in full by GP. |
3.6 Cancellation or Reduction of Services. GP may terminate or reduce the level of any of the Operational Services on 30 days’ prior written notice to the Operators. In the event GP reduces the level of any Operational Services covered by a Flat Fee, the affected Operator and GP shall agree in good faith an appropriate reduction in the Flat Fee. In the event GP terminates the Operational Services, GP shall pay the Operators for the last month (or portion thereof) in which it received services plus any other amounts outstanding to the Operators.
3.7 Reimbursements for Other Operational Expenses. This Agreement does not address the reimbursement of any costs or expenses associated with Operational Services other than Seconded Employee Expenses. To the extent that an Operator or any Affiliate of an Operator incurs any out-of-pocket expenses (other than Seconded Employee Expenses) in connection with the provision of Operational Services, such Operator or Affiliate may be entitled to reimbursement therefor under the terms of the Partnership Agreement or the Omnibus Agreement.
ARTICLE 4
ALLOCATION; RECORDS; PAYMENT OBLIGATIONS
4.1 Allocation; Records. The Operators will use commercially reasonable efforts to maintain an allocation schedule reflecting the direct and indirect costs of the Seconded Employee Expenses based on the services that the Seconded Employees have provided to GP in relation to the Assets. GP will use commercially reasonable efforts to keep and maintain books/records reflecting hours worked and costs and expenses incurred in connection with each of the Seconded
Employees. Each Party will have the right to audit such records maintained by the other during regular business hours and on reasonable prior notice. The foregoing provisions of this Section 4.1 shall not apply when a Flat Fee arrangement is in place, but in such event the Parties shall maintain a schedule showing the basis on which the Flat Fee was established, as well as schedules showing how any subsequent adjustments to the Flat Fee were determined.
4.2 Payment. The Operators agree to pay, as agent for GP, the Seconded Employee Expenses (or provide the employee benefits with respect thereto, as applicable) of the employees temporarily assigned to GP under this Agreement, subject to GP’s reimbursement obligations under Article 3. Subject to GP’s reimbursement obligations under Article 3, the Operators agree to indemnify and hold GP harmless from any and all Losses incurred by GP or any of the Partnership Entities related to the Operators’ failure to carry out their duties to pay or provide employee benefits to the Seconded Employees, except to the extent that such Losses arise solely out of or result solely from the gross negligence or willful misconduct of GP.
ARTICLE 5
TERM
The term of this Agreement commenced on the Effective Date and will continue for an initial period of ten years from the last occurring “Service Date” for the Assets as set forth in Exhibit A, provided however the term of this Agreement with respect any particular Asset will continue for an initial period of ten years from the “Service Date for that Asset as set forth in Exhibit A. Upon the expiration of the initial ten year period, the term of this Agreement shall automatically extend for successive one year extension terms, unless either Party provides at least 30 days’ prior written notice to the other Party prior to the expiration of the initial ten year period or any extension term that the Party wishes for this Agreement to expire at the end of the initial ten year period or the then-current extension term, as applicable. Upon proper notice by a Party to the other Party, in accordance with this Article 5, that the Party wishes for this Agreement to expire on the expiration of the applicable period, this Agreement shall not automatically extend, but shall instead expire upon the expiration of the applicable period and only those provisions that, by their terms, expressly survive this Agreement shall so survive. Notwithstanding the foregoing, GP may terminate this agreement at any time upon 30 days prior written notice to the Operators and only those provisions that, by their terms, expressly survive this Agreement shall so survive.
ARTICLE 6
GENERAL PROVISIONS
6.1 Accuracy of Recitals. The paragraphs contained in the recitals to this Agreement are incorporated in this Agreement by this reference, and the Parties to this Agreement acknowledge the accuracy thereof.
6.2 Notices. Any notice, demand, or communication required or permitted under this Agreement shall be in writing and delivered personally, by reputable courier, or by telecopier, and shall be deemed to have been duly given as of the date and time reflected on the delivery receipt if delivered personally or sent by reputable courier service, or on the automatic telecopier receipt if sent by telecopier, addressed as follows:
If to VSI
Valero Services, Inc.
One Valero Way
San Antonio, Texas 78249
Attention: President
Fax: (210) 345-2413
If to VRCT
Valero Refining Company-Tennessee, L.L.C.
One Valero Way
San Antonio, Texas 78249
Attention: President
Fax: (210) 345-2413
If to VRT
Valero Refining-Texas, L.P.
c/o Valero Services, Inc.
One Valero Way
San Antonio, Texas 78249
Attention: President
Fax: (210) 345-2413
If to GP
Valero Energy Partners GP LLC
One Valero Way
San Antonio, Texas 78249
Attention: President
Fax: (210) 370-5161
A Party may change its address for the purposes of notices hereunder by giving notice to the other Party specifying such changed address in the manner specified in this Section 6.2.
6.3 Further Assurances. The Parties agree to execute such additional instruments, agreements and documents, and to take such other actions, as may be necessary to effect the purposes of this Agreement.
6.4 Modifications. Any actions or agreement by the Parties to modify this Agreement, in whole or in part, shall be binding upon the Parties, so long as such modification shall be in writing and shall be executed by all Parties with the same formality with which this Agreement was executed.
6.5 No Third Party Beneficiaries. No Person not a Party to this Agreement will have any rights under this Agreement as a third party beneficiary or otherwise, including, without limitation,
Seconded Employees. In furtherance but not in limitation of the foregoing: (i) nothing in this Agreement shall be deemed to provide any Seconded Employee with a right to continued secondment or employment; and (ii) nothing in this Agreement shall be deemed to constitute an amendment to any Benefit Plan or limit in any way the right of the Operators and/or their ERISA Affiliates to amend, modify or terminate, in whole or in part, any Benefit Plan which may be in effect from time to time.
6.6 Relationship of the Parties. Nothing in this Agreement will constitute the Partnership Entities, the Operators or their Affiliates as members of any partnership, joint venture, association, syndicate or other entity.
6.7 Assignment. Neither Party will, without the prior written consent of the other Party, which consent shall not be unreasonably withheld, assign, mortgage, pledge or otherwise convey this Agreement or any of its rights or duties hereunder; provided, however, that either Party may assign or convey this Agreement without the prior written consent of the other Party to an Affiliate. Unless written consent is not required under this Section 6.7, any attempted or purported assignment, mortgage, pledge or conveyance by a Party without the written consent of the other Party shall be void and of no force and effect. No assignment, mortgage, pledge or other conveyance by a Party shall relieve the Party of any liabilities or obligations under this Agreement.
6.8 Binding Effect. This Agreement will be binding upon, and will inure to the benefit of, the Parties and their respective successors, permitted assigns and legal representatives.
6.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, and all of which together shall constitute one and the same Agreement. Each Party may execute this Agreement by signing any such counterpart.
6.10 Time of the Essence. Time is of the essence in the performance of this Agreement.
6.11 Governing Law. This Agreement shall be deemed to be a contract made under, and for all purposes shall be construed in accordance with and governed by, the laws of the State of Texas, excluding its conflicts of laws principles that would apply the laws of another jurisdiction. The Parties submit to the exclusive jurisdiction of the courts of competent jurisdiction situated in Bexar County, Texas, for the resolution of any disputes arising hereunder.
6.12 Delay or Partial Exercise Not Waiver. No failure or delay on the part of any Party to exercise any right or remedy under this Agreement will operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy under this Agreement preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or any related document. The waiver by either Party of a breach of any provisions of this Agreement will not constitute a waiver of a similar breach in the future or of any other breach or nullify the effectiveness of such provision.
6.13 Entire Agreement. This Agreement constitutes and expresses the entire agreement between the Parties with respect to the subject matter hereof. All previous discussions, promises,
representations and understandings relative thereto are hereby merged in and superseded by this Agreement.
6.14 Waiver. To be effective, any waiver or any right under this Agreement will be in writing and signed by a duly authorized officer or representative of the Party bound thereby.
6.15 Signatories Duly Authorized. Each of the signatories to this Agreement represents that he is duly authorized to execute this Agreement on behalf of the Party for which he is signing, and that such signature is sufficient to bind the Party purportedly represented.
6.16 Incorporation of Exhibits by References. Any reference herein to any exhibit to this Agreement will incorporate it herein, as if it were set out in full in the text of this Agreement.
6.17 Relationship of VSI, VRCT and VRT. VSI’s obligations under this Agreement shall apply only with respect to those Seconded Employees for which VSI is the Employing Operator, VRCT’s obligations under this Agreement shall apply only with respect to those Seconded Employees for which VRCT is the Employing Operator, and VRT’s obligations under this Agreement shall apply only with respect to those Seconded Employees for which VRT is the Employing Operator. Nothing in this Agreement is intended, nor shall it operate or be construed, to render VSI, VRCT and/or VRT jointly or jointly and severally liable or to otherwise render any Employing Operator liable for any acts, omissions or breaches hereof by any other Employing Operator.
6.18 Amendment of Exhibits; Addition of Operators. The Parties may amend and restate the Exhibits at any time without otherwise amending or restating this Agreement by the execution by all of the Parties of an agreement in the form attached hereto as Exhibit C. The amended and restated Exhibits attached to such executed agreement shall replace the prior Exhibits as of the date of execution of such agreement and shall be incorporated by reference into this Agreement for all purposes. In addition, a Person may be added as an Operator under this Agreement by having such Person join in the execution of the agreement in the form attached hereto as Exhibit C.
[Signature page follows]
IN WITNESS HEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives on the date herein above mentioned.
Valero Services, Inc.
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By: /s/ R. Lane Riggs |
Name: | R. Lane Riggs |
Title: | Executive Vice President |
Valero Refining Company-Tennessee, L.L.C.
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By /s/ R. Lane Riggs |
Name: | R. Lane Riggs |
Title: | Executive Vice President |
Valero Refining-Texas, L.P.
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By: | Valero Tejas Company LLC, its |
| general partner |
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By: /s/ R. Lane Riggs |
Name: | R. Lane Riggs |
Title: | Executive Vice President |
Valero Energy Partners GP LLC
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By /s/ Richard F. Lashway |
Name: | Richard F. Lashway |
Title: | President and Chief Operating Officer |
Signature Page to Services and Secondment Agreement
EXHIBIT A
Assets
The Assets consist of all above and below-ground equipment, facilities and improvements owned (in whole or in part) or leased by any Partnership Entities, or with respect to which any of the Partnership Entities have the right and/or obligation to operate and/or maintain, at each of the office, terminal and truckhaul locations and comprising each of the pipeline systems set forth in the following chart.
Without limiting the generality of the foregoing, the Assets expressly include all of the following located at or comprising any part of the facilities, locations and systems listed in the following chart, to the extent owned, leased or otherwise under the control of any Partnership Entity:
Piping
Pumps
Valves
Fittings
Interconnects
Lease automatic custody transfer (LACT) units
Metering equipment and associated equipment
Cathodic protection equipment
Fire suppression equipment
Tanks
Tank roofs
Tank dikes and foundations
Truck racks and associated equipment
Vapor recovery equipment
Docks and associated equipment
Buildings and improvements, and all fixtures, furnishings and equipment therein
Security equipment, including fences and gates
Drives, walks and parking areas
Signage
Utilities infrastructure
Environmental monitoring and remediation equipment
SCADA equipment
Oil / water separators
Wastewater treatment equipment
Laboratories and associated equipment
Exhibit A, continued
As used in the following chart, the following terms have the following respective meanings:
"Asset Owner” means the Partnership Entity that owns the Asset.
“Service Date” means the date that Seconded Employees first began providing Operational Services at and/or for the Asset.
“Employing Operator” means the Operator that employs the Seconded Employees who will be providing Operational Services related to the Asset.
“Fee Structure” refers to the manner in which Operator is to be paid the portion of the Services Reimbursement associated with the Asset, being one of the two following methods:
“Pass Through” means that Seconded Employee Expenses associated with the Asset are being passed through to GP by the Operator on a reimbursable basis in accordance with Sections 3.1 and 3.2.
“Flat Fee” means that the Operator is charging GP a Flat Fee for all Operational Services being provided by Seconded Employees with respect to the Asset in accordance with Section 3.3. The Flat Fee amounts set forth in the chart are initial amounts as of the Service Date, and are subject to periodic adjustment in accordance with Section 3.3.
Key to entity name abbreviations:
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Operators: | | Asset Owners: |
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VRTC | Valero Refining Company-Tennessee, L.L.C. | VMKS | Valero MKS Logistics, L.L.C. |
VRT | Valero Refining-Texas, L.P. | VPEP | Valero Partners El Paso, LLC |
VSI | Valero Services, Inc. | VPH | Valero Partners Houston, LLC |
| | VP Lucas | Valero Partners Lucas, LLC |
| | VP La. | Valero Partners Louisiana, LLC |
| | VPM | Valero Partners Memphis, LLC |
| | VPNT | Valero Partners North Texas, LLC |
| | VPP | Valero Partners PAPS, LLC |
| | VPST | Valero Partners South Texas, LLC |
| | VPW | Valero Partners Wynnewood, LLC |
| | VPWM | Valero Partners West Memphis, LLC |
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Asset | Asset Owner | Service Date | Employing Operator | Fee Structure |
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Terminals, Offices and Truckhauls | | | | |
Lucas Terminal 9405 West Port Arthur Road Beaumont, TX 77705
| VP Lucas | Dec. 16, 2013 | VSI | Pass Through |
West Memphis Terminal 1282 South 8th St. West Memphis, AR 72301
| VPWM | Dec. 16, 2013 | VSI | Pass Through |
Collierville Terminal 772 Wingo Road Byhalia, MS 38611
| VMKS | Dec. 16, 2013 | VRCT | Pass Through |
Memphis Truck Terminal 321 West Mallory Ave. Memphis, TN 38109 | VPM | Dec. 16, 2013 | VRCT | Pass Through |
Wynnewood System: Wynnewood Terminal Murray County, OK
| VPW | July 1, 2014 | VSI | Pass Through |
Three Rivers Crude System: CR 422 Crude Oil Terminal Live Oak County, Texas
Three Rivers Pipeline Office Live Oak County, Texas
Three Rivers Meter Site Live Oak County, Texas
| VPST | July 1, 2014 | VSI | Pass Through |
McKee Crude System: Clawson Station Hansford County, TX Coble Station Hutchinson County, TX Farnsworth Station Ochiltree County, TX
Follett Station Lipscomb County, TX
Frass Station Lipscomb County, TX
| VPNT | July 1, 2014 | VSI | Pass Through |
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Glazier Station Lipscomb County, TX
Gruver Station Hansford County, TX
Hitchland Station Hansford County, TX
Hooker Station Texas County, OK
McKee Station Moore County, TX
McKee Valve & Meter Site and 8” Pipeline Moore County, TX
Merten Station Gray County, TX
Perryton Office & Pipe Yard Ochiltree County, Texas
Perryton Station (Nos. 1, 2, 3 and 4) Ochiltree County, TX
Piper Station (Nos. 1,2 and 3) Lipscomb County, TX
Sunray Pump Station Sherman County, TX
Tubbs Station Lipscomb County, TX
Turpin Terminal Beaver County, OK
Waka Station Ochiltree County, TX
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St. Charles Terminal - Located in Norco, Louisiana | VP La. | March 1, 2015 | VSI | Flat Fee of $11,067,000 per calendar year |
Houston Terminal - Located in Houston, Texas | VPH | March 1, 2015 | VRT | Flat Fee of $6,323,000 per calendar year |
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Pipelines | | | | |
Port Arthur System: Nederland pipeline: A five-mile, 32-inch pipeline that delivers crude oil to the Lucas terminal from the Sunoco Logistics Nederland marine terminal. Lucas pipeline: A 12-mile, 30-inch pipeline that delivers crude oil from the Lucas terminal to the Valero Port Arthur refinery (1801 South Gulfway Dr., Port Arthur, Texas 77640). PAPS 20” Pipeline: A three-mile, 20-inch pipeline that delivers diesel from the Port Arthur refinery to the PAPS terminal. El Vista 20” Pipeline: A four-mile, 20-inch pipeline that delivers gasoline from the Port Arthur refinery to the El Vista terminal. 12-10 pipeline: An approximately 13 mile, 12-inch and 10-inch pipeline that delivers refined petroleum products from the Port Arthur refinery to the Enterprise TE Products pipeline connection, the Sunoco Logistics MagTex pipeline connection at their Hebert Terminal (15651 West Port Arthur Rd. Beaumont, TX 77705) and Oiltanking’s Beaumont marine terminal (6275 Highway 347 Beaumont TX 77705). |
VP Lucas
VP Lucas
VPP
VPP
VPP
| Dec. 16, 2013 | VSI | Pass Through |
Memphis System
Collierville pipeline: Approximately 52 miles of 10- to 20-inch pipelines that deliver crude oil to the Valero Memphis refinery (543 West Mallory Ave., Memphis, Tennessee 38109) from the Collierville terminal. Shorthorn pipeline: Approximately seven miles of 14-inch pipeline that delivers diesel and gasoline produced at the Valero Memphis refinery to the West Memphis terminal, and two miles of 12-inch pipeline that delivers diesel and gasoline from the West Memphis terminal and the Valero Memphis refinery to Exxon’s Memphis refined petroleum products terminal (454 Wisconsin Ave., Memphis, TN 38106).
| VMKS | Dec. 16, 2013 | | Pass Through |
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Memphis Airport pipeline system: A nine-mile, six-inch pipeline that delivers jet fuel produced at the Valero Memphis refinery to the Swissport Fueling, Inc. terminal (2491 Winchester Rd., Memphis, Tennessee 38116) located at the Memphis International Airport and a two-mile, six-inch pipeline that delivers jet fuel from the Valero Memphis refinery to the FedEx jet fuel terminal (2903 Sprankle Ave, Memphis, TN 38118) located at the Memphis International Airport | | | | |
Wynnewood System: Wynnewood Pipeline. A twelve inch (12”) nominal diameter pipeline, approximately 30 miles in length, originating at the Valero Ardmore Refinery in Carter County, Oklahoma and terminating at the Valero Wynnewood Terminal in Murray County, Oklahoma | VPW | July 1, 2014 | VSI | Pass Through |
Three Rivers Crude System: CR 422 - Valero Ref #1-12. A twelve inch (12”) nominal diameter pipeline, approximately 3,225 feet / 0.61 miles in length, originating at the Valero CR 422 crude oil facility and terminating the Valero Three Rivers Refinery in Live Oak County, Texas.
CR 422 - Valero Ref #2-12. A twelve inch (12”) nominal diameter pipeline, approximately 3,064 feet / 0.58 miles in length, originating at the Valero CR 422 crude oil facility and terminating the Valero Three Rivers Refinery in Live Oak County, Texas.
CR 422 - Valero Ref #3-12. A twelve inch (12”) nominal diameter pipeline, approximately 3,139 feet / 0.59 miles in length, originating at the Valero CR 422 crude oil facility and terminating the Valero Three Rivers Refinery in Live Oak County, Texas.
| VPST | July 1, 2014 | VSI | Pass Through |
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McKee Crude System: Tubbs 4” - A four inch (4”) nominal diameter pipeline, approximately 73,081 feet / 13.84 miles in length, originating at The Shamrock Pipe Line Corporation’s Tubbs Station in Lipscomb County, Texas and terminating at The Shamrock Pipe Line Corporation’s Tubbs /Citizens scrapper trap site in Lipscomb County, Texas.
| VPTN | July 1, 2014 | VSI | Pass Through |
Citizens 6” - A six inch (6”) nominal diameter pipeline, approximately 48,762 feet / 9.24 miles in length, originating at The Shamrock Pipe Line Corporation’s Tubbs/Citizens scrapper trap site in Lipscomb County, Texas and terminating at The Shamrock Pipe Line Corporation’s Piper Station in Lipscomb County, Texas.
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Lipscomb 6” - A six inch (6”) nominal diameter pipeline, approximately 258,838 feet / 49.02 miles in length, originating at Frass Station in Lipscomb County, Texas and terminating at The Shamrock Pipe Line Corporation’s Perryton Station in Ochiltree County, Texas.
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Perryton-Waka 10” - A ten inch (10”) nominal diameter pipeline, approximately 80,135 feet / 15.18 miles in length, originating at The Shamrock Pipe Line Corporation’s Perryton Station in Ochiltree County, Texas and terminating at The Shamrock Pipe Line Corporation’s Waka Station in Ochiltree County, Texas.
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Perryton-Waka 6” - A six inch (6”) nominal diameter pipeline, approximately 80,657 feet / 15.28 miles in length, originating at The Shamrock Pipe Line Corporation’s Perryton Station in Ochiltree County, Texas and terminating at The Shamrock Pipe Line Corporation’s Waka Station in Ochiltree County, Texas.
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Waka-Gruver 8” - An eight inch (8”) nominal diameter pipeline, approximately 133,047 feet / 25.19 miles in length, originating at The Shamrock Pipe Line Corporation’s Waka Station in Ochiltree County, Texas and terminating at The Shamrock Pipe Line Corporation’s Gruver Station in Hansford County, Texas.
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Gruver-Clawson 8” - An eight inch (8”) nominal diameter pipeline, approximately 1,497 feet / 0.28 miles in length, originating at The Shamrock Pipe Line Corporation’s Gruver Station in Hansford County, Texas and terminating at NuStar Logistics, L.P.’s Clawson Station in Hansford County, Texas.
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Clawson-Gruver 6” - A six inch (6”) nominal diameter pipeline, approximately 1,069 feet / 0.20 miles in length, originating at NuStar Logistics, L.P.’s Clawson Station in Hansford County, Texas and terminating at The Shamrock Pipe Line Corporation’s Gruver Station in Hansford County, Texas.
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Turpin-Gruver 6” - A six inch (6”) nominal diameter pipeline, approximately 304,313 feet / 57.64 miles in length, originating at Valero Plains Company LLC’s Turpin Terminal in Beaver County, Oklahoma and terminating at The Shamrock Pipe Line Corporation’s Gruver Station in Hansford County, Texas.
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Gruver-McKee 6” - A six inch (6”) nominal diameter pipeline, approximately 157,609 feet / 29.85 miles in length, originating at The Shamrock Pipe Line Corporation’s Gruver Station in Hansford County, Texas and terminating at The Shamrock Pipe Line Corporation’s McKee scrapper trap site in Moore County, Texas.
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McKee - McKee Refinery 8” - An eight inch (8”) nominal diameter pipeline, approximately 4,747 feet / 0.90 miles in length, originating at The Shamrock Pipe Line Corporation’s McKee scrapper trap site in Moore County, Texas and terminating at the Valero McKee Refinery in Moore County, Texas.
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Turpin 6” (Hansford County, TX) - A six inch (6”) nominal diameter pipeline, approximately 5,899 feet / 1.12 miles in length, originating west of SH 15 in Hansford County, Texas and terminating south of FM 1262 in Hansford County, Texas.
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Turpin 6” (Moore County, TX) - A six inch (6”) nominal diameter pipeline, approximately 5,280 feet / 1.0 miles in length, originating at The Shamrock Pipe Line Corporation’s McKee scrapper trap site in Moore County, Texas and terminating at the Valero McKee Refinery in Moore County, Texas.
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EXHIBIT B
Operational Services
General Note: Not all of the following Operational Services apply with respect to each Asset. Rather, the Seconded Employees working at a specific location shall only be required to provide those Operational Services applicable to the Assets at such location.
List of Operational Services
Operation of the Assets in accordance with prudent industry practice and the directions for product and feedstock movements given by GP (or, where customary practice dictates, customers of the Partnership, in which case such directions shall be deemed for purposes of this Agreement to have come from GP, acting for and on behalf of the Partnership), including but not limited to operation of the pump stations and other facilities within such operating parameters and specifications as may be in accordance with sound engineering and operating practices and applicable laws, operation of meter stations, including calibration of measurement and product analysis equipment, operation of booster pumps, providing custody measurement as required and the coordination of product and feedstock movements as directed.
Operation of truck rack loading and unloading, including blending operations, management of computer loading systems and processing of delivery tickets.
Operation of vapor recovery systems, to include emission monitoring requirements.
Operation of wastewater treatment systems and/or oil water separator systems (in compliance with all applicable hazardous waste handling procedures).
Provision of communications, inspection, surveillance, flow control, corrosion control, and monitoring.
Establishment of and compliance with safety, health, environmental, training, emergency response, spill response and other programs in connection with the operation of the Assets.
Preparation and retention of appropriate records and logs as required by applicable laws and consistent with past practice (subject to changes required by changes in law and/or the adoption of new policies and procedures).
Maintenance of instrument systems required for performance of pipeline monitoring and control services, product analysis, and measurements in accordance with applicable requirements and generally accepted industry practices.
Providing scheduling services for all products shipped into and delivered out of the Assets, with appropriate consultation and coordination with affected refineries, third-party pipelines, third-party off-line delivery and shipper personnel, and control room personnel.
Coordination of all inventory management activities and assistance in the development and implementation of inventory control policies and guidelines regarding the Assets.
Determining net volume received and delivered by utilizing measurement facilities installed, operated and maintained in accordance with the latest edition of the American Petroleum Institute Manual of Petroleum Measurement Standards and standard industry practices, and reconciliation of book inventory with actual inventory.
Provision of sufficient on-the-job and outside training to employees and contractors operating and maintaining the Assets for the operation of the Assets in a safe and efficient manner in accordance with the applicable Partnership policies and procedures and applicable governmental rules, regulations and laws.
Preparation, filing and renewal, as applicable and, to the extent not performed under the Omnibus Agreement, of all operating licenses and/or permits as directed by GP.
Emergency response services, including but not limited to closing pipeline valves in connection with a response to any emergency involving the Assets.
Laboratory and analytical services including but not limited to product quality and assurance analysis.
Additive procurement services and inventory management of additive inventories (except to the extent any additives are procured and/or managed by customers of the Partnership, in which case the services hereunder shall consist of appropriate coordination with such customers).
Security services, including but not limited to controlling access to the Assets and (except to the extent such activities are customarily conducted by customers of the Partnership) negotiation, execution and management of access agreements.
Maintenance and repair of the Assets, including but not limited to pipeline repairs, terminal repairs, aerial pipeline patrols, population density counts, right-of-way maintenance (including but not limited to filling of washes, mowing weeds and brush, repairing fences, erection and maintenance of fences, barricades or other suitable protection to protect the Assets and associated equipment from damage due to mowers, trucks or other vehicles, flagging and identification of pipelines in the event of excavation in the vicinity of the pipelines by the Operators or third parties), in each case, within such maintenance/repair parameters and specifications as may be in accordance with sound engineering and maintenance practices and applicable laws.
Implementation and administration of a preventative maintenance program for the Assets, including, without limitation, periodic testing, adjustment and maintenance of the Assets, meter station and
valve inspections and meter proving maintenance, in each case in accordance with prudent maintenance practices and applicable laws.
Implementation and administration of a tank maintenance and integrity program for the Assets, including, without limitation, periodic testing, maintenance, repair and/or replacement in each case in accordance with prudent maintenance practices and applicable laws.
Inspection services for monitoring work performed by others in the vicinity of the Assets.
Preparation and retention of appropriate records and logs as required by applicable laws and that a prudent provider of maintenance services would maintain regarding the Assets.
Reconstruction, reconditioning, overhaul and/or replacement of the Assets, as appropriate.
Technical services for trouble-shooting problems, improving the Assets performance, upgrading the Assets, repairing the Assets and/or meeting regulatory or safety requirements.
Maintaining compliance with all applicable federal, state and local environmental, health and safety laws including but not limited to conducting all environmental investigation and remediation activities, as required by federal, state and local environmental laws and prudent business practices.
Facilitating the acquisition of all materials (including spare parts inventories), equipment, services, supplies and labor necessary for the maintenance and repair of the Assets.
Except to the extent provided under the Omnibus Agreement, performing all planning, design and engineering functions related to the maintenance and repair of the Assets including but not limited to selecting and overseeing contractors and material suppliers for such activities.
Preparing excavation plans for pipeline right-of-way work, and advising the Partnership of any right-of-way work which could threaten the integrity of the Partnership’s pipelines.
Construction, reconstruction, reconditioning, overhaul and replacement of the Assets, including but not limited to engineering, procurement, construction and project performance testing and services relating thereto. Related functions include:
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• | Oversight and management services as may be necessary in connection with these activities . |
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• | Planning, design and engineering functions related to the activities. |
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• | Procurement of all materials, equipment, services, supplies and labor necessary for and related to the activities. |
Preparation and/or assistance in the preparation of capital project (AFE) documents for approval by the Partnership.
Routine maintenance, repairs and inspections of the tanks and other facilities at the St. Charles Terminal and Houston Terminal.
Together with such other routine maintenance and operational services as GP may require in connection with the ownership and operation of the Assets consistent with the Operators’ past practices at the Assets.
Exhibit C
Form of Cover Page for Amendment and Restatement of
Exhibits to Amended and Restated Services and Secondment Agreement
An Amended and Restated Services and Secondment Agreement was executed as of March 1, 2015 (the “Amended and Restated Services and Secondment Agreement”), among Valero Services, Inc., a Delaware corporation, Valero Refining Company-Tennessee, L.L.C., a Delaware limited liability company, Valero Refining-Texas, L.P., a Texas limited partnership, and Valero Energy Partners GP LLC, a Delaware limited liability company. Capitalized terms not otherwise defined in this document shall have the terms set forth in the Amended and Restated Services and Secondment Agreement.
The Parties agree that, as of the date hereof, the Exhibits are hereby amended and restated in their entirety to be as attached hereto. Pursuant to Section 6.18 of the Amended and Restated Services and Secondment Agreement, such amended and restated Exhibits shall replace the prior Exhibits as of the date hereof and shall be incorporated by reference into the Amended and Restated Services and Secondment Agreement for all purposes. As amended hereby, the Amended and Restated Services and Secondment Agreement is hereby ratified and affirmed and shall continue in full force and effect.
[Include the following paragraph if new Operators are to be added]
By its execution hereof, [_________________], a [__________________] (“New Operator”), has agreed to be bound to all of the terms and provisions hereof governing Operators, with respect to those Assets for which it is listed as the Operator in the attached Exhibit A. From and after the date hereof, the terms “Operator,” “Operators,” “Party” and “Parties” in the Amended and Restated Services and Secondment Agreement shall be deemed to include New Operator for all purposes.
[Remainder of page intentionally left blank.]
TERMINAL SERVICES SCHEDULE
(Houston Terminal)
This Terminal Services Schedule (this “Schedule”) is entered into on the 1st day of March, 2015 (the “Effective Date”) by and between VALERO PARTNERS OPERATING CO. LLC, a Delaware limited liability company (“Company”) and VALERO MARKETING AND SUPPLY COMPANY, a Delaware corporation (“Customer”) pursuant to the Master Terminal Services Agreement (“Agreement”) between Company and Customer dated December 16, 2013. Except as set forth herein, the terms and conditions of the Agreement are incorporated by reference into this Schedule. Unless otherwise defined in this Schedule, the defined terms in this Schedule will have the same meaning used in the Agreement.
1. Definitions. For purposes of this Schedule and the Agreement as it relates to this Schedule,the following terms shall have the meanings set forth below:
(a) “Tankage” means the crude oil, refined products and intermediates storage tanks identified on Exhibit A attached hereto and incorporated herein for all purposes that are located at the Terminal. The term “Tank” means any individual crude oil, refined product or intermediate storage tank within the Tankage. The Company may designate alternate tankage in the event the Tanks become unavailable.
2. Term. This Schedule shall have a primary term commencing on the Effective Date and ending 10 years from the Effective Date (the “Initial Term”), and may be renewed by Customer, at Customer’s sole option, for one successive 5 year renewal term (a “Renewal Term”), upon at least 180 Days’ written Notice from Customer to Company prior to the end of the Initial Term. The Initial Term and Renewal Term, if any, shall be referred to in this Schedule as the “Term”.
3. Terminal. The terminal services contemplated by this Schedule will be performed at Company’s Affiliate’s Houston Tank Farm located in Houston, Texas (the “Terminal”).
4. Refinery. The Terminal supports Customer’s Affiliate’s Houston Refinery located in Houston, Texas (the “Refinery”).
5. Product. The products to be handled and stored under this Schedule (each a “Product”, and collectively the “Products”) are those specified Products set forth on Exhibit B attached hereto and incorporated herein for all purposes.
6. Receipts and Deliveries. Product will be received at and delivered from the Terminal by pipeline. Custody of Products received at the Terminal shall pass to Company at the Demarcation Point. Custody of Products delivered from the Terminal shall pass to Customer at the Demarcation Points. For purposes of this Section the “Demarcation Points” shall mean those points at which any receipt pipeline to the Tankage or delivery pipeline from the Tankage connects to any receipt or delivery pipeline outside of the Terminal that is used for the purpose of transporting Products to and from the Terminal. The Parties may determine the actual Demarcation Points following the
Effective Date and agree to execute any amendments or supplements to this Schedule if necessary to incorporate the actual Demarcation Points.
7. Specifications. Customer will ensure that all of Customer’s Product delivered to the Terminal under the terms of this Schedule meets the Company’s applicable specifications for such Product (the “Specifications”), provided that (i) the Product specifications and properties remain consistent with the pipeline system specifications for the applicable pipelines connected to the Terminal, and (ii) the Product specifications and properties comply with any specifications imposed by Law. These Specifications are minimum specifications for the Terminal and do not supersede any published or otherwise required specification set forth by the delivering pipelines that may be more stringent for movements on those third party pipelines. Ethanol delivered to the Terminal by or on behalf of Customer shall meet all the specifications listed in the latest version of ASTM D4806.
8. Throughput Charges. For each Month during the Term, Customer will pay Company (i) $0.227 per Barrel of Product throughput and handled at the Terminal for or on behalf of Customer for throughput volumes up to 315,921 average Barrels per Day of Product for Product set forth in Exhibit B to this Schedule so received or withdrawn during such Month (“Tier 1 Rate”), and (ii) $0.05 per Barrel of Product throughput and handled at the Terminal by or on behalf of Customer on terminal throughput volumes in excess of 315,921 average Barrels per Day of Product for Product set forth in Exhibit B to this Schedule so received or withdrawn during such Month (“Tier 2 Rate”), in each case subject to escalation pursuant to Section 11. The Tier 1 Rate and Tier 2 Rate may be referred to collectively or individually as the “Throughput Charge”. For the avoidance of doubt, to the extent any Quarterly Deficiency Payment is applied to any Quarterly Surplus Volumes (such volumes being referred to as “Pre-Paid Volumes”), the Throughput Charge for such Pre-Paid Volumes shall be the Tier 1 Rate for the Calendar Quarter in which such Quarterly Deficiency Payment was made. For each Month within a Calendar Quarter, the Throughput Charge applied to volumes tendered for such Month shall be based on a quarter-to-date calculation of the Minimum Monthly Commitment (as defined below), and the revenue billed for such Month shall be adjusted to reflect such quarter-to-date calculation. For purposes of this Section, the term “Minimum Monthly Commitment” shall be 300,000 average Barrels per Day multiplied by the number of days in the applicable Month. An illustrative example of the quarter-to-date calculation of the Minimum Monthly Commitment and applicable Throughput Charges for such quarter is attached hereto as Exhibit C. For avoidance of doubt, movements of Product from the Terminal to the Refinery for processing at the Refinery and movements of Product out of the Refinery from processing to the Terminal are not considered throughput for which Customer will be charged a Throughput Charge.
9. Other Charges.
(a) Holdover Fee. If Customer does not remove its Product from the Terminal on or before the date this Schedule terminates, except to the extent any delay in removal is caused by Company, Customer will pay a holdover fee of $0.05 per Barrel of Product per day in addition to any Throughput Charge.
(b) Sampling Fee. Customer will pay a $100 fee per sample for all samples drawn at Customer’s request excluding any composite samples taken on pipeline receipts to or pipeline deliveries from the Terminal.
10. Minimum Throughput Commitments. For each Calendar Quarter during the Term, Customer shall tender or cause to be tendered an average of at least 300,000 Barrels per Day of Products to or from the Terminal for handling in approximately ratable quantities (such average, the “Minimum Quarterly Commitment”) and Company shall accept and deliver such Product in accordance with the terms of this Schedule. Except as expressly provided in the Agreement in connection with an Outage, a Company Force Majeure or a Customer Force Majeure, if during any Calendar Quarter, Customer fails to satisfy its Minimum Quarterly Commitment in such Calendar Quarter, then Customer will pay Company a deficiency payment (each, a “Quarterly Deficiency Payment”) in an amount equal to the volume of the deficiency (the “Quarterly Deficiency Volume”) multiplied by the Throughput Charge. Customer shall pay Company the amount of such Quarterly Deficiency Payment along with any Throughput Charge payable hereunder. The dollar amount of any Quarterly Deficiency Payment paid by Customer may be applied as a credit against any amounts incurred by Customer and owed to Company with respect to volumes of Product handled at the Terminal in excess of Customer’s Minimum Quarterly Commitment (or, if this Schedule expires or is terminated, to volumes handled at the Terminal in excess of the applicable Minimum Quarterly Commitment in effect as of the date of such expiration or termination) (such excess volume in any Calendar Quarter during the Term is referred to as the “Quarterly Surplus Volume”) during any of the succeeding four Calendar Quarters, after which time any unused credits will expire. This Section 10 shall survive the expiration or termination of this Schedule, if necessary for the application of any Quarterly Deficiency Payment against any Quarterly Surplus Volume as set forth herein.
11. Escalation. On July 1, 2016, and on July 1st of each year thereafter while this Schedule is in effect, Company shall adjust the Throughput Charge, which adjustments shall be effective as of July 1st of the year in which such election is made, by multiplying the Throughput Charge, by an amount equal to a maximum of (a) 1.0 plus (b) a fraction, of which (i) the numerator is the positive change, if any, in the Consumer Price Index – All Urban Consumers (Series ID CUUR0300SA0) (such index, the “CPI”) during the 12-Month period ending on March 31st of such year, as reported during the Month of April of such year and (ii) the denominator is the CPI as of the first day of such 12-Month period, provided that if, with respect to any such 12-Month period, the CPI has decreased during such 12-Month period, Company may increase fees on the following July 1st only to the extent that the percentage change in the CPI since the most recent previous such increase in fees is greater than the aggregate amount of the cumulative decreases in the CPI during the intervening period or periods.
12. Nominations. Customer shall furnish to Company, by the 20th Day of each Month preceding the Month of delivery (except for the first Month of the Term, which shall be on or before the 5th day of such Month), a delivery schedule that includes the estimated quantity of Products that Customer anticipates delivering to and receiving from the Terminal during the following Month.
13. Monthly Statements. For purposes of this Schedule and the Agreement as it relates to this Schedule, Section 6.01 of the Agreement is hereby amended and restated as follows:
Within 10 days after the end of each Month, Company will provide Customer a statement (a “Monthly Statement”) for each proceeding Month, which Monthly Statement shall
include for each Product specified on Exhibit B to this Schedule: receipts and withdrawals, and the Throughput Charges due the Company (after application of any Quarterly Surplus Volume credit to which the Company may be entitled pursuant to this Schedule). If requested by Customer, Company will provide pipeline meter tickets for receipts and withdrawals at the Terminal for such Month, if available. Each Monthly Statement immediately following the last Month in each Calendar Quarter shall include a report that sets forth the amount of Quarterly Deficiency Volume, if any, or Quarterly Surplus Volume, if any, and any Quarterly Deficiency Payment that may be due and payable by Customer.
14. Liens. Customer hereby grants to Company a warehouseman’s lien on all of Customer’s Products in storage at the Terminal for any amounts payable by Customer to Company that have not been paid when due hereunder. If a warehouse receipt is required under Law for such a lien to arise, this Schedule will be deemed to be the warehouse receipt for all Products at the Terminal.
15. Special Termination by Customer. If Customer or any of its Affiliates determines to completely or partially suspend refining operations at the Refinery for a period of at least 12 consecutive Months, the Parties will negotiate in good faith to agree upon a reduction of the Minimum Quarterly Commitment to reflect such suspension of operations. If the Parties are unable to agree to an appropriate reduction of the Minimum Quarterly Commitment, then after Customer or such Affiliate has made a public announcement of such suspension, Customer may provide written Notice to Company of its intent to terminate this Schedule and this Schedule will terminate 12 Months following the date such Notice is delivered to Company. In the event Customer or such Affiliate publicly announces, prior to the expiration of such 12-Month period, its intent to resume operations at the Refinery, then such Notice shall be deemed revoked and this Schedule shall continue in full force and effect as if such Notice had never been delivered.
16. Effect of Customer Restructuring. If Customer or any of its Affiliates determines to restructure its respective supply, refining or sales operations at the Refinery in such a way as could reasonably be expected to materially and adversely affect the economics of Customer’s performance of its obligations under this Schedule, then the Parties will negotiate in good faith an alternative arrangement that is no worse economically for Company than the economic benefits to be received by Company under this Schedule, which may include the substitution of new commitments of Customer on other assets owned or to be acquired or constructed by Company.
17. Additional Services. If Company performs additional services at Customer’s written request, or if Company, upon written notice to Customer, performs any additional services because Customer’s Product does not meet the applicable Specifications, Customer will pay Company the cost of such services plus an administrative fee that is equal to 10% of such documented, invoiced costs.
18. Removal of Tank for Service Inspection. The Parties agree that if the Company determines to remove a Tank included in the Terminal from service or if a Tank is removed from service for inspection in compliance with API Standard 653 for Aboveground Storage Tanks then Company will not be required to utilize, operate or maintain such Tank or provide the services required under this Schedule with respect to such Tank; provided however, that any such removal will not reduce
the Throughput Charge except to the extent that Company is unable to provide to Customer the applicable throughput capacity to satisfy the Minimum Quarterly Commitment.
19. Tank Cleaning and Removal of Products. Notwithstanding any provision herein to the contrary, Customer will be responsible for all actual costs incurred by Company for tank cleaning, product removal, and disposal of all residual Product (including any BS&W) during the Term in the event (x) of a change in service of a Tank, (y) any cleaning of the Tankage is necessary for Company to comply with Applicable Law, including compliance with API 653 or any legal or regulatory requirement adopting or substantially similar to the requirements set forth in API 653, or (z) it becomes necessary to remove a Tank from service for maintenance. Under such circumstances, Company shall exercise commercially reasonable efforts to (a) provide Customer with at least sixty (60) days prior written notice of its intention to remove a Tank for cleaning or maintenance, which notice shall include (i) the legal basis for such requirement, if required, and (ii) the estimated amount of time any such Tank will be taken out of service for such purpose, and (b) except as otherwise prohibited by Applicable Law, clean only one Tank in a particular service at any given time while allowing the other Tanks to remain in service, subject to any Force Majeure event; provided, however, the failure of Company to timely provide such notice shall not relieve Customer of its obligations required hereunder.
20. Marketing of Throughput and Storage Services to Third Parties. During the Term, Company may provide throughput services to third parties at the Terminal and storage services to third parties in the Tankage, provided that, (i) the provision of such throughput and storage services to third parties is not reasonably likely to negatively impact Customer’s ability to use either the Terminal or the Tankage in accordance with the terms of this Schedule in any material respect, (ii) prior to any third party use of either of the Terminal or the Tankage or the entry into any agreement with respect thereto, Company shall have received prior written consent from Customer with respect to such third party usage or the entry into such agreement, as applicable, not to be unreasonably withheld, conditioned or delayed and (iii) to the extent such third-party usage reduces the ability of Company to provide the throughput capacity to satisfy the Minimum Quarterly Commitment, the Minimum Quarterly Commitment shall be proportionately reduced to the extent of the difference between the Minimum Quarterly Commitment and the amount that can be throughput at the Terminal or stored in the Tankage (prorated for the portion of the Quarter during which the Minimum Quarterly Commitment was unavailable).
21. Increase in Ad Valorem Taxes. If Company’s ad valorem tax obligation related to the Tankage and other facilities at the Terminal substantially increases after the Effective Date as a result of the change in ownership of the Terminal or the Terminal being assessed separately from the Refinery, the Parties will renegotiate the Throughput Charge in good faith based on the amount of the increased tax liability and Company’s good faith estimate of Customer’s pro rata share (or if the amount of the increased tax liability relate only to Customer’s Tankage, then 100%) of the increase in the Throughput Charges necessary to cover such increased tax liability.
22. Operating and Maintenance Expenses. If during the first three years of the Term of this Schedule, Company’s expenses related to the operation and maintenance of the Tankage and other facilities at the Terminal substantially increase or decrease relative to the Parties’ expectations as
of the Effective Date, the Parties will renegotiate the Throughput Charges in good faith in order to reset the Throughput Charges to preserve the Parties’ original economic, operational, commercial, and competitive expectations related to this Schedule as of the Effective Date.
23. Contacts and Notices.
(a) For Company. The following contacts and their respective subject matter expertise are provided for convenience purposes only. All formal notices and communication required under this Schedule to Company shall be in writing and delivered as set forth in the Agreement:
|
| |
Operational: | VP Pipelines & Terminals |
| Tel: (210) 345-4057 |
| Fax: (210) 370-4801 |
| |
Invoice: | Troy Heard, Supervisor Accounting |
| Tel: (210) 345-3219 |
| Fax: (210) 370-4355 |
(b) For Customer: The following contacts and their respective subject matter expertise are provided for convenience purposes only. All formal notices and communication required under this Schedule to Customer shall be in writing and delivered as set forth in the Agreement:
|
| |
Operational: | VP & General Manager - Houston Refinery |
| Tel: (713) 923-3585 |
| Fax: (713) 923-3399 |
| |
Invoice: | Troy Heard, Supervisor Accounting |
| Tel: (210) 345-3219 |
| Fax: (210) 370-4355 |
IN WITNESS WHEREOF, the Parties hereto have caused this Schedule to be duly executed by their respective authorized officers.
Company:
VALERO PARTNERS OPERATING CO. LLC
|
| |
By: /s/ Richard F. Lashway |
Name: | Richard F. Lashway |
Title: | President and Chief Operating Officer |
Customer:
VALERO MARKETING AND SUPPLY COMPANY
|
| |
By: /s/ R. Lane Riggs |
Name: | R. Lane Riggs |
Title: | Executive Vice President |
[Signature Page to Terminal Services Schedule (Houston Terminal)]
EXHIBIT A
TANKS
|
| | | |
Houston Tank Ref # | Shell Capacity (bbls) | Diameter | Year Built |
215 | 132,000 | 150 | 1960 |
234 | 150,000 | 150 | 2007 |
232 | 73,000 | 120 | 1992 |
211 | 179,000 | 165 | 2015 |
212 | 179,000 | 165 | 2015 |
205 | 150,000 | 150 | 2008 |
228 | 110,000 | 150 | 1975 |
507 | 150,000 | 150 | 2013 |
511 | 132,000 | 150 | 2006 |
505 | 80,000 | 125 | 1974 |
226 | 65,000 | 110 | 2005 |
204 | 55,000 | 90 | 2014 |
210 | 54,000 | 95 | 2008 |
230 | 41,000 | 100 | 1991 |
506 | 78,000 | 125 | 1975 |
225 | 75,000 | 120 | 1971 |
227 | 153,000 | 150 | 2013 |
1 | 236,000 | 210 | 1990 |
2 | 295,000 | 210 | 2012 |
3¹ | 146,000 | 190 | 1968 |
4 | 220,000 | 190 | 2009 |
6 | 220,000 | 210 | 1991 |
901 | 77,000 | 110 | 2007 |
233 | 73,000 | 120 | 1992 |
907 | 50,000 | 90 | 2006 |
915 | 69,000 | 95 | 2014 |
917 | 31,000 | 75 | 1969 |
920 | 31,000 | 72 | 2006 |
909 | 4,450 | 35 | 1961 |
927 | 55,000 | 90 | 2007 |
____________________________
1 Tank 3 may be substituted with Tank 5
|
| | | |
912 | 8,100 | 43 | 1961 |
913 | 8,100 | 43 | 2008 |
918 | 28,000 | 75 | 1968 |
921 | 32,000 | 72 | 2009 |
224 | 40,000 | 80 | 1970 |
231 | 102,000 | 123 | 2004 |
216 | 60,000 | 100 | 1960 |
5² | 215,000 | 220 | 1977 |
TOTAL | 3,641,650 | | |
____________________________
2 Tank 5 is currently out of service and if brought back into service may be substituted for Tank 3. The Shell Capacity of Tank 5 has not been included in the Total Shell Capacity.
EXHIBIT B
PRODUCTS
Products are hydrocarbons commonly stored in atmospheric storage tanks (<11 psia TVP) (True Vapor Pressure) such as, but not limited to:
Crude (Crude Oil, Blended Crude Oil, Crude Oil Mixture, Diluted Crude Oil, Synthetic Crude, Bitumen Crude)
Gasoline and Gasoline Blendstocks including Alkylate, Naphtha, Reformate, Cat gasoline, LSR, Naphtha
Distillate (Ultra Low Sulfur Diesel, Kerosene, Jet Fuel, Light Cycle Oil, Other distillates such as High Sulfur Diesel)
Gas Oils (Vacuum Gas Oil (VGO), Coker gas oil)
Resid (Fuel Oil, Residual Fuel Oil, No. 6 High Sulfur, Slurry, ATB)
Benzene
Products exclude:
Petcoke
Sulfur
Butane
Propane
Propylene
Hydrogen
Natural Gas
Butane / Butylene
P/P
NC4
Y-Grade
Acid
Spent Caustic
Process Water
Sour Water
EXHIBIT C
EXAMPLE
TERMINAL SERVICES SCHEDULE
(St. Charles Terminal)
This Terminal Services Schedule (this “Schedule”) is entered into on the 1st day of March, 2015 (the “Effective Date”) by and between VALERO PARTNERS OPERATING CO. LLC, a Delaware limited liability company (“Company”) and VALERO MARKETING AND SUPPLY COMPANY, a Delaware corporation (“Customer”) pursuant to the Master Terminal Services Agreement (“Agreement”) between Company and Customer dated December 16, 2013. Except as set forth herein, the terms and conditions of the Agreement are incorporated by reference into this Schedule. Unless otherwise defined in this Schedule, the defined terms in this Schedule will have the same meaning used in the Agreement.
1. Definitions. For purposes of this Schedule and the Agreement as it relates to this Schedule, the following terms shall have the meanings set forth below:
(a) “Tankage” means the crude oil, refined products and intermediates storage tanks identified on Exhibit A attached hereto and incorporated herein for all purposes that are located at the Terminal. The term “Tank” means any individual crude oil, refined product or intermediate storage tank within the Tankage. The Company may designate alternate tankage in the event the Tanks become unavailable.
2. Term. This Schedule shall have a primary term commencing on the Effective Date and ending 10 years from the Effective Date (the “Initial Term”), and may be renewed by Customer, at Customer’s sole option, for one successive renewal term expiring on January 31, 2030 (a “Renewal Term”), upon at least 180 Days’ written Notice from Customer to Company prior to the end of the Initial Term. The Initial Term and Renewal Term, if any, shall be referred to in this Schedule as the “Term”.
3. Terminal. The terminal services contemplated by this Schedule will be performed at Company’s Affiliate’s St. Charles Tank Farm located in Norco, Louisiana (the “Terminal”).
4. Refinery. The Terminal supports Customer’s Affiliate’s St. Charles Refinery located in Norco, Louisiana (the “Refinery”).
5. Product. The products to be handled and stored under this Schedule (each a “Product”, and collectively the “Products”) are those specified Products set forth on Exhibit B attached hereto and incorporated herein for all purposes.
6. Receipts and Deliveries. Product will be received at and delivered from the Terminal by pipeline. Custody of Products received at the Terminal shall pass to Company at the Demarcation Point. Custody of Products delivered from the Terminal shall pass to Customer at the Demarcation Points. For purposes of this Section the “Demarcation Points” shall mean those points at which any receipt pipeline to the Tankage or delivery pipeline from the Tankage connects to any receipt or delivery pipeline outside of the Terminal that is used for the purpose of transporting Products to and from the Terminal. The Parties may determine the actual Demarcation Points following the
Effective Date and agree to execute any amendments or supplements to this Schedule if necessary to incorporate the actual Demarcation Points.
7. Specifications. Customer will ensure that all of Customer’s Product delivered to the Terminal under the terms of this Schedule meets the Company’s applicable specifications for such Product (the “Specifications”), provided that (i) the Product specifications and properties remain consistent with the pipeline system specifications for the applicable pipelines connected to the Terminal, and (ii) the Product specifications and properties comply with any specifications imposed by Law. These Specifications are minimum specifications for the Terminal and do not supersede any published or otherwise required specification set forth by the delivering pipelines that may be more stringent for movements on those third party pipelines. Ethanol delivered to the Terminal by or on behalf of Customer shall meet all the specifications listed in the latest version of ASTM D4806.
8. Throughput Charges. For each Month during the Term, Customer will pay Company (i) $0.516 per Barrel of Product throughput and handled at the Terminal for or on behalf of Customer for throughput volumes up to 435,695 average Barrels per Day of Product for Product set forth in Exhibit B to this Schedule so received or withdrawn during such Month (“Tier 1 Rate”), and (ii) $0.05 per Barrel of Product throughput and handled at the Terminal by or on behalf of Customer on terminal throughput volumes in excess of 435,695 average Barrels per Day of Product for Product set forth in Exhibit B to this Schedule so received or withdrawn during such Month (“Tier 2 Rate”), in each case subject to escalation pursuant to Section 11. The Tier 1 Rate and Tier 2 Rate may be referred to collectively or individually as the “Throughput Charge”. For the avoidance of doubt, to the extent any Quarterly Deficiency Payment is applied to any Quarterly Surplus Volumes (such volumes being referred to as “Pre-Paid Volumes”), the Throughput Charge for such Pre-Paid Volumes shall be the Tier 1 Rate for the Calendar Quarter in which such Quarterly Deficiency Payment was made. For each Month within a Calendar Quarter, the Throughput Charge applied to volumes tendered for such Month shall be based on a quarter-to-date calculation of the Minimum Monthly Commitment (as defined below), and the revenue billed for such Month shall be adjusted to reflect such quarter-to-date calculation. For purposes of this Section, the term “Minimum Monthly Commitment” shall be 390,000, average Barrels per Day multiplied by the number of days in the applicable Month. An illustrative example of the quarter-to-date calculation of the Minimum Monthly Commitment and applicable Throughput Charges for such quarter is attached hereto as Exhibit C. For avoidance of doubt, movements of Product from the Terminal to the Refinery for processing at the Refinery and movements of Product out of the Refinery from processing to the Terminal are not considered throughput for which Customer will be charged a Throughput Charge.
9. Other Charges.
(a) Holdover Fee. If Customer does not remove its Product from the Terminal on or before the date this Schedule terminates, except to the extent any delay in removal is caused by Company, Customer will pay a holdover fee of $0.05 per Barrel of Product per day in addition to any Throughput Charge.
(b) Sampling Fee. Customer will pay a $100 fee per sample for all samples drawn at Customer’s request excluding any composite samples taken on pipeline receipts to or pipeline deliveries from the Terminal.
10. Minimum Throughput Commitments. For each Calendar Quarter during the Term, Customer shall tender or cause to be tendered an average of at least 390,000 Barrels per Day of Products to or from the Terminal for handling in approximately ratable quantities (such average, the “Minimum Quarterly Commitment”) and Company shall accept and deliver such Product in accordance with the terms of this Schedule. Except as expressly provided in the Agreement in connection with an Outage, a Company Force Majeure or a Customer Force Majeure, if during any Calendar Quarter, Customer fails to satisfy its Minimum Quarterly Commitment in such Calendar Quarter, then Customer will pay Company a deficiency payment (each, a “Quarterly Deficiency Payment”) in an amount equal to the volume of the deficiency (the “Quarterly Deficiency Volume”) multiplied by the Throughput Charge. Customer shall pay Company the amount of such Quarterly Deficiency Payment along with any Throughput Charge payable hereunder. The dollar amount of any Quarterly Deficiency Payment paid by Customer may be applied as a credit against any amounts incurred by Customer and owed to Company with respect to volumes of Product handled at the Terminal in excess of Customer’s Minimum Quarterly Commitment (or, if this Schedule expires or is terminated, to volumes handled at the Terminal in excess of the applicable Minimum Quarterly Commitment in effect as of the date of such expiration or termination) (such excess volume in any Calendar Quarter during the Term is referred to as the “Quarterly Surplus Volume”) during any of the succeeding four Calendar Quarters, after which time any unused credits will expire. This Section 10 shall survive the expiration or termination of this Schedule, if necessary for the application of any Quarterly Deficiency Payment against any Quarterly Surplus Volume as set forth herein.
11. Escalation. On July 1, 2016, and on July 1st of each year thereafter while this Schedule is in effect, Company shall adjust the Throughput Charge, which adjustments shall be effective as of July 1st of the year in which such election is made, by multiplying the Throughput Charge, by an amount equal to a maximum of (a) 1.0 plus (b) a fraction, of which (i) the numerator is the positive change, if any, in the Consumer Price Index – All Urban Consumers (Series ID CUUR0300SA0) (such index, the “CPI”) during the 12-Month period ending on March 31st of such year, as reported during the Month of April of such year and (ii) the denominator is the CPI as of the first day of such 12-Month period, provided that if, with respect to any such 12-Month period, the CPI has decreased during such 12-Month period, Company may increase fees on the following July 1st only to the extent that the percentage change in the CPI since the most recent previous such increase in fees is greater than the aggregate amount of the cumulative decreases in the CPI during the intervening period or periods.
12. Nominations. Customer shall furnish to Company, by the 20th Day of each Month preceding the Month of delivery (except for the first Month of the Term, which shall be on or before the 5th day of such Month), a delivery schedule that includes the estimated quantity of Products that Customer anticipates delivering to and receiving from the Terminal during the following Month.
13. Monthly Statements. For purposes of this Schedule, and the Agreement as it relates to this Schedule, Section 6.01 of the Agreement is hereby amended and restated as follows:
Within 10 days after the end of each Month, Company will provide Customer a statement (a “Monthly Statement”) for each proceeding Month, which Monthly Statement shall include for each Product specified on Exhibit B to this Schedule: receipts and withdrawals, and the Throughput Charges due the Company (after application of any Quarterly Surplus Volume credit to which the Company may be entitled pursuant to this Schedule). If requested by Customer, Company will provide pipeline meter tickets for receipts and withdrawals at the Terminal for such Month, if available. Each Monthly Statement immediately following the last Month in each Calendar Quarter shall include a report that sets forth the amount of Quarterly Deficiency Volume, if any, or Quarterly Surplus Volume, if any, and any Quarterly Deficiency Payment that may be due and payable by Customer.
14. Liens. Customer hereby grants to Company a warehouseman’s lien on all of Customer’s Products in storage at the Terminal for any amounts payable by Customer to Company that have not been paid when due hereunder. If a warehouse receipt is required under Law for such a lien to arise, this Schedule will be deemed to be the warehouse receipt for all Products at the Terminal.
15. Special Termination by Customer. If Customer or any of its Affiliates determines to completely or partially suspend refining operations at the Refinery for a period of at least 12 consecutive Months, the Parties will negotiate in good faith to agree upon a reduction of the Minimum Quarterly Commitment to reflect such suspension of operations. If the Parties are unable to agree to an appropriate reduction of the Minimum Quarterly Commitment, then after Customer or such Affiliate has made a public announcement of such suspension, Customer may provide written Notice to Company of its intent to terminate this Schedule and this Schedule will terminate 12 Months following the date such Notice is delivered to Company. In the event Customer or such Affiliate publicly announces, prior to the expiration of such 12-Month period, its intent to resume operations at the Refinery, then such Notice shall be deemed revoked and this Schedule shall continue in full force and effect as if such Notice had never been delivered.
16. Effect of Customer Restructuring. If Customer or any of its Affiliates determines to restructure its respective supply, refining or sales operations at the Refinery in such a way as could reasonably be expected to materially and adversely affect the economics of Customer’s performance of its obligations under this Schedule, then the Parties will negotiate in good faith an alternative arrangement that is no worse economically for Company than the economic benefits to be received by Company under this Schedule, which may include the substitution of new commitments of Customer on other assets owned or to be acquired or constructed by Company.
17. Additional Services. If Company performs additional services at Customer’s written request, or if Company, upon written notice to Customer, performs any additional services because Customer’s Product does not meet the applicable Specifications, Customer will pay Company the cost of such services plus an administrative fee that is equal to 10% of such documented, invoiced costs.
18. Removal of Tank for Service Inspection. The Parties agree that if the Company determines to remove a Tank included in the Terminal from service or if a Tank is removed from service for inspection in compliance with API Standard 653 for Aboveground Storage Tanks then Company will not be required to utilize, operate or maintain such Tank or provide the services required under this Schedule with respect to such Tank; provided however, that any such removal will not reduce the Throughput Charge except to the extent that Company is unable to provide to Customer the applicable throughput capacity to satisfy the Minimum Quarterly Commitment.
19. Tank Cleaning and Removal of Products. Notwithstanding any provision herein to the contrary, Customer will be responsible for all actual costs incurred by Company for tank cleaning, product removal and disposal of all residual Product (including any BS&W) during the Term in the event (x) of a change in service of a Tank, (y) any cleaning of the Tankage is necessary for Company to comply with Applicable Law, including compliance with API 653 or any legal or regulatory requirement adopting or substantially similar to the requirements set forth in API 653, or (z) it becomes necessary to remove a Tank from service for maintenance. Under such circumstances, Company shall exercise commercially reasonable efforts to (a) provide Customer with at least sixty (60) days prior written notice of its intention to remove a Tank for cleaning or maintenance, which notice shall include (i) the legal basis for such requirement, if required, and (ii) the estimated amount of time any such Tank will be taken out of service for such purpose, and (b) except as otherwise prohibited by Applicable Law, clean only one Tank in a particular service at any given time while allowing the other Tanks to remain in service, subject to any Force Majeure event; provided, however, the failure of Company to timely provide such notice shall not relieve Customer of its obligations required hereunder.
20. Marketing of Throughput and Storage Services to Third Parties. During the Term, Company may provide throughput services to third parties at the Terminal and storage services to third parties in the Tankage, provided that, (i) the provision of such throughput and storage services to third parties is not reasonably likely to negatively impact Customer’s ability to use either the Terminal or the Tankage in accordance with the terms of this Schedule in any material respect, (ii) prior to any third party use of either of the Terminal or the Tankage or the entry into any agreement with respect thereto, Company shall have received prior written consent from Customer with respect to such third party usage or the entry into such agreement, as applicable, not to be unreasonably withheld, conditioned or delayed and (iii) to the extent such third-party usage reduces the ability of Company to provide the throughput capacity to satisfy the Minimum Quarterly Commitment, the Minimum Quarterly Commitment shall be proportionately reduced to the extent of the difference between the Minimum Quarterly Commitment and the amount that can be throughput at the Terminal or stored in the Tankage (prorated for the portion of the Quarter during which the Minimum Quarterly Commitment was unavailable).
21. Increase in Ad Valorem Taxes. If Company’s ad valorem tax obligation related to the Tankage and other facilities at the Terminal substantially increases after the Effective Date as a result of the change in ownership of the Terminal or the Terminal being assessed separately from the Refinery, the Parties will renegotiate the Throughput Charge in good faith based on the amount of the increased tax liability and Company’s good faith estimate of Customer’s pro rata share (or
if the amount of the increased tax liability relate only to Customer’s Tankage, then 100%) of the increase in the Throughput Charges necessary to cover such increased tax liability.
22. Operating and Maintenance Expenses. If during the first three years of the Term of this Schedule, Company’s expenses related to the operation and maintenance of the Tankage and other facilities at the Terminal substantially increase or decrease relative to the Parties’ expectations as of the Effective Date, the Parties will renegotiate the Throughput Charges in good faith in order to reset the Throughput Charges to preserve the Parties’ original economic, operational, commercial, and competitive expectations related to this Schedule as of the Effective Date.
23. Contacts and Notices.
(a) For Company. The following contacts and their respective subject matter expertise are provided for convenience purposes only. All formal notices and communication required under this Schedule to Company shall be in writing and delivered as set forth in the Agreement:
|
| |
Operational: | VP Pipelines & Terminals |
| Tel: (210) 345-4057 |
| Fax: (210) 370-4801 |
|
| |
Invoice: | Troy Heard, Supervisor Accounting |
| Tel: (210) 345-3219 |
| Fax: (210) 370-4355 |
(b) For Customer: The following contacts and their respective subject matter expertise are provided for convenience purposes only. All formal notices and communication required under this Schedule to Customer shall be in writing and delivered as set forth in the Agreement:
|
| |
Operational: | VP & General Manager – St. Charles Refinery |
| Tel: (985) 764-5868 |
| Fax: (985) 764-2359 |
|
| |
Invoice: | Troy Heard, Supervisor Accounting |
| Tel: (210) 345-3219 |
| Fax: (210) 370-4355 |
IN WITNESS WHEREOF, the Parties hereto have caused this Schedule to be duly executed by their respective authorized officers.
Company:
VALERO PARTNERS OPERATING CO. LLC
|
| |
By: /s/ Richard F. Lashway |
Name: | Richard F. Lashway |
Title: | President and Chief Operating Officer |
Customer:
VALERO MARKETING AND SUPPLY COMPANY
|
| |
By: /s/ R. Lane Riggs |
Name: | R. Lane Riggs |
Title: | Executive Vice President |
[Signature Page to Terminal Services Schedule (St. Charles Terminal)]
EXHIBIT A
TANKS
|
| | | |
St. Charles Tank Ref # | Shell Capacity (bbls) | Diameter | Year Built |
150-22 | 150,000 | 165 | 1995 |
150-23 | 150,000 | 165 | 1996 |
325-5 | 325,000 | 220 | 2009 |
325-6 | 325,000 | 220 | 2009 |
225-1 | 225,000 | 180 | 2014 |
225-2 | 225,000 | 180 | 2014 |
325-1 | 325,000 | 270 | 1981 |
325-2 | 325,000 | 270 | 1981 |
325-3 | 325,000 | 270 | 1981 |
325-4 | 325,000 | 270 | 2005 |
150-1 | 150,000 | 164 | 2013 |
150-2 | 150,000 | 180 | 1957 |
150-27 | 150,000 | 165 | 1996 |
45-1 | 50,000 | 90 | 1996 |
45-2 | 50,000 | 90 | 1984 |
150-26 | 150,000 | 165 | 1996 |
150-5 | 150,000 | 183 | 1973 |
37-1 | 37,000 | 94 | 1975 |
78 | 15,000 | 60 | 1950 |
80-1 | 80,000 | 120 | 1951 |
55-1 | 55,000 | 100 | 1949 |
55-8 | 55,000 | 115 | 1978 |
150-6 | 150,000 | 183 | 2013 |
150-17 | 150,000 | 183 | 1980 |
55-5 | 55,000 | 100 | 1956 |
55-6 | 55,000 | 100 | 1956 |
425-2 | 425,000 | 280 | 1981 |
130-1 | 130,000 | 150 | 1954 |
130-3 | 130,000 | 150 | 1954 |
150-18 | 150,000 | 183 | 1979 |
150-19 | 150,000 | 183 | 1979 |
|
| | | |
325-7 | 325,000 | 220 | 2012 |
625-2 | 625,000 | 306 | 2014 |
130-2 | 130,000 | 150 | 1954 |
130-5 | 130,000 | 150 | 1954 |
425-3 | 425,000 | 280 | 1981 |
425-4 | 425,000 | 270 | 1981 |
150-4 | 150,000 | 183 | 1973 |
150-20 | 150,000 | 183 | 1980 |
80-3 | 80,000 | 134 | 2007 |
80-4 | 80,000 | 134 | 1954 |
67-1 | 67,000 | 110 | NA |
180-9 | 180,000 | 160 | 2008 |
100-3 | 100,000 | 135 | 2014 |
150-7 | 150,000 | 183 | 1973 |
150-8 | 150,000 | 183 | 1973 |
130-8 | 130,000 | 170 | 1972 |
425-1 | 425,000 | 280 | 1981 |
625-1 | 625,000 | 320 | 1981 |
130-6 | 130,000 | 150 | 1995 |
150-24 | 150,000 | 165 | 1995 |
77 | 15,000 | 56 | 1940 |
81 | 25,000 | 75 | 1946 |
150-25 | 150,000 | 165 | 1995 |
| | | |
TOTAL | 10,004,000 | | |
EXHIBIT B
PRODUCTS
Products are hydrocarbons commonly stored in atmospheric storage tanks (<11 psia TVP) (True Vapor Pressure) such as, but not limited to:
Crude (Crude Oil, Blended Crude Oil, Crude Oil Mixture, Diluted Crude Oil, Synthetic Crude, Bitumen Crude)
Gasoline and Gasoline Blendstocks including Alkylate, Naphtha, Reformate, Cat gasoline, LSR, Naphtha
Distillate (Ultra Low Sulfur Diesel, Kerosene, Jet Fuel, Light Cycle Oil, Other distillates such as High Sulfur Diesel)
Gas Oils (Vacuum Gas Oil (VGO), Coker gas oil)
Resid (Fuel Oil, Residual Fuel Oil, No. 6 High Sulfur, Slurry, ATB)
Slops
Benzene
Products exclude:
Petcoke
Sulfur
Butane
Propane
Propylene
Hydrogen
Natural Gas
Butane / Butylene
P/P
NC4
Y-Grade
Acid
Spent Caustic
Process Water
Sour Water
EXHIBIT C
EXAMPLE
LEASE AND ACCESS AGREEMENT
(Houston Terminal)
THIS LEASE AND ACCESS AGREEMENT (this “Lease”) is made and entered into to be effective as of the 1st day of March, 2015 (the “Effective Date”), between Valero Refining-Texas, L.P., a Texas limited partnership (herein called “Lessor”) and Valero Partners Houston, LLC, a Delaware limited liability company (herein called “Lessee”).
W I T N E S S E T H:
WHEREAS, on the Effective Date, Lessee has acquired from Lessor the Tank Farm Assets (as defined below) located on the Refinery Site (as defined below) in Houston, Texas;
WHEREAS, Lessor has agreed to lease to Lessee and Lessee has agreed to lease from Lessor the land on which the Tank Farm Assets are located, on the terms and conditions set forth in this Lease;
WHEREAS, Lessor owns and operates certain facilities and other improvements at the Refinery Site that are necessary or desirable for Lessee to utilize in Lessee’s operations of the Tank Farm Assets but that may also be utilized by Lessor and that Lessor has agreed to provide Lessee with access to in accordance with this Lease; and
NOW, THEREFORE, for and in consideration of the premises, the mutual agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee covenant and agree as follows:
ARTICLE 1
DEMISE AND PREMISES
1.1 Certain Defined Terms. Unless the context otherwise requires, the following terms shall have the respective meanings set forth in this Section 1.1:
“Affiliate” means any entity that directly or indirectly Controls, is Controlled by, or is under common Control with the referenced entity, including, without limitation, the referenced entity’s parents and their general partners; provided that, for purposes of this Agreement, Valero and its subsidiaries (other than the General Partner and the Partnership and its subsidiaries), including the Lessor, on the one hand, and the General Partner and the Partnership and its subsidiaries, including the Lessee, on the other hand, shall not be considered Affiliates of each other.
“Applicable Law” means all applicable constitutions, laws (including common law), treaties, statutes, orders, decrees, rules, injunctions, licenses, permits, approvals, agreements, regulations, codes, ordinances issued by any Governmental Authority, including applicable judicial or administrative orders, consents, decrees, and judgments, published directives, guidelines, governmental authorizations, requirements or other governmental restrictions which have the force of law, and determinations by, or interpretations of any of the foregoing by any Governmental
Authority having jurisdiction over the matter in question and binding on a given Person, whether in effect as of the date hereof or thereafter and, in each case, as amended.
“Business Day” means any Day except for Saturday, Sunday or an official holiday in the State of Texas.
“Charge Pump” means the last pump prior to pumped inputs entering a refining unit.
“Commencement Date” has the meaning set forth in Section 3.1.
“Contribution Agreement” means that certain Contribution Agreement dated March 1, 2015, among Valero Terminaling and Distribution Company and Valero Refining-New Orleans, L.L.C., as Contributors and the Partnership.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.
“Day” means the period of time commencing at 12:00 a.m. on one calendar day and running until, but not including, 12:00 a.m. on the next calendar day, according to local time where the Premises are located.
“Demarcation Point” is defined in the definition of “Facility Pipelines”.
“Environmental Cleanup” has the meaning set forth in Section 10.4.
“Environmental Laws” means all federal, state, and local laws, statutes, rules, regulations, orders, judgments, ordinances, codes, injunctions, decrees, Environmental Permits and other legally enforceable requirements and rules of common law relating to pollution or protection of human health, natural resources, wildlife and the environment or workplace health or safety including the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq., the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. §§6901 et seq., the Clean Air Act, as amended, 42 U.S.C. §§7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. §§1251 et seq., the Toxic Substances Control Act, as amended, 15 U.S.C. §§2601 et seq., the Oil Pollution Act of 1990, 33 U.S.C. §§2701 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §§300f et seq., the Hazardous Materials Transportation Act of 1994, as amended, 49 U.S.C. §§ 5101 et seq., and other environmental conservation and protection laws and the Occupational Safety and Health Act of 1970, 29 U.S.C. §§ 651 et seq, and the regulations promulgated pursuant thereto, and any state or local counterparts, each as amended from time to time.
“Environmental Permit” means any permit, approval, identification number, license, registration, certification, consent, exemption, variance or other authorization required under or issued pursuant to any applicable Environmental Law, including applications for renewal of such permits in which the application allows for continued operation under the terms of an expired permit.
“Facility Pipelines” means all crude oil, intermediates and refined product pipelines to the extent they are (i) located wholly on, below, above and/or within the Premises and connect into the Tanks, or (ii) located partially on and partially off the Premises and used in connection with the operation of the Tanks, provided that the Parties shall demarcate the point at which any such pipeline located partially on and partially off the Premises connects to any Refinery Pipeline (as determined, the “Demarcation Point”) and that portion extending from the boundary of the Premises to the Demarcation Point shall be considered Facility Pipeline. The Facility Pipelines do not include the Refinery Facilities.
“General Partner” means Valero Energy Partners GP LLC, a Delaware limited liability company.
“Governmental Authority” means any federal, state, tribal, foreign or local governmental entity, authority, department, court or agency, including any political subdivision thereof, exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature, and including any arbitrating body, commission or quasi-governmental authority or self-regulating organization of competent authority exercising or enlisted to exercise similar power or authority.
“Hazardous Substance” means (a) any substance, whether solid, liquid, gaseous, semi-solid, or any combination thereof, that is designated, defined or classified as a hazardous waste, solid waste, hazardous material, pollutant, contaminant or toxic or hazardous substance, or terms of similar meaning, or that is otherwise regulated under any Environmental Law, including any hazardous substance as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, and including asbestos and lead-containing paints or coatings, and (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other refined petroleum hydrocarbons.
“Improvements” and “Material Improvements” have the meanings set forth in Section 7.1.
“Interest Rate” means an annual rate (based on a 360-day year) equal to the lesser of (i) two percent (2%) over the prime rate as published under “Money Rates” in the Wall Street Journal in effect at the close of the Business Day on which payment was due and (ii) the maximum rate permitted by Applicable Law.
“Lessee Indemnified Party(ies)” means Lessee and all other members of the Partnership Group and their respective officers, directors, shareholders, unitholders, members, managers, employees, agents, representatives, successors and assigns.
“Lessee Responsible Parties” has the meaning set forth in Section 10.1.
“Lessor Indemnified Party(ies)” means Lessor and its ultimate parent company and their Affiliates (other than members of the Partnership Group) and their respective officers, directors, shareholders, unitholders, members, managers, employees, agents, representatives, successors and assigns.
“Lessor Services” has the meaning set forth in Section 5.1.
“Losses” means any losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs and expenses (including court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent.
“Monthly Payment” has the meaning set forth in Section 5.2.
“Omnibus Agreement” means that certain Amended and Restated Omnibus Agreement dated July 1, 2014, among Valero Energy Corporation, a Delaware corporation, Valero Marketing and Supply Company, a Delaware corporation, Valero Terminaling and Distribution Company, a Delaware corporation, The Premcor Refining Group Inc., a Delaware corporation, The Premcor Pipeline Co., a Delaware corporation, Valero Energy Partners LP, a Delaware limited partnership, Valero Energy Partners GP LLC, a Delaware limited liability company, Valero Partners Operating Co. LLC, a Delaware limited liability company, Valero Partners EP, LLC, a Delaware limited liability company, Valero Partners Lucas, LLC, a Delaware limited liability company, Valero Partners Memphis, LLC, a Delaware limited liability company, Valero Partners North Texas, LLC, a Delaware limited liability company, Valero Partners South Texas, LLC, a Delaware limited liability company, and Valero Partners Wynnewood, LLC, a Delaware limited liability company, as the same has been amended by that certain Amendment and Restatement of Schedules to Amended and Restated Omnibus Agreement dated as of the Effective Date, and as the same may be further amended and supplemented from time to time.
“Partnership” means Valero Energy Partners LP.
“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of December 16, 2013, as the same may be amended from time to time.
“Partnership Change in Control” means Valero ceases to Control the general partner of the Partnership.
“Partnership Group” has the meaning ascribed to such term in the Partnership Agreement.
“Permitted Exceptions” has the meaning set forth in Section 2.2.
“Permitted Transferee” has the meaning set forth in Section 17.3.
“Permitted Use” has the meaning set forth in Section 6.1.
“Permits” means all permits, licenses, franchises, authorities, consents, and approvals, as necessary under applicable Environmental Laws for operating the Tank Farm Assets and/or the Premises.
“Person” means any individual or entity, including any partnership, corporation, association, joint stock company, trust, joint venture, limited liability company, unincorporated organization or Governmental Authority (or any department, agency or political subdivision thereof).
“Premises” means those tracts or parcels of land located in Houston, Texas on which the Tank Farm Assets are situated as depicted by the cross-hatched areas identified on Exhibit C attached hereto and made a part hereof for all purposes. The Premises is shown on Exhibit C as 8 separate depictions with each including a cross reference to the Refinery Site parcel or tract upon which the Premises is located. For avoidance of doubt, the Premises is intended to include all of the land underlying the Tanks and those portions adjacent to the Tanks that are necessary for the use and operation of the Tank Farm Assets and the Improvements, including where applicable, the dike walls or other containment areas surrounding the Tanks. The Premises do not include the Refinery Facilities and any roads, drives or other ingress and egress areas located within the boundaries of the Premises (it being understood that Lessee shall have a non-exclusive right to use such roads, drives or other ingress and egress areas pursuant to Section 2.2 hereof).
“Refinery” means the crude oil refinery and related facilities (commonly known as the “Valero Houston Refinery”) owned and operated by Lessor in Houston, Texas at the Refinery Site.
“Refinery Facilities” means those assets and facilities of Lessor or third parties that may be located on the Premises but are used in connection with the operation of the Refinery (as opposed to the delivery, storage and redelivery of crude oil, feedstocks and products to the Tanks) or are necessary in order for Lessor to provide the Lessor Services, including without limitation any (i) water lines water tanks and fire water systems (ii) waste water facilities, (iii) control or maintenance buildings, (iv) Charge Pumps, (v) pressurized tanks (bullets and spheres), (vi) Refinery Pipelines, (vii) pipe racks that are not wholly located within the Premises (viii) tanks not in hydrocarbon service, and (ix) electrical and IT/controls infrastructure.
“Refinery Pipelines” means (i) any crude oil, intermediates or refined products pipeline or portion thereof that runs between a Demarcation Point and a point off the Premises for the purpose of delivering crude oil, intermediates and products into the Tanks or receiving crude oil, intermediates and products from the Tanks; and (ii) any crude oil, intermediates or refined products pipeline, or portion thereof, that runs between a Demarcation Point and a point off the Premises for the purpose of delivering crude oil, intermediates and refined products to the Refinery process units or receiving crude oil, intermediates and refined products from the Refinery process units.
“Refinery Site” means those tracts or parcels of land located in Houston, Texas where the Premises are located as more particularly described on Exhibit B attached hereto and made a part hereof for all purposes, or which may be acquired by Lessor after the date hereof for which access thereto is necessary for the use and operation of the Tank Farm Assets or the Improvements, together with any other tracts or parcels of land adjacent thereto and any common areas, parking areas and driveways for vehicular and pedestrian ingress/egress related thereto to the extent owned or controlled by Lessor and, for which access is necessary for the use and operation of the Tank Farm Assets or the Improvements.
“Refinery Site-Wide Permits” means those Permits under which Lessor, immediately prior to the Commencement Date, operated the Refinery and the Tank Farm Assets.
“Release” means any spilling, leaking, seeping, pumping, pouring, emitting, emptying, injecting, discharging, escaping, leaching, dumping, disposing or releasing of any Hazardous Substances into the environment (including the air, soil, surface water, or groundwater) of any kind whatsoever, but not any offsite disposal or treatment in accordance with Environmental Law.
“Rent” has the meaning set forth in Section 4.1.
“Shared Access Facilities” has the meaning set forth in Section 2.2.
“Tanks” means the crude oil, refined products and intermediates storage tanks identified on Exhibit A attached hereto and incorporated herein for all purposes. For further identification the Tanks have been cross-hatched on the depiction of the Premises set forth on Exhibit C.
“Tank Farm Assets” means the Tanks, together with (i) tank valves, tank gauges, booster pumps, transfer pumps, meters, recorders, fittings, pressure and temperature equipment, cathodic protection equipment, leak detection equipment, improvements and other equipment, all of which are located on the Premises and used in connection with the operation of the Tanks, and (ii) the Facility Pipelines.
“Tax Reimbursement” has the meaning set forth in Section 9.2.
“Taxes” means all federal, state and local real and personal property ad valorem taxes, assessments, and other governmental charges, general and special, ordinary and extraordinary, including but not limited to assessments for public improvements or benefits assessed against the Premises or Tank Farm Assets or the use or operation thereof during the Term, including, but not limited to, any federal state or local income, gross receipts, withholding, franchise, excise, sales, use, value added, recording, transfer or stamp tax, levy, duty, charge or withholding of any kind imposed or assessed by any Governmental Authority, together with any addition to tax, penalty, fine or interest thereon. The term “Taxes” does not, however, include federal or state income taxes or franchise taxes imposed on Lessor.
“Term” has the meaning set forth in Section 3.1.
“Third Party Maintenance Contracts” has the meaning set forth in Section 5.5.
“Valero” means Valero Energy Corporation.
1.2 References. As used in this Lease, unless a clear contrary intention appears: (a) the singular includes the plural and vice versa; (b) reference to any Person includes such Person’s successors and assigns but, in the case of a Party, only if such successors and assigns are permitted by this Lease, and reference to a Person in a particular capacity excludes such Person in any other capacity; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Lease), document or instrument means such agreement, document, or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable,
the terms of this Lease; (e) reference to any Section means such Section of this Lease, and references in any Section or definition to any clause means such clause of such Section or definition; (f) “hereunder,” “hereof,” “hereto” and words of similar import will be deemed references to this Lease as a whole and not to any particular Section or other provision hereof or thereof; (g) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; and (h) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including.”
ARTICLE 2
DEMISE OF PREMISES
2.1 Demise of Premises. Lessor, in consideration of the Rent to be paid and of the covenants and agreements in this Lease to be performed by Lessee, does hereby lease and demise to Lessee and Lessee hereby leases, the Premises, upon and subject to the terms, covenants and conditions set forth in this Lease.
2.2 Shared Access Facilities. During the Term, Lessor hereby grants to Lessee and its respective Affiliates, agents, employees and contractors, for no additional consideration, an irrevocable, non-exclusive right of access to and use of those portions of the Refinery Site that are reasonably necessary for access to and/or the use, operation, maintenance, replacement, inspection, protection, repair and removal of the Tank Farm Assets and Improvements by Lessee, all so long as such access and use by any of the Lessee Responsible Parties does not unreasonably interfere in any material respect with Lessor’s operations at the Refinery Site and materially complies with Lessor’s rules, norms and procedures governing safety and security at the Refinery Site. Such access rights in favor of Lessee shall include, but not be limited to the right to use roads within the Refinery Site that provide Lessee access, ingress and egress to the Tank Farm Assets and Improvements and the right to use the Refinery Pipelines, docks, and pumps (and associated utilities) for the movement of crude oil, intermediates and refined products in and out of the Tank Farm Assets, whether or not such Refinery Pipelines are wholly-located on the Refinery Site. Lessor shall not unreasonably interfere with such access and use rights. The facilities from time to time on the Refinery Site that are subject to the access and use rights provided under this Section 2.2 are referred to herein as the “Shared Access Facilities”.
2.3 “Subject to” Restrictions, Etc.; Reservations. This Lease is expressly granted by Lessor and accepted by Lessee subject to all applicable building, zoning and other ordinances and governmental requirements affecting the Premises and to all restrictions, covenants, encumbrances, rights-of-ways, easements, exceptions, reservations and other matters of record encumbering or affecting the Premises. Furthermore, subject to the rights of Lessee hereunder, Lessor reserves the right to grant any, easements, licenses, and other similar agreements affecting the Premises, including, without limitation, utility and pipeline easements, provided that such easements and licenses shall be located in a manner that minimizes interference with the operations of Lessee at the Premises and does not increase any operational cost or risk to Lessee, while also minimizing construction and operational costs and risks for Lessor. The matters referenced in this Section 2.3 are the “Permitted Exceptions”.
2.4 Acceptance of Premises. Lessee acknowledges that it is familiar with the Premises and its condition. Lessee accepts the Premises in its “AS-IS,” “WITH ALL FAULTS” physical condition as of the Commencement Date, subject to the terms and conditions of this Lease. LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, SUITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, AND INCLUDING WITHOUT LIMITATION, (I) THE CONDITION OR SUFFICIENCY OF THE PREMISES FOR LESSEE’S INTENDED USE, (II) THE CONDITION OR ZONING STATUS OF THE PREMISES, OR ANY OTHER FACT OR MATTER RELATING THERETO, OR (III) WHETHER ANY OF THE PREMISES CONTAINS ANY SUBSTANCE OR MATERIAL WHICH IS OR MAY BE IN VIOLATION OF ANY ENVIRONMENTAL LAW. Lessee acknowledges that, except as may be otherwise expressly provided herein, in no event shall Lessor have any obligation for any defects in the Premises or any limitation on its use. The taking of possession of the Premises shall be conclusive evidence that the Premises was in good condition at the time possession was taken.
ARTICLE 3
TERM
3.1 Term. The initial term of this Lease (the “Initial Term”) shall be for 10 years commencing on March 1, 2015 (the “Commencement Date”). Following the Initial Term the Term of this Lease shall automatically renew for four successive five-year periods (each a “Renewal Term”). Lessee may terminate this Lease at the end of the Initial Term or any subsequent Renewal Term by delivering written notice to Lessor, on or before 180 days prior to the end of any such period, that Lessee has elected to terminate this Lease. The Initial Term together with any applicable Renewal Terms shall be referred to herein as the “Term”. In addition, at Lessee’s option, Lessee may terminate this Lease, by providing written notice to Lessor on or before 180 days prior to the desired termination date, if Lessee ceases to operate the Tanks, or ceases its business operations. In the event of such termination prior to the end of the Term, Lessor shall retain one half of the remaining Rent (as defined below) for the current 12-month rental period as set forth in Section 4.1 below as its sole and exclusive remedy for such early termination and shall refund to Lessee the remaining Rent. In the event the aforesaid Commencement Date shall occur on a date other than the first day of the calendar month, then the Term of this Lease shall be for the number of full lease years plus the number of days remaining in the month in which the Term commences.
ARTICLE 4
RENT
4.1 Rent. Lessee shall pay to Lessor annual rent (“Rent”) in the initial amount of $1,715,000 per year, payable in equal monthly installments on or before the last day of each month in the amount of $142,916.66. If any installment of Rent falls due on a day that is not a Business Day, then such installment shall be due and payable on the next day that is a Business Day. Rent for any partial lease year and/or month at the beginning and/or end of the Term shall be prorated based on the number of days during such lease year and/or month that this Lease was in effect.
4.2 Accrual and Payment of Rent. All Rent shall be payable in immediately available funds to an account specified in writing by Lessor from time to time, or at Lessor’s address set forth in Section 19.12 (or at such place or places as Lessor may from time to time direct), free from all claims, demands, set offs, or counterclaims against Lessor of any kind or character. Any delinquent payment (that is, any payment not made within five calendar days after the due date) shall, in addition to any other remedy of Lessor, incur a late charge of 5% (which late charge is intended to compensate Lessor for the cost of handling and processing such delinquent payment and should not be considered interest) and bear interest at the Interest Rate, such interest to be computed from and including the date such payment was due through and including the date of the payment; provided, however, in no event shall Lessee be obligated to pay a sum of late charge and interest higher than the maximum rate permitted by Applicable Law.
4.3 Escalation. On July 1, 2016, and on July 1st of each year thereafter during the Term, Lessor shall adjust Rent by multiplying Rent by an amount equal to a maximum of (a) 1.0 plus (b) a fraction, of which (i) the numerator is the positive change, if any, in the Consumer Price Index – All Urban Consumers (Series ID CUUR0300SA0) (such index, the “CPI”) during the 12-month period ending March 31st of such year, as reported during the month of April of such year and (ii) the denominator is the CPI as of the first day of such 12-month period, provided that if, with respect to any such 12‑month period, the CPI has decreased during such 12-month period, Company may increase fees on the following July 1 only to the extent that the percentage change in the CPI since the most recent previous such increase in fees is greater than the aggregate amount of the cumulative decreases in the CPI during the intervening period or periods.
4.4 Independent Covenant. The obligation of Lessee to pay Rent is an independent covenant, and no act or circumstances whatsoever, whether such act or circumstances constitutes a breach of a covenant by Lessor or not, shall release Lessee of the obligation to pay Rent.
4.5 Rental. Wherever the term “Rental” or “Rent” is used under the terms of this Lease it shall be deemed to refer to the Rent as well as any additional rental due hereunder unless the context specifically states otherwise.
ARTICLE 5
ADDITIONAL LESSOR OBLIGATIONS
5.1 Provision of Lessor Services. During the Term of this Lease, in consideration of the Rent, Lessor shall make available and provide to Lessee, in accordance with the terms and conditions of this Lease, shared use of certain services, utilities, materials and facilities as more fully described on Exhibit D (the “Lessor Services”), located or utilized at the Refinery that are necessary to operate and maintain the Tank Farm Assets as currently operated and maintained.
5.2 Adjustment to Rent for Lessor Services. If the actual cost to Lessor of providing any Lessor Services or any additional Lessor Services exceeds the amount allocated therefor in the Rent (taking into account any increases in Rent pursuant to Section 4.3), Lessor may increase the Rent by an amount equal to such increase. Lessor shall provide Lessee reasonable supporting documentation for any such increase, and if Lessee objects to the amount of any such increase Lessor and Lessee will negotiate in good faith to resolve such dispute. Prior to resolution of any such dispute, Lessee
shall continue to pay the Rent prevailing prior to Lessor’s requested adjustment, with a true-up payment to be made by Lessee promptly upon resolution of the dispute (assuming that the parties agree to an increase in Rent).
5.3 Increased Quantities and Additional Lessor Services:
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(a) | If subsequent to the date hereof increased quantities of any Lessor Services are reasonably required by Lessee in connection with its ownership, operation or maintenance of the Tank Farm Assets or any improvements or additions thereto, Lessor shall use commercially reasonable efforts to provide such increased quantities of such Lessor Services on the same terms and conditions set forth in Exhibit D, so long as the provision of such increased quantities does not interfere in any material respect with Lessor’s operations at the Refinery Site or require Lessor to make a capital improvement in order to provide such increased Lessor Services. If the provision by Lessor of increased quantities of any Lessor Services as requested by Lessee would require Lessor to make such a capital improvement, then Lessee may submit a request to Lessor. If increased quantities of any Lessor Services is requested by Lessee, and provided by Lessor, the Rent may be increased in accordance with Section 5.2 hereof. Notwithstanding anything to the contrary herein, in the event that (i) Lessee uses the Tank Farm Assets to provide services to third parties, (ii) Lessee’s provision of such third-party services results in a material increase of any Lessor Services required by Lessor Services, and (iii) provision of such Lessor Services is available to Lessee from third-party vendors on commercially reasonable terms, then Lessor may decline to provide such increased and additional Lessor Services. |
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(b) | If subsequent to the date hereof Lessor Services not specifically described herein, but which are being produced or utilized by Lessor or its Affiliates in the normal course of their operations at the Refinery Site, are or become reasonably necessary to operate or maintain the Tank Farm Assets and any Improvements, Lessor shall use commercially reasonable efforts to provide such Lessor Services on terms and conditions consistent with the provision of the existing Lessor Services by Lessor. The Rent with respect to such additional Lessor Services may be increased in accordance with Section 5.2 hereof. |
5.4 Disclaimers.
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(a) | FAILURE TO ANY EXTENT TO MAKE AVAILABLE, OR ANY SLOW-DOWN, STOPPAGE OR INTERRUPTION OF ANY LESSOR SERVICES DESCRIBED IN THIS ARTICLE 5 RESULTING FROM ANY CAUSE WHATSOEVER (OTHER THAN LESSOR’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) SHALL NOT RENDER LESSOR LIABLE IN ANY RESPECT FOR DAMAGES, NOR BE CONSTRUED AS AN EVICTION OF LESSEE (ACTUAL OR CONSTRUCTIVE) NOR RELIEVE LESSEE FROM FULFILLMENT OF ANY COVENANT OR AGREEMENT HEREOF. NEITHER LESSOR NOR ANY OF ITS LESSOR INDEMNIFIED PARTIES SHALL BE |
LIABLE TO LESSEE OR ANY OF THE LESSEE INDEMNIFIED PARTIES FOR ANY LOSSES ARISING OUT OF THE PROVISION AND DELIVERY OF (OR FAILURE TO PROVIDE AND DELIVER) ANY LESSOR SERVICES, AND LESSEE HEREBY RELEASES THE LESSOR INDEMNIFIED PARTIES FROM ALL SUCH LOSSES.
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(b) | LESSEE ASSUMES ALL RISKS AND LIABILITIES IN CONNECTION WITH ITS USE OF ANY LESSOR SERVICES PROVIDED BY LESSOR PURSUANT TO THE TERMS OF THIS LEASE OTHER THAN TO THE EXTENT ARISING FROM LESSOR’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. LESSEE HAS NOT MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY AND ALL REPRESENTATIONS, WARRANTIES, COVENANTS, AGREEMENTS, OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE LESSOR SERVICES SO PROVIDED INCLUDING WITHOUT LIMITATION (A) THE NATURE, QUALITY, CHARACTER OR SUFFICIENCY OF FACILITIES AND EQUIPMENT UTILIZED TO SUPPLY THE LESSOR SERVICES TO LESSEE; (B) THE CONDITION OF THE LESSOR SERVICES; (C) ANY SPECIFIC PRESSURE OR VOLUME OF FIREWATER, IT BEING UNDERSTOOD THAT NO SUCH GUARANTEE IS PROVIDED BY LESSOR, AND THAT THERE MAY BE TIMES WHEN THE FIREWATER SERVICE TO EITHER OR BOTH THE TANKS AND THE REFINERY IS INTERRUPTED OR UNAVAILABLE, (D) THE COMPLIANCE OF OR BY THE LESSOR SERVICES WITH ANY APPLICABLE LAWS; (E) THE MERCHANTABILITY, OR FITNESS OF THE LESSOR SERVICES FOR A PARTICULAR PURPOSE; OR (F) ANY OTHER MATTER WITH RESPECT TO THE LESSOR SERVICES OR THEIR RESPECTIVE DELIVERY FACILITIES COLLECTIVELY THE “DISCLAIMED MATTERS”). LESSEE HEREBY WAIVES ANY SUCH DISCLAIMED MATTERS. FURTHER, LESSOR MAKES NO WARRANTY OR REPRESENTATION THAT THE LESSOR SERVICES CONFORM TO LESSEE’S SPECIFICATIONS OR ANY LEGAL OR INDUSTRY STANDARDS. |
5.5 Third Party Maintenance Providers. Lessor and its Affiliates have contracts with third-party service providers with respect to the maintenance and inspection of certain Refinery Facilities and Shared Access Facilities which contracts have historically related in part to the Tank Farm Assets (the “Third Party Maintenance Contracts”). With respect to those Third Party Maintenance Contracts that have not been assigned to Lessee or its Affiliates or that Lessee or its Affiliates are not a party to, (a) Lessor or its Affiliates shall cause such third-party service providers to perform such services under such Third Party Maintenance Contracts as reasonably requested by Lessee or its Affiliates with respect to the Tank Farm Assets, and (b) Lessee and its Affiliates shall be solely responsible for any costs, fees or expenses or any Losses arising from such requests, and shall indemnify and hold harmless Lessor and its Affiliates therefor.
ARTICLE 6
CONDUCT OF BUSINESS
6.1 Use of Premises. Lessee shall have the right to use the Premises for the purpose of operating, maintaining, repairing and replacing the Tank Farm Assets and for any other lawful purpose associated with the operation and ownership of the Tank Farm Assets (the “Permitted Use”). Lessee shall not use the Premises (or permit the Premises to be used by or under Lessee) for any unlawful purpose. Lessee shall not use the Premises in any manner or for any purpose which will cause the forfeiture of or will violate any Applicable Law or in such a manner as to materially threaten or harm Lessor’s interest in the Premises. No activities or operations performed by or on behalf of Lessee under this Lease shall cause any interference with the operations of Lessor at the Refinery.
6.2 Waste. Lessee shall not commit, or suffer to be committed, any waste upon the Premises, ordinary wear and tear or damages to the extent caused by any Lessor Indemnified Party excepted, and subject to the provisions of Article 14.
6.3 Governmental Regulations. Lessee shall, at Lessee’s sole cost and expense, at all times comply with all Applicable Laws (including, without limitation, requirements under Environmental Laws, zoning laws, building and fire codes, and permitting requirements) now in force, or which may hereafter be in force, pertaining to the Premises or the ownership, operation and maintenance of the Tank Farm Assets.
6.4 Refinery Site-Wide Permits. Lessee and Lessor shall use commercially reasonable efforts to cause the applicable Governmental Authorities, to the extent allowed by Applicable Law, to separate the Tank Farm Assets and the Improvements from the coverage of any Refinery Site-Wide Permits following the Commencement Date in order to provide for separate Permits to be held directly by Lessee with respect to the Tank Farm Assets and the Improvements. To the extent that the Tank Farm Assets and the Improvements remain under any Refinery Site-Wide Permits or other Permits held directly by Lessor, Lessor agrees to allow (to the extent allowed by Applicable Law) such Tank Farm Assets and the Improvements to continue coverage under such Permits.
ARTICLE 7
ALTERATIONS, IMPROVEMENTS AND MAINTENANCE
7.1 Improvements. Lessee may make any alterations, additions, improvements or other changes to the Tank Farm Assets as may be necessary or useful in connection with the Permitted Use in Lessee’s reasonable discretion (collectively, the “Improvements”), without the prior written consent of Lessor, provided Lessee complies with the requirements of this Lease (including, without limitation, Section 6.3 and this Article 7) with respect thereto. If such Improvements require alterations, additions or improvements to the Premises or any of the Shared Access Facilities, Lessee shall notify Lessor in writing in advance and the parties shall negotiate in good faith any increase to the rental paid by Lessee or otherwise provide for reimbursement of any material increase in cost (if any) to Lessor that result from any modifications to the Premises or the Shared Access Facilities necessary to accommodate the Improvements, or as otherwise mutually agreed by the parties. Notwithstanding the foregoing or any other provision to the contrary contained herein, if there is a Partnership Change in Control, then Lessee shall not be permitted to make any Material
Improvements (as defined below), without the prior written consent of Lessor, which may not be unreasonably withheld, conditioned or delayed; provided that Lessor’s consent shall not be required hereunder if the Improvements (i) are required by Applicable Law, (ii) are pursuant to Section 14.2 below, or (iii) do not interfere in any material respect with the operations of the Refinery and do not materially increase any of Lessor’s obligations or liabilities under this Lease or any other related agreement. If the Material Improvements cause such interference or materially increase Lessor’s obligations or liabilities under this Lease or any other related agreement, Lessee agrees to indemnify, defend and hold harmless the Lessor Indemnified Parties from and against any Losses resulting from such interference or the increase in Lessor’s obligations or liabilities under this Lease or any other related agreement. For purposes of this paragraph, the term “Material Improvements” mean any Improvements which cost in excess of $15,000,000. If Lessor’s consent is required hereunder, Lessor shall provide written notice to Lessee of Lessor’s acceptance or rejection of any proposed construction or material alteration within thirty (30) days after Lessor’s receipt of the written request for such consent and adequate written explanation and supporting written information respecting the proposed construction or material alteration. In no way shall Lessee act or represent to any contractor, subcontractor, materialman, supplier or laborer that it is acting on behalf of or as agent of Lessor with regard to any construction, maintenance, repair or other work whatsoever on or about the Premises.
7.2 Maintenance by Lessee. Except as otherwise expressly provided below in Article 14, Lessee shall at its sole cost, risk and expense at all times keep the Premises, the Tank Farm Assets and the Improvements in good order and repair and make all necessary repairs thereto, structural and nonstructural, ordinary and extraordinary, and unforeseen and foreseen (ordinary wear and tear excepted). When used in this Section 7.2, the term “repairs” shall include all necessary replacements, renewal, alterations and additions. All repairs made by Lessee shall be at least equal in quality and class to the original work. Lessor may (but shall not be obligated to) perform any repairs if Lessee fails to do so (following Lessor’s notice to Lessee and Lessee’s opportunity to cure such failure pursuant to Section 13.11(b) hereof, except in the event of an emergency situation), in which event Lessee shall reimburse Lessor for all reasonable costs and expenses incurred by Lessor in connection therewith.
7.3 Requirements for all Construction. In connection with any construction, alteration, repair, maintenance, or other similar work at or about the Premises done by or under Lessee, including any Improvements: (i) all work shall be performed in a good and workmanlike manner, and shall comply with all Applicable Laws; (ii) for construction or alterations requiring Lessor’s consent as described above, all construction and material alteration work shall be performed in accordance with plans and specifications previously approved by Lessor, which approval shall not be unreasonably withheld, conditioned, or delayed (provided that such plans and specifications shall be provided to Lessor in advance for Lessor’s review even if Lessor’s approval is not required under this Lease), and (iii) Lessee shall not permit any mechanics’, materialman’s or other liens to be filed or recorded against the Premises for any work or materials performed for or provided to Lessee (other than a notice of commencement or similar notice of the commencement of statutory lien rights which is not a claim or notice of a failure to pay, and except for liens being contested in good faith by Lessee that Lessee has bonded over or otherwise taken appropriate steps to ensure cannot be foreclosed or otherwise enforced). Without limiting the foregoing, Lessee agrees to indemnify
and hold harmless Lessor and the Premises from and against all claims, liens and demands (including, without limitation, mechanic’s and materialman’s liens) by or on behalf of any party, arising from the use, occupancy, conduct or management of or from any work or thing whatsoever done in, on or about the Premises by Lessee or any party acting under Lessee (other than any Lessor Indemnified Party).
7.4 Liability Disclaimer. No review or approval of plans, specifications or other information or documentation by Lessor shall constitute a representation or warranty by Lessor that such plans, specifications or other information or documentation satisfy any applicable laws or other requirements or will provide for a safe operation, and no such review or approval shall make Lessor otherwise liable with respect thereto. Lessee shall be solely responsible for determining whether its plans, specifications, construction and maintenance meet its needs, satisfy applicable laws and other requirements and will provide for a safe operation.
ARTICLE 8
ACCESS; RELOCATION
8.1 Lessor’s Access. Lessor hereby retains for itself and its Affiliates, agents, employees and contractors, the right of access to all of the Premises, the Tank Farm Assets and the Improvements (i) to determine whether the conditions and covenants contained in this Lease are being kept and performed, (ii) to comply with Environmental Laws, (iii) to inspect, maintain, repair, improve, replace and operate the Refinery Facilities or the Shared Access Facilities and any assets of Lessor located on the Premises or to install or construct any structures or equipment necessary for the maintenance, operation or improvement of any such assets or the installation, construction or maintenance of any connection facilities, (iv) if reasonably necessary for access to an/or the operation, maintenance, replacement, inspection, protection, repair and removal of any of Lessor’s assets, and/or (v) to show the Premises to prospective lenders or purchasers, provided, however, that Lessor’s entry upon, inspection of and/or access to the Premises shall not unreasonably interfere in any material respect with Lessee’s operation of the Premises and complies with Lessee’s reasonable safety requirements.
8.2 Relocation of Tank Farm Assets. Lessor shall have the right to move Lessor’s assets located on the Refinery Site, so long as it is not reasonably foreseeable that such relocation will adversely affect Lessee’s business operations on the Premises and the operation of the Tank Farm Assets or Improvements. If such relocation of Lessor’s assets requires relocation of any of the Tank Farm Assets or Improvements, then such relocation of the Tank Farm Assets or Improvements shall be at Lessor’s sole cost and expense.
ARTICLE 9
TAXES, ASSESSMENTS
9.1 Lessee’s Obligation for Taxes on the Tank Farm Assets. Lessee shall pay and discharge, prior to delinquency all Taxes which are levied or assessed, and/or which become payable during the Term upon all or any part of the Tank Farm Assets and the Improvements or Lessee’s use or operation of the Tank Farm Assets and the Improvements. Upon written request by Lessor, Lessee shall provide Lessor evidence that Lessee has paid all Taxes within thirty (30) days thereafter. In
the event Lessee fails to pay any such taxes before the final due date for those sums, Lessor may pay those sums to the taxing authority and any amounts paid by Lessor shall bear interest at the Interest Rate from the date paid by Lessor until repaid by Lessee.
9.2 Lessee’s Obligation for Taxes on the Premises. Lessor and Lessee shall use commercially reasonable efforts to cause the Premises to be separately assessed for purposes of Taxes as soon as reasonably practicable following the Commencement Date (to the extent allowed by Applicable Law). During the Term, Lessee shall pay all Taxes assessed directly against the Premises directly to the applicable taxing authority prior to delinquency and shall promptly thereafter provide Lessor with evidence of such payment. In the event Lessor and Lessee are unable to cause the Premises to be separately assessed as provided above, Lessee shall pay or reimburse Lessor, upon request, for any such Taxes paid by Lessor to the applicable taxing authorities (the “Tax Reimbursement”). The Tax Reimbursement shall be equal to the total portion of such Taxes attributable to the Premises, as determined in the reasonable discretion of Lessor, provided however, if the Premises are not rendered as a separate tax parcel the Tax Reimbursement as to the Premises shall equal the product of the total portion of Taxes relating to the combined land area of the Refinery and the Premises multiplied by a fraction, the numerator of which is the actual number of square feet of the Premises and the denominator of which is the total number of square feet of the combined land area of the Refinery and the Premises at the time of the assessment. The certificate issued or given by the appropriate officials authorized or designated by applicable Law to issue or give the same or to receive payment of such Taxes shall be prima facie evidence of the existence, payment, nonpayment and amount of such Taxes. Lessee may contest the validity or amount of any such Taxes or the valuation of the Premises, at Lessee’s sole cost and expense, by appropriate proceedings, diligently conducted in good faith in accordance with applicable Law. If Lessee contests such items, then Lessor shall cooperate with Lessee in any such contesting of the validity or amount of any such Taxes or the valuation of the Premises. Taxes for the first and last years of the Term shall be prorated between the parties based on the portions of such years that are coincident with the applicable tax years and for which each applicable party is responsible
ARTICLE 10
ENVIRONMENTAL
10.1 Compliance. During the Term, Lessee shall comply with Environmental Laws applicable to its operations and business at or on the Premises which compliance shall include handling, storing, and disposing of all substances at, in or on the Premises in compliance with all applicable Environmental Laws and satisfying any and all environmental enforcement, permitting, notifications or reporting requirements directly arising out of Lessee’s use of the Premises, as required by Applicable Law. Without limiting the foregoing, Lessee shall not (a) use or knowingly permit the use by or under Lessee or any vendors, equipment lessors, invitees, licensees, carriers, contractors or subcontractors of any tier of any of the Lessee Indemnified Parties (collectively, the “Lessee Responsible Parties”) of the Premises for the on-site disposal of Hazardous Substances or any other activities in violation of Environmental Laws, or (b) Release, or knowingly allow the Release by or under Lessee or any Lessee Responsible Parties, of any Hazardous Substances onto the Premises or adjacent lands or waters in violation of or at concentrations that exceed those allowed by Environmental Laws.
10.2 Hazardous Substances. Lessee may not store any types or quantities of Hazardous Substances on the Premises except for petroleum products used, stored and handled in connection with the operation of the Tank Farm Assets in accordance with the Permitted Use and de minimis quantities of other Hazardous Substances, provided that such Hazardous Substances are used, stored, and otherwise handled in compliance with applicable Environmental Laws.
10.3 Notices.
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(a) | Lessee shall provide Lessor with material safety data sheets (“MSDS”) on all Hazardous Substances brought onto the Premises or stored in the Tanks. |
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(b) | Except with respect to those Hazardous Substances used, stored and otherwise handled by Lessee in conjunction with the operation of the Tank Farm Assets in accordance with the Permitted Use and used, stored, and otherwise handled in compliance with applicable Environmental Laws (Lessor hereby acknowledging that certain Hazardous Substances will be used, handled and stored in the ordinary course of operations), Lessee shall notify Lessor promptly upon the discovery by Lessee of any Hazardous Substances at, on or in the Premises, at concentrations exceeding those allowed by Environmental Laws or upon receipt of written communication from any governmental agency concerning the actual or alleged violation of an applicable Environmental Law in any way related to the Premises. Lessee shall provide notice to Lessor of any suit filed against Lessee or with respect to the Premises by any non-governmental third party alleging violations of applicable Environmental Law by Lessee (or anyone acting on behalf of Lessee) at the Premises. |
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(c) | Lessor shall promptly notify Lessee of any Release of Hazardous Substances at or associated with Lessor’s refinery process to the extent adversely affecting the Premises or that could present an unreasonable risk to Lessee’s employees. |
10.4 Lessee Indemnity. Except to the extent otherwise provided in the Omnibus Agreement or the Contribution Agreement (which shall govern and control in the event of any conflict with this Section 10.4), Lessee shall indemnify, defend and hold harmless the Lessor Indemnified Parties from and against all Losses suffered or incurred by any of the Lessor Indemnified Parties, directly or indirectly, including as a result of any claim by a third party, by reason of or arising out of:
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(a) | Lessee’s failure or alleged failure to comply with Environmental Laws or its obligations under Article 10 hereof; |
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(b) | any violation of Environmental Laws resulting or arising from Lessee’s occupancy of the Premises on or after the Commencement Date; or |
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(c) | any environmental remediation or corrective action that is required by Environmental Law, to the extent resulting or arising from a Release on, under, about or migrating to or from the Premises occurring on or after the Commencement Date: including (A) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation, risk-based closure activities, |
or other corrective action required or necessary under Environmental Laws, and (B) the cost and expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws.
ARTICLE 11
INSURANCE
11.1 Lessee agrees to maintain during the Term hereof (i) all risk property insurance with respect to the Tank Farm Assets and all improvements, equipment and other personal property (for the full replacement value thereof) owned by Lessee or used by Lessee on the Premises; (ii) commercial general liability insurance covering injury or death to persons or damage to property in an amount of not less than One Million and 00/100 Dollars ($1,000,000.00) per occurrence including, but not limited to, the following coverages: Contractual Liability, Products and Completed operations, Coverage for explosion, collapse and underground hazards, and sudden and accidental pollution liability; (iii) Automobile bodily injury and property damage liability insurance, including but not limited to insurance for pollution-related events, which extends to owned, if any, non-owned, and hired automobiles used by Lessee in connection with its operations, the limits of which liability of such insurance shall not be less than One Million and 00/100 Dollars ($1,000,000.00) combined single limit for bodily injury and property damage combined per accident; (iv) Workers’ Compensation Insurance for statutory limits and employer’s liability coverage in an amount not less than One Million and 00/100 Dollars ($1,000,000.00) or as required by applicable law; and (v) excess liability/umbrella coverage in excess of underlying coverages in a limit not less than Fifteen Million and No/100 Dollars ($15,000,000) any one occurrence and in the aggregate.
11.2 All such policies, except for Workers’ Compensation, shall name Lessor and its ultimate parent, Valero and its respective subsidiaries and Affiliates as additional insureds to the fullest extent permitted by applicable Law, such that the breadth of coverage afforded such additional insureds under the policies is at least as broad as that afforded the primary insured under such policies, and in all events such that the policies will respond to losses arising out of any act, omission, failure to act or negligence on the part of any such additional insured relating to the performance of Lessee’s obligations under this Lease, including losses associated with completed operations. All such policies shall also include a provision making them primary over (and not secondary to or contributory with) any insurance carried by Lessor or any other additional insured added pursuant to this Lease. With respect to all policies, Lessee shall waive, and does waive, all rights of subrogation as against the Lessor Indemnified Parties and the Lessee Indemnified Parties. There shall be no gap in the dollar value of the additional insureds’ coverage under the above policies from the policies’ deductible amounts up to the full limits of the policies. Contemporaneously with its execution of this Lease and on each yearly anniversary thereafter, Lessee shall furnish certificates of insurance evidencing that such insurance is in effect, and that the required waivers of subrogation and additional insured endorsements have been provided, and containing the unequivocal agreement on the part of the insurer to notify Lessor of any cancellation or material change in coverage at least 30 days before the effective date of such cancellation or change. The insurance coverage required hereunder shall operate independent and apart from any of Lessee’s indemnity obligations hereunder and shall in no way serve to waive or limit any such obligations.
ARTICLE 12
INDEMNITY
12.1 Indemnification by Lessee. Except in respect of Losses related to environmental matters, which are exclusively addressed in Article 10 hereof, and except to the extent otherwise provided in the Omnibus Agreement, Lessee agrees to indemnify, defend and hold harmless the Lessor Indemnified Parties from and against any and all Losses which may be imposed on, incurred by or asserted against the Lessor Indemnified Parties, in any way and to the extent relating to or arising out of (i) actions taken or omissions any of the Lessee Indemnified Parties or any Lessee Responsible Parties in connection with the ownership, use or operation of the Tank Farm Assets, the Improvements and/or the Premises or any accident or occurrence in connection therewith, (ii) any failure to perform any covenant or agreement made or undertaken by Lessee in this Lease, (iii) the use and/or occupation of the Premises, by Lessee and any of the Lessee Responsible Parties and/or (iv) any injury or damage to any person or property, occurring in or about the Premises; provided, however, that Lessee shall not be required to indemnify the Lessor Indemnified Parties for any Losses under clauses (i), (ii), (iii) or (iv), to the extent resulting from or arising out of the sole or gross negligence or willful misconduct of any of the Lessor Indemnified Parties. IT IS INTENDED THAT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE FOREGOING INDEMNIFICATION SHALL OPERATE TO PROTECT THE LESSOR INDEMNIFIED PARTIES AGAINST EVEN THOSE LOSSES THAT ARE CAUSED OR ALLEGEDLY CAUSED, IN WHOLE OR IN PART, BY THE SOLE, PARTIAL, JOINT, JOINT AND SEVERAL, COMPARATIVE OR CONTRIBUTORY NEGLIGENCE (BUT NOT THE GROSS NEGLIGENCE) OF ANY OF THE LESSOR INDEMNIFIED PARTIES, OR FOR WHICH ANY OF THE LESSOR INDEMNIFIED PARTIES MAY BE LIABLE UNDER ANY SO-CALLED “STRICT LIABILITY” LAW OR ANY OTHER APPLICABLE LAW OR LEGAL THEORY IMPOSING LIABILITY ON A PERSON WITHOUT REGARD TO SUCH PERSON’S ACTUAL DEGREE OF FAULT OR NEGLIGENCE.
12.2 Indemnification by Lessor. Except to the extent otherwise provided in the Omnibus Agreement (which shall govern and control in the event of any conflict with this Section 12.2), and except with respect to Losses related to environmental matters, which are exclusively addressed in Article 10 hereof, Lessor agrees to indemnify, defend and hold harmless the Lessee Indemnified Parties from and against any Losses which may be imposed on, incurred by or asserted against the Lessee Indemnified Parties as a result of, caused by, arising out of, or in any way relating to any injury or damage to any person or property, occurring in or about the Premises as a direct result of the sole negligent act or omission or gross negligence or willful misconduct of any of the Lessor Indemnified Parties.
12.3 Survival. Notwithstanding anything contained in this Lease to the contrary, the provisions of this Article 12 shall survive the expiration or earlier termination of this Lease.
ARTICLE 13
DEFAULTS; REMEDIES; TERMINATION
13.1 Lessee Event of Default. Each of the following events shall be an event of default (“Event of Default”) by Lessee under this Lease:
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(a) | Lessee shall fail to make any payment of Rent or any other sums which are payable under this Lease when due, and such failure shall continue for a period of 10 days after receipt of written notice from Lessor of such failure, provided however, Lessor shall only be required to provide notice under this paragraph once during any calendar year; |
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(b) | Lessee shall fail to comply with any term, provision or covenant of this Lease (other than the preceding subparagraph), and shall not cure, or have commenced to cure and pursue completion of the cure with due diligence, such failure within 30 days after written notice thereof to Lessee; provided however, that if any such default is of a nature that cannot reasonably be cured within 30 days and cure of such default has been commenced in good faith within such 30 day period, the commencement of the cure of such default within such 30 day period and the diligent prosecution to completion of such cure within a reasonable amount of time, but in any event within 120 days after the date Lessor sends the above-described notice, shall be deemed to be a cure of such default for purposes of this paragraph; or |
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(c) | Lessee or any guarantor or surety of Lessee’s obligations hereunder shall (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “proceeding for relief”); (C) become the subject of any proceeding for relief which is not dismissed within 60 days of its filing or entry; (D) abandon the Premises for a period exceeding 180 days; or (E) be dissolved or otherwise fail to maintain its legal existence. |
13.2 Lessor’s Remedies.
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(a) | Upon the occurrence of any default or Event of Default under this Lease which has not been cured as permitted pursuant to Section 13.1, Lessor shall have the right (without an election of remedies and without in any way limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such default or Event of Default) to do any one or more of the following: exercise all remedies available at law or equity including, without limitation, the bringing of an action for damages or an injunction on account of such default or Event of Default or for specific performance of this Lease, or: |
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(1) | With or without terminating this Lease, may take any reasonable action to remedy any failure of Lessee to comply with or perform this Lease, and may enter the Premises as necessary notwithstanding the foregoing notice requirement described in Section 13.1, in the event of an emergency, to provide Lessee with such notice as is reasonable thereof. Lessee shall reimburse Lessor on written demand for all costs so incurred, plus a |
reasonable charge to compensate Lessor for the additional administrative burden.
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(2) | Terminate this Lease, in which event Lessee shall immediately surrender the Premises to Lessor, and if Lessee fails to do so, Lessor may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon (as applicable) and take possession of the Premises and expel or remove Lessee and any other person who may be occupying the Premises or any part thereof, by force if necessary (and Lessee hereby waives any claim for loss or damage by reason of such reentry, repossession, or removal), in which event Lessee shall pay to Lessor upon demand the sum of (i) all Rent and other amounts accrued hereunder to the date of termination, (ii) all amounts due under Section 13.2(b) below and (iii) damages in an amount equal to the total Rent that Lessee would have been required to pay for the remainder of the Term discounted to present value at a discount rate reasonably designated by Lessor diminished by any net sums thereafter received by Lessor through reletting the Premises during said period; or |
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(3) | Terminate Lessee’s right of possession (but not this Lease), enter and repossess the Premises without further demand or notice of any kind to Lessee and without terminating this Lease, and remove all persons or property therefrom using such lawful force as may be necessary (and Lessee hereby waives any claim for loss or damage by reason of such reentry, repossession, or removal), in which event Lessee shall pay to Lessor upon demand (i) all Rent and other amounts accrued hereunder to the date of termination of possession, (ii) all amounts due from time to time under Section 13.2(b) below, and (iii) all Rent and other sums required hereunder to be paid by Lessee during the remainder of the Term as they become due, diminished by any net sums thereafter received by Lessor through reletting the Premises during said period. Reentry by Lessor in the Premises will not affect the obligations of Lessee hereunder for the unexpired Term. Lessor may bring action against Lessee to collect amounts due by Lessee on one or more occasions, without the necessity of Lessor’s waiting until expiration of the Term. Notwithstanding any such reletting without termination, Lessor may at any time thereafter elect in writing to terminate this Lease for such previous breach. |
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(b) | Upon any Event of Default (after the expiration of any applicable notice and cure period), Lessee shall also pay to Lessor all necessary and reasonable costs and expenses incurred by Lessor, including court costs and reasonable attorneys’ fees, in (i) retaking or otherwise obtaining possession of the Premises, (ii) removing and storing Lessee’s or any other occupant’s property, (iii) repairing, restoring, altering, remodeling or otherwise returning the Premises into its original condition (normal wear and tear and casualty excepted), (iv) reletting all or any part of the Premises, (v) paying or performing the underlying obligation which Lessee failed to pay or |
perform, and (vi) enforcing any of Lessor’s rights or remedies arising as a consequence of the Event of Default.
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(c) | Any self-help option granted to Lessor hereunder shall not release Lessee from its obligation to perform the terms, provisions, covenants and conditions set forth in this Lease and required to be performed by Lessee hereunder. |
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(d) | The rights, remedies and recourses hereunder upon an Event of Default shall be cumulative and no right, remedy or recourse, whether or not exercised, shall be deemed to be in exclusion of any other right, remedy, or recourse. |
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(e) | As described in Section 4.2 hereof, if Lessee fails to pay any amount due hereunder, as and when due, the amount due and unpaid shall bear interest at the Interest Rate from the date due until paid. |
13.3 No Waiver. Exercise by Lessor of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Lessor, whether by agreement or by operation of law, it being understood that such surrender and/or termination can be effected only by the written agreement of Lessor and Lessee. Any law, usage, or custom to the contrary notwithstanding, Lessor shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Lessor at any time to enforce its rights under this Lease strictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same. Lessee and Lessor further agree that forbearance or waiver by Lessor to enforce its rights pursuant to this Lease or at law or in equity, shall not be a waiver of Lessor’s right to enforce one or more of its rights in connection with any subsequent default. A receipt by Lessor of rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Lessor of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Lessor. The terms “enter,” “re-enter,” “entry” or “re-entry,” as used in this Lease, are not restricted to their technical legal meanings. Any reletting of the Premises shall be on such terms and conditions as Lessor in its sole discretion may determine (including without limitation a term different than the remaining Lease Term, rental concessions, alterations and repair of the Premises, lease of less than the entire Premises to any tenant and leasing any or all other portions of the Project before reletting the Premises). Lessor shall not be liable, nor shall Lessee’s obligations hereunder be diminished because of, Lessor’s failure to relet the Premises or collect rent due in respect of such reletting. Notwithstanding the foregoing, Lessor agrees that it shall use commercially reasonable efforts to mitigate its damages as a result of Lessee’s default under this Lease.
13.4 Lessor Event of Default. If Lessor shall violate, neglect or fail to perform or observe any of the covenants, terms, conditions, agreements, or obligations contained in this Lease on its part to be performed or observed, which default continues for a period of more than thirty (30) days after its receipt of written notice from Lessee specifying such default (provided that if such default is of a nature that cannot reasonably be cured within thirty (30) days, then as long as Lessor commences to cure said default within such thirty (30) day period and thereafter diligently pursues such efforts to completion, but in no event longer than one hundred eighty (180) days after the date
Lessee sends the default notice, then Lessor shall be deemed to have cured such default for purposes of this paragraph), Lessee may, at its election (in addition to any other rights or remedies provided Lessee at law, in equity or hereunder), upon further written notice to Lessor: (i) effect such a cure and incur any reasonable expense or cost necessary to perform such obligation of Lessor and bill Lessor for the reasonable cost thereof and Lessor shall pay all such reasonable costs and expenses incurred by Lessee within thirty (30) days after Lessor’s receipt of such notice, which notice shall include an itemization and documentation of the expenses and costs incurred by Lessee; or (ii) notwithstanding the foregoing notice requirement, in the event of an emergency, to provide Lessor with such notice as is reasonable thereof and to effect a cure and incur such expenses as necessary to effect such cure in order to protect and prevent the loss of life and/or risk of loss, life or property and Lessor shall pay all such reasonable costs and expenses within thirty (30) days after Lessor’s receipt of notice thereof and written itemization and documentation for such expenses; (iii) initiate an action for damages, specific performance or an injunction; (iv) terminate this Lease by the giving of written notice to Lessor; or (v) pursue any remedies available to Lessee at law or in equity.
ARTICLE 14
EMINENT DOMAIN; CASUALTY
14.1 Eminent Domain. If the whole or any substantial part, in Lessor’s reasonable discretion of the Premises should be taken for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a “Taking”), this Lease shall terminate and the Rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of the Premises shall occur. If there is a Taking of less than a substantial part of the Premises, this Lease shall not terminate, but the Rent payable hereunder during the unexpired portion of this Lease shall be reduced to such extent as may be fair and reasonable under all of the circumstances, including the proportion to the reduction in utility of the Premises caused by such Taking. In the event of any such Taking, Lessor and Lessee shall each be entitled to receive and retain such separate awards and/or portion of lump sum awards as may be allocated to their respective interests in any condemnation proceedings. Lessor shall be entitled to any award and all damages payable as a result of any condemnation or taking of the fee of the Premises. Lessee shall have the right to claim and recover from the condemning authority, but not from Lessor, such compensation as may be separately awarded or recoverable by Lessee in Lessee’s own right on account of any and all damage to the Tank Farm Assets and/or Lessee’s business by reason of the condemnation, including loss of value of any unexpired portion of the Term, and for or on account of any cost or loss to which Lessee might be put in removing Lessee’s personal property, fixtures, leasehold improvements and equipment, including, without limitation, the Tank Farm Assets, from the Premises.
14.2 Casualty.
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(a) | Lessee to Repair Improvements. Subject to Section 14.2(b) below, if during the Term all or any portion of the Tank Farm Assets shall be damaged or destroyed by fire or other casualty, Lessee shall repair or restore the Tank Farm Assets. The work of repair or restoration, which shall be completed with due diligence, shall be |
commenced within a reasonable time after the damage or loss occurs. Rent and Monthly Payment shall not abate while the Tank Farm Assets are being repaired or restored.
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(b) | Damage at the End of Lease. If, during the last three (3) years of the Term, any portion of the Tank Farm Assets shall be damaged by fire or other casualty in excess of 50% of the replacement cost thereof , then Lessee shall have the option, to be exercised within sixty (60) days after such event, to either (i) repair or restore the Tank Farm Assets as hereinabove provided, or (ii) terminate this Lease by notice to Lessor, which termination shall be deemed to be effective as of the date of the casualty. If Lessee terminates this Lease pursuant to this Section 14.2(b), Lessee shall surrender possession of the Premises to Lessor and will, at the request of Lessor from the insurance proceeds otherwise payable to Lessor, cause the Tank Farm Assets to be razed and the Premises to be leveled, cleaned, and otherwise put in good order. No termination of this Lease pursuant to this Section 14.2(b) will be effective until Lessee pays and performs all of Lessee’s duties and obligations in connection with the termination. |
ARTICLE 15
SURRENDER OF THE PREMISES
15.1 Surrender of Premises. Lessee shall at the expiration of the Term, or at any earlier termination of this Lease, surrender the Premises to Lessor in as good condition as it received the Premises, ordinary wear and tear and damaged caused by any Lessor Indemnified Parties excepted, and subject to the provisions of Article 14.
15.2 Removal of Improvements. Except as otherwise expressly agreed to by Lessor and Lessee, Lessee shall have the right to remove all Tank Farm Assets and other improvements, fixtures, equipment, materials, supplies and personal property installed by Lessee from the Premises upon the termination or expiration of this Lease, but in no event later than the date that is 120 days following the expiration or termination of this Lease (the “Removal Date”) and Lessor shall provide Lessee with access to the Premises at reasonable times until expiration of the Removal Date for the purpose of removing such items. Lessee shall provide Lessor with written notice of its election to remove the Tank Farm Assets and other improvements, fixtures, equipment, materials, supplies and personal property from the Premises at least 60 days prior to the expiration of the Lease. If Lessee elects to remove the Tank Farm Assets and Improvements from the Premises after such removal Lessee shall restore any damage to the Premises and clean the Premises so as to eliminate therefrom any accumulation (other than any de minimis and non-hazardous accumulation) of foreign substances, materials, or debris, in addition to any Environmental Cleanup that may be required under Article 10. Lessee shall pay Lessor pro rata Rent (based on the amount of Rent applicable during the last month prior to the termination or expiration) through the date of Lessee’s complete removal of all such items. During the period of such removal and clean-up, all terms and conditions of this Lease, including, the indemnity and insurance provisions shall continue in full force and effect. If Lessee elects not to remove all of the Tank Farm Assets and Improvements from the Premises on or before the Removal Date, and provided that such facilities are in good working
condition at the expiration of the Term (ordinary wear and tear excepted) then, such Tank Farm Assets and Improvements shall be deemed permanently abandoned to Lessor’s sole ownership, and Lessor may remove and dispose of such facilities in any manner which Lessor may deem appropriate, without any liability whatsoever to Lessee. If Lessee elects not to remove all of the Tank Farm Assets and Improvements from the Premises on or before the Removal Date and such facilities are not in good working condition at the expiration of the term (ordinary wear and tear excepted), or Lessee fails to so remove any or all of the Tank Farm Assets and Improvements from the Premises before the Removal Date, then, in addition to all rights and remedies available at law or in equity, without any prior notice, Lessor may (but shall be under no obligation), at Lessor’s option, deem such Tank Farm Assets and Improvements to be permanently abandoned to Lessor’s sole ownership, and Lessor may remove and dispose of such facilities in any manner which Lessor may deem appropriate, without any liability whatsoever to Lessee, and Lessee shall reimburse Lessor for all costs of such removal and disposal upon demand from Lessor. If requested by Lessor, Lessee shall execute any and all documents necessary to evidence that title to the Tank Farm Assets and Improvements that Lessee does not remove by the Removal Date is in Lessor and to extinguish and remove any cloud or potential cloud on the title to the Premises and/or such facilities created by Lessee.
15.3 Holding Over. If Lessee retains possession of the Premises after the termination of the Term, unless otherwise agreed in writing or for removal of its facilities during the Removal Period, such possession shall be subject to immediate termination by Lessor at any time, and all of the other terms and provisions of this Lease (excluding any expansion or renewal option or other similar right or option) shall be applicable during such holdover period, except that Lessee shall pay Lessor from time to time, upon demand, as Rent for the holdover period, an amount equal to 150% of the Rent in effect on the termination date computed on a monthly basis for each month or part thereof during such holding over. All other payments shall continue under the terms of this Lease. In addition, Lessee shall be liable for all damages incurred by Lessor as a result of such holding over. No holding over by Lessee, whether with or without consent of Lessor, shall operate to extend this Lease except as otherwise expressly provided, and this Section 15.3 shall not be construed as consent for Lessee to retain possession of the Premises.
ARTICLE 16
LIMITATION OF LIABILITY
16.1 Release of Certain Liability. Without limiting any obligations of Lessor or its Affiliates, under the Omnibus Agreement or the Contribution Agreement, except in the event of sole or gross negligence or willful misconduct on the part of Lessor or its employees or agents, Lessor shall not be liable to Lessee or any of the Lessee Responsible Parties or any other person claiming by, through or under Lessee or entering upon the Premises under or with the express or implied invitation of Lessee for any personal injury, including death, to persons or damage to property due to (i) the condition or design or any defect in the Premises, (ii) any portion of the Premises becoming out of repair or arising from the leaking of gas, water, sewer, steam, pipes, electricity or otherwise. Lessee, with respect to itself and the Lessee Responsible Parties or any other person entering upon the Premises under or with the express or implied invitation of Lessee hereby expressly assumes all risks of personal injury, including death, to persons or damage to property, either proximate or
remote, by reason of the present or future condition of the Premises and expressly release Lessor of and from any and all liability for such damage or loss.
16.2 Exculpation. Any liability of Lessor under the terms of this Lease or in connection with the Premises shall be limited to the interest of Lessor in the Premises and Lessor shall not be personally liable for any deficiency. None of Lessor’s officers, managers, partners, members, employees, agents or representatives will ever have any personal liability to Lessee under or in connection with this Lease, and Lessee hereby waives and releases all claims, causes of action, or other rights of recovery it may ever have against such parties under or in connection with this Lease. NOTWITHSTANDING ANY PROVISION OF THIS LEASE TO THE CONTRARY, IN NO EVENT SHALL EITHER PARTY HERETO BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, PUNITIVE, EXEMPLARY, CONSEQUENTIAL, INCIDENTAL OR INDIRECT LOSSES OR DAMAGES (IN TORT, CONTRACT OR OTHERWISE) UNDER OR IN RESPECT OF THIS LEASE, EXCEPT TO THE EXTENT ANY SUCH DAMAGES ARE OWED TO A THIRD PARTY AND THE OBLIGATED PARTY IS ENTITLED TO INDEMNIFICATION THEREFOR BY THE OTHER PARTY UNDER THE EXPRESS TERMS OF THIS LEASE.
ARTICLE 17
ASSIGNMENT AND SUBLETTING
17.1 Assignment by Lessor. Lessor may assign or transfer its rights, interests, and obligations under this Lease and in any part of the Premises to any third party (including any Person who acquires the Refinery or any interest therein), provided that an such third party expressly assumes all obligations of Lessor under the Lease for the period on and after the effective date of the assignment and Lessor shall remain liable for the performance and obligations of lessor/landlord hereunder for the period prior to the effective date of such assignment. Upon any such transfer Lessee will attorn to the transferee lessor and look solely to the transferee lessor to perform any obligations of Lessor accruing on or after the effective date of the transfer.
17.2 Assignment and Sublease by Lessee. Lessee shall not assign, pledge or encumber this Lease, or sublet the whole or any part of the Premises without the prior written consent of Lessor. This prohibition against assigning or subletting shall be construed to include a prohibition against any assignment or subletting by operation of law. For purposes of this paragraph, a transfer of the ownership interests controlling Lessee shall be deemed an assignment of this Lease. In the event any assignment or subletting of this Lease is made with or without Lessor’s consent, Lessee shall nevertheless remain liable for the performance of all of the terms, conditions and covenants of this Lease. Any assignment or subletting without the prior written consent of Lessor shall be void and constitute a breach of the Lease and shall, at the option of the Lessor, terminate the Lease. No consent to any assignment, voluntarily or by operation of law, of this Lease or any subletting of said Premises shall be deemed to be a consent to any subsequent assignment or subletting.
17.3 Permitted Transfers. Notwithstanding the prohibition on assignment in Section 17.2 hereof, Lessee may assign all of its interest in this Lease or sublet all of the Premises only by written instrument evidencing such assignment or sublease to any Affiliate of Lessee or any Person who purchases or acquires all or substantially all of the Tank Farm Assets of Lessee, or any successor to Lessee by merger, consolidation or otherwise (each a “Permitted Transferee”), provided that
(i) Lessee shall promptly notify Lessor of any such Permitted Transfer, (ii) Lessee shall remain liable for the performance of all of the obligations of Lessee hereunder, and (iii) if Lessee no longer exists because of a merger, consolidation, or acquisition, the surviving or acquiring entity shall expressly assume in writing the obligations of Lessee hereunder. Additionally, the Permitted Transferee shall assume all of Lessee’s obligations and comply with all of the terms and conditions of this Lease. Promptly after the effective date of any permitted transfer hereunder, Lessee agrees to furnish Lessor with copies of the instrument effecting any of the foregoing transfers and documentation establishing Lessee’s satisfaction of the requirements set forth above applicable to any such assignment or sublet. The occurrence of a permitted transfer hereunder shall not waive Lessor’s rights as to any subsequent assignment, subletting or other transfer of this Lease or any interest therein. Any subsequent assignment, subletting or other transfer of this Lease or any interest therein by a Permitted Transferee shall be subject to Lessor’s prior written consent (as hereinabove provided).
ARTICLE 18
QUIET ENJOYMENT
18.1 Lessor covenants and warrants that Lessee, upon paying the Rent reserved hereunder and observing and performing all of the covenants, conditions and provisions on Lessee’s part to be observed and performed hereunder, may peaceably and quietly have, hold, occupy, use and enjoy, and shall have the full, exclusive and unrestricted use and enjoyment of, all the Premises during the Term for the Permitted Use and subject to the terms and conditions of this Lease, and Lessor agrees to warrant and forever defend title to the Premises (other than the Permitted Exceptions) against the claims of any and all persons whomsoever lawfully claiming or to claim the same or any part thereof. Lessor’s undertaking in the immediately preceding sentence is made solely for the benefit of Lessee and not for the benefit of any title insurer, and any such title insurer shall not be subrogated to the rights of Lessee hereunder.
ARTICLE 19
GENERAL PROVISIONS
19.1 Estoppel Certificates. Lessee and Lessor shall, at any time and from time to time upon not less than 20 days prior written request from the other party, execute, acknowledge and deliver to the other a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which Rent and other charges are paid, and (ii) acknowledging that there are not, to the executing party’s knowledge, any uncured defaults on the part of the other party hereunder (or specifying such defaults, if any are claimed). Any such statement may be conclusively relied upon by any prospective purchaser of the Premises or the leasehold. Nothing in this Section 19.1 shall be construed to waive the conditions elsewhere contained in this Lease applicable to assignment or subletting of the Premises by Lessee.
19.2 Leasehold Mortgage. Lessee shall at all times and from time to time have the right to encumber by mortgage, deed of trust, or security agreement (the “Mortgage”) Lessee’s leasehold estate in the Premises, together with Lessee’s rights and interests in all buildings, fixtures, equipment, and improvements situated thereon, and all rents, issues, profits, revenues, and other income to be
derived by Lessee therefrom, to secure such loans from time to time made by any Person to Lessee; provided, however, that such Mortgage shall in no event encumber Lessor’s fee title or leasehold interest (as applicable) in the Premises or Lessor’s interest under this Lease.
19.3 Subordination, Non-Disturbance and Attornment. Upon request of Lessor or the holder of any Mortgage covering Lessor’s interest in the Premises (a “Mortgagor”), Lessee will enter into a subordination, non-disturbance and attornment agreement in a customary form reasonably acceptable to the Mortgagor, Lessor and Lessee, evidencing that Lessee’s rights under this Lease are subordinate to the lien of such Mortgage and to all advances made or thereafter to be made upon the security thereof.
19.4 Conflict Between this Lease and the Omnibus Agreement. Notwithstanding any provision to the contrary contained herein, for so long as the Omnibus Agreement remains in full force and effect, to the extent of any conflict between the terms of this Lease and the terms of the Omnibus Agreement, the terms of the Omnibus Agreement shall govern and control. Further, notwithstanding any waiver or agreement of either of the parties hereto contained in this Lease, no such waiver or agreement shall affect or limit the rights or remedies of such party under the Omnibus Agreement, or the obligations and liabilities of the other parties to the Omnibus Agreement.
19.5 Notices. All notices, requests, demands and other communications required or permitted to be given under this Lease shall be deemed to have been duly given if in writing and delivered personally or sent via first class, postage prepaid, registered or certified mail (return receipt requested), or by overnight delivery service or facsimile transmission addressed as follows:
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If to Lessor: |
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Valero Refining-Texas, L.P. |
One Valero Way |
San Antonio, Texas 78249 |
Attention: General Counsel |
Facsimile: (210) 345-3214 |
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If to Lessee: |
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Valero Partners Houston, LLC |
One Valero Way |
San Antonio, Texas 78249 |
Attention: General Counsel |
Facsimile: (210) 345-3214 |
Any party may change the address to which the communications are to be directed to it by giving notice to the other in the manner provided in this Section 19.5. Notice by mail shall be deemed to have been given and received on the third calendar day after posting. Notice by overnight delivery
service, facsimile transmission or personal delivery shall be deemed given on the date of actual delivery.
19.6 Mutual Cooperation; Further Assurances. Upon request by either party from time to time during the Term, each party hereto agrees to execute and deliver all such other and additional instruments, notices and other documents and do all such other acts and things as may be necessary to carry out the purposes of this Lease and to more fully assure the parties’ rights and interests provided for hereunder. Lessor and Lessee each agree to cooperate with the other on all matters relating to required permits and regulatory compliance by either Lessee or Lessor in respect of the Premises so as to ensure continued full operation of the Premises by Lessee pursuant to the terms of this Lease.
19.7 Recording. Upon the request of either Party, Lessor and Lessee shall execute, acknowledge, deliver and record a “short form” memorandum of this Lease in a form mutually acceptable to the Parties and sufficient to provide public notice of the existence of this Lease. Promptly upon request by Lessor at any time following the expiration or earlier termination of this Lease, however such termination may be brought about, Lessee shall execute and deliver to Lessor an instrument, in recordable form, evidencing the termination of this Lease and the release by Lessee of all of Lessee’s right, title and interest in and to the Premises existing under and by virtue of this Lease.
19.8 Force Majeure. In the event of Lessor or Lessee being rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Lease, other than to make payments due hereunder, it is agreed that on such party’s giving notice and full particulars of such Force Majeure to the other party as soon as practicable after the occurrence of the cause relied on, then the obligations of the parties, so far as they are affected by such Force Majeure, shall be suspended during the continuance of any inability so caused but for no longer period, and such cause shall, as far as possible, be remedied with all reasonable dispatch. The term “Force Majeure” as employed herein means any circumstances beyond the reasonable control of the contracting parties experiencing such inability to perform, whether of the kind enumerated herein or not, including but not limited to, acts of God, strikes, lockouts, or other industrial disturbances, curtailments or shutdowns, acts of the public enemy, sabotage, wars (whether or not an official declaration is made thereof), blockades, insurrection, riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, tornadoes, storms, floods, washouts, freezeoffs, civil disturbances, explosions, breakage, accidents to machinery, equipment or lines of pipe, repairs, maintenance, improvements, replacements or alterations to plants or lines of pipe, inability of either party to obtain necessary machinery, materials or permits, or the act of any Governmental Authority. It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirements that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing party when such course is inadvisable in the discretion of the party having the difficulty.
19.9 Entire Agreement; Amendment. Subject to Section 19.4, this Lease, including the exhibits attached hereto, constitutes the entire agreement and understanding between the parties hereto with respect to the lease of the Premises, and supersedes all prior and contemporaneous agreements and
undertakings of the parties, in connection herewith. This Lease may be modified in writing only, signed by the parties to interest at the time of modification.
19.10 Binding Effect. Except as herein otherwise expressly provided, this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors, sublessees and assigns. Nothing in this Section 19.10 shall be construed to waive the conditions elsewhere contained in this Lease applicable to assignment or subletting of the Premises by Lessee.
19.11 Waivers. No waiver or waivers of any breach or default or any breaches or defaults by either party of any term, condition or liability of or performance by the other party of any duty or obligation hereunder shall be deemed or construed to be a waiver or waivers of subsequent breaches or defaults of any kind, character or description under any circumstance. The acceptance of Rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof, other than the failure of Lessee to pay the particular Rent so accepted, regardless of Lessor’s knowledge of such preceding breach at the time of acceptance of such Rent.
19.12 No Partnership. The relationship between Lessor and Lessee at all times shall remain solely that of landlord and tenant and shall not be deemed a partnership or joint venture.
19.13 Choice of law. The provisions of this Lease shall be governed by and construed in accordance with the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might require the application of laws of another jurisdiction.
19.14 Waiver of Jury Trial. LESSEE AND LESSOR WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LESSOR AND LESSEE ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
19.15 Severability. The invalidity or unenforceability of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity or enforceability of any other provision hereof.
19.16 Survival. All obligations of Lessor and Lessee that shall have accrued under this Lease prior to the expiration or earlier termination hereof shall survive such expiration or termination to the extent the same remain unsatisfied as of the expiration or earlier termination of this Lease. Lessor and Lessee further expressly agree that all provisions of this Lease which contemplate performance after the expiration or earlier termination hereof shall survive such expiration or earlier termination of this Lease.
19.17 Time of Essence. Time is of the essence in the performance of all obligations falling due hereunder.
19.18 Captions. The headings to Articles, Sections and other subdivisions of this Lease are inserted for convenience of reference only and will not affect the meaning or interpretation of this Lease.
19.19 Schedules and Exhibits. All schedules and exhibits hereto which are referred to herein are hereby made a part hereof and incorporated herein by such reference.
19.20 Counterparts. This Lease may be executed in multiple originals and when executed, all such counterparts shall constitute one document.
[Remainder of Page Intentionally Left Blank]
The parties hereto have executed this Lease to be effective as of the Effective Date.
LESSOR:
VALERO REFINING-TEXAS, L.P.
By: Valero Tejas Company LLC
Its: General Partner
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By: | /s/ R. Lane Riggs |
Name: | R. Lane Riggs |
Title: | Executive Vice President |
LESSEE:
VALERO PARTNERS HOUSTON, LLC
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By: | /s/ Richard F. Lashway |
Name: | Richard F. Lashway |
Title: | President and Chief Operating Officer |
Signature Page to Lease and Access Agreement (Houston Terminal)
EXHIBIT A
TANKS
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Houston Tank Ref # | Shell Capacity (bbls) | Diameter | Year Built |
215 | 132,000 | 150 | 1960 |
234 | 150,000 | 150 | 2007 |
232 | 73,000 | 120 | 1992 |
211 | 179,000 | 165 | 2015 |
212 | 179,000 | 165 | 2015 |
205 | 150,000 | 150 | 2008 |
228 | 110,000 | 150 | 1975 |
507 | 150,000 | 150 | 2013 |
511 | 132,000 | 150 | 2006 |
505 | 80,000 | 125 | 1974 |
226 | 65,000 | 110 | 2005 |
204 | 55,000 | 90 | 2014 |
210 | 54,000 | 95 | 2008 |
230 | 41,000 | 100 | 1991 |
506 | 78,000 | 125 | 1975 |
225 | 75,000 | 120 | 1971 |
227 | 153,000 | 150 | 2013 |
1 | 236,000 | 210 | 1990 |
2 | 295,000 | 210 | 2012 |
3 | 146,000 | 190 | 1968 |
4 | 220,000 | 190 | 2009 |
6 | 220,000 | 210 | 1991 |
901 | 77,000 | 110 | 2007 |
233 | 73,000 | 120 | 1992 |
907 | 50,000 | 90 | 2006 |
915 | 69,000 | 95 | 2014 |
917 | 31,000 | 75 | 1969 |
920 | 31,000 | 72 | 2006 |
909 | 4,450 | 35 | 1961 |
927 | 55,000 | 90 | 2007 |
912 | 8,100 | 43 | 1961 |
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913 | 8,100 | 43 | 2008 |
918 | 28,000 | 75 | 1968 |
921 | 32,000 | 72 | 2009 |
224 | 40,000 | 80 | 1970 |
231 | 102,000 | 123 | 2004 |
216 | 60,000 | 100 | 1960 |
5 | 215,000 | 220 | 1977 |
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TOTAL | 3,856,650 | | |
EXHIBIT B
DESCRIPTION OF THE REFINERY SITE
PARCEL ONE:
Being a 144.1181 acre tract of land, Identified as “Part II, Tract I”, situated in the Callahan & Vince Survey, Harris County, Texas as described in a “deed with vendor’s lien”, dated March 12, 1986, from Charter International Oil Company to Hill Petroleum Company, as filed under Harris county Clerk’s File No. K447752, Film Code Reference No. 041-64-1732, Official Public Records of Real Property, Harris County, Texas.
The portion of the Premises on Parcel One as depicted on Exhibit C includes the following
Tanks:
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Houston Tank # | Shell Capacity (bbls) | Diameter | Year Built |
211 | 179,000 | 165 | 2015 |
212 | 179,000 | 165 | 2015 |
205 | 150,000 | 150 | 2008 |
228 | 110,000 | 150 | 1975 |
507 | 150,000 | 150 | 2013 |
511 | 132,000 | 150 | 2006 |
505 | 80,000 | 125 | 1974 |
226 | 65,000 | 110 | 2005 |
204 | 55,000 | 90 | 2014 |
210 | 54,000 | 95 | 2008 |
230 | 41,000 | 100 | 1991 |
506 | 78,000 | 125 | 1975 |
225 | 75,000 | 120 | 1971 |
227 | 153,000 | 150 | 2013 |
901 | 77,000 | 110 | 2007 |
907 | 50,000 | 90 | 2006 |
915 | 69,000 | 95 | 2014 |
917 | 31,000 | 75 | 1969 |
920 | 31,000 | 72 | 2006 |
909 | 4,450 | 35 | 1961 |
927 | 55,000 | 90 | 2007 |
912 | 8,100 | 43 | 1961 |
913 | 8,100 | 43 | 2008 |
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918 | 28,000 | 75 | 1968 |
921 | 32,000 | 72 | 2009 |
224 | 40,000 | 80 | 1970 |
231 | 102,000 | 123 | 2004 |
PARCEL TWO:
Being a 16.4349 acre tract of land, Identified as “Part II, Tract II”, situated in the Callahan & Vince Survey, Harris County, Texas as described in a “deed with vendor’s lien”, dated March 12, 1986, from Charter International Oil Company to Hill Petroleum Company, as filed under Harris county Clerk’s File No. K447752, Film Code Reference No. 041-64-1732, Official Public Records of Real Property, Harris County, Texas.
The portion of the Premises on Parcel Two as depicted on Exhibit C includes the following
Tanks:
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Houston Tank # | Shell Capacity (bbls) | Diameter | Year Built |
215 | 132,000 | 150 | 1960 |
216 | 60,000 | 100 | 1960 |
232 | 73,000 | 120 | 1992 |
233 | 73,000 | 120 | 1992 |
234 | 150,000 | 150 | 2007 |
PARCEL THREE:
Being a 28.9624 acre tract of land, Identified as “Part III”, situated in the Callahan & Vince Survey, Harris County, Texas as described in a “deed with vendor’s lien”, dated March 12, 1986, from Charter International Oil Company to Hill Petroleum Company, as filed under Harris county Clerk’s File No. K447752, Film Code Reference No. 041-64-1732, Official Public Records of Real Property, Harris County, Texas.
The portion of the Premises on Parcel Three as depicted on Exhibit C includes the following
Tanks:
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Houston Tank # | Shell Capacity (bbls) | Diameter | Year Built |
1 | 236,000 | 210 | 1990 |
2 | 295,000 | 210 | 2012 |
3 | 146,000 | 190 | 1968 |
4 | 220,000 | 190 | 2009 |
6 | 220,000 | 210 | 1991 |
5 | 215,000 | 220 | 1977 |
EXHIBIT C
DEPICTION OF THE PREMISES
EXHIBIT D
LESSOR SERVICES
Lessor will supply the Lessor Services listed on this Exhibit D to Lessee with respect to Lessee’s ownership, operation and maintenance of the Tank Farm Assets, together with such additional services and/or Refinery Facilities as the Parties may agree from time to time.
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• | Utilities – All utilities (including gas, water, steam, industrial gases, electricity and telephone) will be furnished by Lessor for Lessee’s operation of the Tank Farm Assets consistent with past practice. If Lessee’s electrical load or use of other utilities at the Tank Farm Assets increases above historical rates, Lessor will only be required to supply the increased load to the extent Lessor’s existing utility infrastructure is capable of doing so without detriment to the safe and reliable operation of the Refinery. Lessee shall reimburse Lessor for all utilities consumed at the Tank Farm Assets, calculated in a manner mutually reasonably agreed to by the parties, at the same rates that Lessor is required to pay its provider, plus any taxes and other applicable fees (but without any markup by Lessor). If Lessor’s actual cost of providing electricity materially changes or Lessee’s use of electricity materially changes, Lessor or Lessee may request an adjustment to the Rent by an appropriate amount, and the other party will not unreasonably refuse to grant such adjustment. Lessee agrees to reasonably cooperate with Lessor, if requested by Lessor or required by Applicable Law or the rules of the utility provider, to cause all electricity used at the Tank Farm Assets to be separately metered or sub-metered at Lessee’s sole cost and expense. |
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• | Wastewater Processing – To the extent allowed by Applicable Law, all waste water treatment will be supplied to Lessee by Lessor from existing Refinery Site sources. This treatment pertains to dock and sump materials generated during the normal course of operations and includes sump generated waste materials. The Parties acknowledge that Governmental Authorities may impose pre-treatment standards on any waste waters Lessee releases to Lessor for processing. If such pre-treatment standards are imposed, Lessor shall be responsible for ensuring that the relevant Lessee personnel are adequately trained to comply with such standards and for submitting any related and required reports with the applicable Governmental Authority. Lessee will supply field data to Lessor to fulfill any such reposting requirements. |
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• | Fire and Emergency Protection – Lessor will provide response support in the event of an emergency. Lessor will maintain the existing tank farm fire water and emergency response system and any necessary improvements will be made by Lessor. As further provided below, Lessor does not make, and hereby expressly disclaims, any and all representations or warranties (whether express, implied or statutory) as to the delivery pressure or volume of firewater that may be available to the Tank Farm Assets, or as to any other aspects of any firewater services provided hereunder, and Lessee acknowledges that there may be times when the firewater service to the Tank Farm Assets is interrupted or unavailable. Lessee agrees that Lessor shall have access to the Tank Farm Assets to operate, repair, inspect and maintain portions of the Refinery firewater system located therein. |
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• | Groundwater Monitoring. Lessor currently operates any existing groundwater monitoring and remedial systems and will retain the obligation to maintain the existing systems until such time as the applicable Governmental Authority grants closure or Lessee and Lessor mutually agree that further operation is not necessary. As set forth in the Omnibus Agreement, in the event that Lessee has a Release following the Effective Date of this Lease and the Release has a material adverse impact on the existing remedial system or triggers new remedial obligations, Lessee shall reimburse Lessor for the additional costs incurred as a result of the Release. |
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• | Solid/Hazardous Waste Processing. Lessor shall provide solid/hazardous waste processing consistent with Applicable Law. |
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• | LDAR Monitoring and Reporting. Lessor will provide to Lessee services necessary to perform leak detection, monitoring and reporting on all Tank Farm Assets within the Refinery Site as required by Applicable Law and any applicable consent decree. Lessor’s and Lessee’s employees will be included in the Refinery LDAR training program, which training program shall comply with the Clean Air Act and any applicable consent decree. Lessor will provide data to Lessee on all LDAR surveillance activities. |
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• | Security. Lessor shall provide routine security patrols, general monitoring and surveillance, provided however Lessor be responsible for the loss of or damage to the Tank Farm Assets and Improvements. |
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• | IT/Controls Infrastructure. – Lessee will be entitled to access and use all necessary IT/Controls infrastructures for the operation of the Tank Farm Assets. Lessor shall maintain all IT/Controls infrastructures. |
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• | Laydown Areas/Storage for Spares. Lessor will provide laydown areas and storage for spares on an as-needed basis. |
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• | Landscape Maintenance. Lessor will provide or cause to be provided landscape maintenance services to the Premises. |
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• | Janitorial Services. Lessor will provide or cause to be provided janitorial services to the Premises. |
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• | Non-hazardous Waste Handling and Collection. Lessor will provide or cause to be provided non-hazardous waste handling and collection services to the Premises, including vacuum truck services. |
LEASE AND ACCESS AGREEMENT
(St Charles Terminal)
THIS LEASE AND ACCESS AGREEMENT (this “Lease”) is made and entered into to be effective as of the 1st day of March, 2015 (the “Effective Date”), between Valero Refining-New Orleans, L.L.C., a Delaware limited liability company (herein called “Lessor”), and Valero Partners Louisiana, LLC, a Delaware limited liability company (herein called “Lessee”).
W I T N E S S E T H:
WHEREAS, on the Effective Date, Lessee has acquired from Lessor the Tank Farm Assets (as defined below) located on the Refinery Site (as defined below) in Norco, Louisiana;
WHEREAS, Lessor has agreed to lease and sublease (with respect to the Gore Leased Land) to Lessee and Lessee has agreed to lease and sublease (with respect to the Gore Leased Land) from Lessor the land on which the Tank Farm Assets are located, on the terms and conditions set forth in this Lease;
WHEREAS, Lessor owns and operates certain facilities and other improvements at the Refinery Site that are necessary or desirable for Lessee to utilize in Lessee’s operations of the Tank Farm Assets but that may also be utilized by Lessor and that Lessor has agreed to provide Lessee with access to in accordance with this Lease; and
NOW, THEREFORE, for and in consideration of the premises, the mutual agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee covenant and agree as follows:
ARTICLE 1
DEMISE AND PREMISES
1.1 Certain Defined Terms. Unless the context otherwise requires, the following terms shall have the respective meanings set forth in this Section 1.1:
“Affiliate” means any entity that directly or indirectly Controls, is Controlled by, or is under common Control with the referenced entity, including, without limitation, the referenced entity’s parents and their general partners; provided that, for purposes of this Agreement, Valero and its subsidiaries (other than the General Partner and the Partnership and its subsidiaries), including the Lessor, on the one hand, and the General Partner and the Partnership and its subsidiaries, including the Lessee, on the other hand, shall not be considered Affiliates of each other.
“Applicable Law” means all applicable constitutions, laws (including common law), treaties, statutes, orders, decrees, rules, injunctions, licenses, permits, approvals, agreements, regulations, codes, ordinances issued by any Governmental Authority, including applicable judicial or administrative orders, consents, decrees, and judgments, published directives, guidelines, governmental authorizations, requirements or other governmental restrictions which have the force of law, and determinations by, or interpretations of any of the foregoing by any Governmental
Authority having jurisdiction over the matter in question and binding on a given Person, whether in effect as of the date hereof or thereafter and, in each case, as amended.
“Business Day” means any Day except for Saturday, Sunday or an official holiday in the State of Louisiana.
“Charge Pump” means the last pump prior to pumped inputs entering a refining unit.
“Commencement Date” has the meaning set forth in Section 3.1.
“Contribution Agreement” means that certain Contribution Agreement dated March 1, 2015, among Valero Terminaling and Distribution Company and Valero Refining-New Orleans, L.L.C., as Contributors and the Partnership.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.
“Day” means the period of time commencing at 12:00 a.m. on one calendar day and running until, but not including, 12:00 a.m. on the next calendar day, according to local time where the Premises are located.
“Demarcation Point” is defined in the definition of “Facility Pipelines”.
“Environmental Cleanup” has the meaning set forth in Section 10.4.
“Environmental Laws” means all federal, state, and local laws, statutes, rules, regulations, orders, judgments, ordinances, codes, injunctions, decrees, Environmental Permits and other legally enforceable requirements and rules of common law relating to pollution or protection of human health, natural resources, wildlife and the environment or workplace health or safety including the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq., the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. §§6901 et seq., the Clean Air Act, as amended, 42 U.S.C. §§7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. §§1251 et seq., the Toxic Substances Control Act, as amended, 15 U.S.C. §§2601 et seq., the Oil Pollution Act of 1990, 33 U.S.C. §§2701 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §§300f et seq., the Hazardous Materials Transportation Act of 1994, as amended, 49 U.S.C. §§ 5101 et seq., and other environmental conservation and protection laws and the Occupational Safety and Health Act of 1970, 29 U.S.C. §§ 651 et seq, and the regulations promulgated pursuant thereto, and any state or local counterparts, each as amended from time to time.
“Environmental Permit” means any permit, approval, identification number, license, registration, certification, consent, exemption, variance or other authorization required under or issued pursuant to any applicable Environmental Law, including applications for renewal of such permits in which the application allows for continued operation under the terms of an expired permit.
“Facility Pipelines” means all crude oil, intermediates and refined product pipelines to the extent they are (i) located wholly on, below, above and/or within the Premises and connect into the Tanks, or (ii) located partially on and partially off the Premises and used in connection with the operation of the Tanks, provided that the Parties shall demarcate the point at which any such pipeline located partially on and partially off the Premises connects to any Refinery Pipeline (as determined, the “Demarcation Point”) and that portion extending from the boundary of the Premises to the Demarcation Point shall be considered Facility Pipeline. The Facility Pipelines do not include the Refinery Facilities.
“General Partner” means Valero Energy Partners GP LLC, a Delaware limited liability company.
“Gore Lease” means the Lease Agreement dated July 24, 1974 between Kathryn B. Gore, as lessor, and Good Hope Refineries, Inc., as lessee (predecessors to Lessor and Lessee, respectively, hereunder), as amended (or assigned, as applicable) by the following: (i) Amendment of Lease dated December 20, 1994, recorded in COB 489, folio 292 of the records of the Clerk of Court of St. Charles Parish, Louisiana; (ii) Amendment of Lease dated March 3, 1998, recorded in COB 533, folio 701, of the records of the Clerk of Court of St. Charles Parish, Louisiana; (iii) Amendment of Lease dated December 4, 1998, recorded in COB 546, folio 778, of the records of the Clerk of Court of St. Charles Parish, Louisiana; (iv) assignment by TransAmerican Refining Corporation to TCR Holding Corporation by instrument dated December 13, 1998, recorded in COB 547, folio 296, of the records of the Clerk of Court of St. Charles Parish, Louisiana; (v) assignment by TCR Holding Corporation to TransContinental Refining Corporation (currently Orion Refining Corporation) by instrument dated December 13, 1998, recorded in COB 547, folio 406, of the records of St. Charles Parish, Louisiana; (vi) Amendment of Lease dated March 6, 2001, recorded in COB 582, folio 357, of the records of the Clerk of Court in St. Charles Parish, Louisiana; (vii) assignment by Orion Refining Corporation to Valero Refining-New Orleans, L.L.C. by instrument recorded July 3, 2003 in COB 620, folio 79, of the records of the Clerk of Court of St. Charles Parish, Louisiana; and (viii) Fifth Amendment to Lease Agreement dated January 1, 2015.
“Gore Leased Land” means, collectively, the land underlying Tanks 425-1, 425-2, 425-3, 425-4 and 625-1 that is leased by the Lessor, as lessee, pursuant to the Gore Lease.
“Governmental Authority” means any federal, state, tribal, foreign or local governmental entity, authority, department, court or agency, including any political subdivision thereof, exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature, and including any arbitrating body, commission or quasi-governmental authority or self-regulating organization of competent authority exercising or enlisted to exercise similar power or authority.
“Hazardous Substance” means (a) any substance, whether solid, liquid, gaseous, semi-solid, or any combination thereof, that is designated, defined or classified as a hazardous waste, solid waste, hazardous material, pollutant, contaminant or toxic or hazardous substance, or terms of similar meaning, or that is otherwise regulated under any Environmental Law, including any hazardous substance as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, and including asbestos and lead-containing paints or coatings, and
(b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other refined petroleum hydrocarbons.
“Improvements” and “Material Improvements” have the meanings set forth in Section 7.1.
“Interest Rate” means an annual rate (based on a 360-day year) equal to the lesser of (i) two percent (2%) over the prime rate as published under “Money Rates” in the Wall Street Journal in effect at the close of the Business Day on which payment was due and (ii) the maximum rate permitted by Applicable Law.
“Lessee Indemnified Party(ies)” means Lessee and all other members of the Partnership Group and their respective officers, directors, shareholders, unitholders, members, managers, employees, agents, representatives, successors and assigns.
“Lessee Responsible Parties” has the meaning set forth in Section 10.1.
“Lessor Indemnified Party(ies)” means Lessor and its ultimate parent company and their Affiliates (other than members of the Partnership Group) and their respective officers, directors, shareholders, unitholders, members, managers, employees, agents, representatives, successors and assigns.
“Lessor Services” has the meaning set forth in Section 5.1.
“Losses” means any losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs and expenses (including court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent.
“Monthly Payment” has the meaning set forth in Section 5.2.
“Omnibus Agreement” means that certain Amended and Restated Omnibus Agreement dated July 1, 2014, among Valero Energy Corporation, a Delaware corporation, Valero Marketing and Supply Company, a Delaware corporation, Valero Terminaling and Distribution Company, a Delaware corporation, The Premcor Refining Group Inc., a Delaware corporation, The Premcor Pipeline Co., a Delaware corporation, Valero Energy Partners LP, a Delaware limited partnership, Valero Energy Partners GP LLC, a Delaware limited liability company, Valero Partners Operating Co. LLC, a Delaware limited liability company, Valero Partners EP, LLC, a Delaware limited liability company, Valero Partners Lucas, LLC, a Delaware limited liability company, Valero Partners Memphis, LLC, a Delaware limited liability company, Valero Partners North Texas, LLC, a Delaware limited liability company, Valero Partners South Texas, LLC, a Delaware limited liability company, and Valero Partners Wynnewood, LLC, a Delaware limited liability company, as the same has been amended by that certain Amendment and Restatement of Schedules to Amended and Restated Omnibus Agreement dated as of the Effective Date, and as the same may be further amended and supplemented from time to time.
“Partnership” means Valero Energy Partners LP.
“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of December 16, 2013, as the same may be amended from time to time.
“Partnership Change in Control” means Valero ceases to Control the general partner of the Partnership.
“Partnership Group” has the meaning ascribed to such term in the Partnership Agreement.
“Permitted Exceptions” has the meaning set forth in Section 2.2.
“Permitted Transferee” has the meaning set forth in Section 17.3.
“Permitted Use” has the meaning set forth in Section 6.1.
“Permits” means all permits, licenses, franchises, authorities, consents, and approvals, as necessary under applicable Environmental Laws for operating the Tank Farm Assets and/or the Premises.
“Person” means any individual or entity, including any partnership, corporation, association, joint stock company, trust, joint venture, limited liability company, unincorporated organization or Governmental Authority (or any department, agency or political subdivision thereof).
“Premises” means those tracts or parcels of land located in Norco, Louisiana on which the Tank Farm Assets are situated as depicted by the cross-hatched areas identified on Exhibit C attached hereto and made a part hereof for all purposes. The Premises is shown on Exhibit C as 9 separate depictions with each including a cross reference to the Refinery Site parcel or tract upon which the Premises is located. For avoidance of doubt, the Premises is intended to include all of the land underlying the Tanks and those portions adjacent to the Tanks that are necessary for the use and operation of the Tank Farm Assets and the Improvements, including where applicable, the dike walls or other containment areas surrounding the Tanks. The Premises do not include the Refinery Facilities and any roads, drives or other ingress and egress areas located within the boundaries of the Premises (it being understood that Lessee shall have a non-exclusive right to use such roads, drives or other ingress and egress areas pursuant to Section 2.2 hereof).
“Refinery” means the crude oil refinery and related facilities (commonly known as the “Valero St. Charles Refinery”) owned and operated by Lessor in Norco, Louisiana at the Refinery Site.
“Refinery Facilities” means those assets and facilities of Lessor or third parties that may be located on the Premises but are used in connection with the operation of the Refinery (as opposed to the delivery, storage and redelivery of crude oil, feedstocks and products to the Tanks) or are necessary in order for Lessor to provide the Lessor Services, including without limitation any (i) water lines water tanks and fire water systems (ii) waste water facilities, (iii) control or maintenance buildings, (iv) Charge Pumps, (v) pressurized tanks (bullets and spheres), (vi) Refinery
Pipelines, (vii) pipe racks that are not wholly located within the Premises (viii) tanks not in hydrocarbon service, and (ix) electrical and IT/controls infrastructure.
“Refinery Pipelines” means (i) any crude oil, intermediates or refined products pipeline or portion thereof that runs between a Demarcation Point and a point off the Premises for the purpose of delivering crude oil, intermediates and products into the Tanks or receiving crude oil, intermediates and products from the Tanks; and (ii) any crude oil, intermediates or refined products pipeline, or portion thereof, that runs between a Demarcation Point and a point off the Premises for the purpose of delivering crude oil, intermediates and refined products to the Refinery process units or receiving crude oil, intermediates and refined products from the Refinery process units.
“Refinery Site” means those tracts or parcels of land located in Norco, Louisiana where the Premises are located as more particularly described on Exhibit B attached hereto and made a part hereof for all purposes (including the Gore Leased Land), or which may be acquired by Lessor after the date hereof for which access thereto is necessary for the use and operation of the Tank Farm Assets or the Improvements, together with any other tracts or parcels of land adjacent thereto and any common areas, parking areas and driveways for vehicular and pedestrian ingress/egress related thereto to the extent owned or controlled by Lessor and, for which access is necessary for the use and operation of the Tank Farm Assets or the Improvements.
“Refinery Site-Wide Permits” means those Permits under which Lessor, immediately prior to the Commencement Date, operated the Refinery and the Tank Farm Assets.
“Release” means any spilling, leaking, seeping, pumping, pouring, emitting, emptying, injecting, discharging, escaping, leaching, dumping, disposing or releasing of any Hazardous Substances into the environment (including the air, soil, surface water, or groundwater) of any kind whatsoever, but not any offsite disposal or treatment in accordance with Environmental Law.
“Rent” has the meaning set forth in Section 4.1.
“Shared Access Facilities” has the meaning set forth in Section 2.2.
“Tanks” means the crude oil, refined products and intermediates storage tanks identified on Exhibit A attached hereto and incorporated herein for all purposes. For further identification the Tanks have been cross-hatched on the depiction of the Premises set forth on Exhibit C.
“Tank Farm Assets” means the Tanks, together with (i) tank valves, tank gauges, booster pumps, transfer pumps, meters, recorders, fittings, pressure and temperature equipment, cathodic protection equipment, leak detection equipment, improvements and other equipment, all of which are located on the Premises and used in connection with the operation of the Tanks, and (ii) the Facility Pipelines.
“Tax Reimbursement” has the meaning set forth in Section 9.2.
“Taxes” means all federal, state and local real and personal property ad valorem taxes, assessments, and other governmental charges, general and special, ordinary and extraordinary,
including but not limited to assessments for public improvements or benefits assessed against the Premises or Tank Farm Assets or the use or operation thereof during the Term, including, but not limited to, any federal state or local income, gross receipts, withholding, franchise, excise, sales, use, value added, recording, transfer or stamp tax, levy, duty, charge or withholding of any kind imposed or assessed by any Governmental Authority, together with any addition to tax, penalty, fine or interest thereon. The term “Taxes” does not, however, include federal or state income taxes or franchise taxes imposed on Lessor.
“Term” has the meaning set forth in Section 3.1.
“Third Party Maintenance Contracts” has the meaning set forth in Section 5.5.
“Valero” means Valero Energy Corporation.
1.2 References. As used in this Lease, unless a clear contrary intention appears: (a) the singular includes the plural and vice versa; (b) reference to any Person includes such Person’s successors and assigns but, in the case of a Party, only if such successors and assigns are permitted by this Lease, and reference to a Person in a particular capacity excludes such Person in any other capacity; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Lease), document or instrument means such agreement, document, or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of this Lease; (e) reference to any Section means such Section of this Lease, and references in any Section or definition to any clause means such clause of such Section or definition; (f) “hereunder,” “hereof,” “hereto” and words of similar import will be deemed references to this Lease as a whole and not to any particular Section or other provision hereof or thereof; (g) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; and (h) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including.”
ARTICLE 2
DEMISE OF PREMISES
2.1 Demise of Premises. Lessor, in consideration of the Rent to be paid and of the covenants and agreements in this Lease to be performed by Lessee, does hereby lease and demise (and subleases with respect to the Gore Leased Land) to Lessee and Lessee hereby leases (and subleases with respect to the Gore Leased Land), the Premises, upon and subject to the terms, covenants and conditions set forth in this Lease.
2.2 Shared Access Facilities. During the Term, Lessor hereby grants to Lessee and its respective Affiliates, agents, employees and contractors, for no additional consideration, an irrevocable, non-exclusive right of access to and use of those portions of the Refinery Site that are reasonably necessary for access to and/or the use, operation, maintenance, replacement, inspection, protection, repair and removal of the Tank Farm Assets and Improvements by Lessee, all so long as such access and use by any of the Lessee Responsible Parties does not unreasonably interfere in any material respect with Lessor’s operations at the Refinery Site and materially complies with Lessor’s rules,
norms and procedures governing safety and security at the Refinery Site. Such access rights in favor of Lessee shall include, but not be limited to the right to use roads within the Refinery Site that provide Lessee access, ingress and egress to the Tank Farm Assets and Improvements and the right to use the Refinery Pipelines, docks, and pumps (and associated utilities) for the movement of crude oil, intermediates and refined products in and out of the Tank Farm Assets, whether or not such Refinery Pipelines are wholly-located on the Refinery Site. Lessor shall not unreasonably interfere with such access and use rights. The facilities from time to time on the Refinery Site that are subject to the access and use rights provided under this Section 2.2 are referred to herein as the “Shared Access Facilities”.
2.3 “Subject to” Restrictions, Etc.; Reservations. This Lease is expressly granted by Lessor and accepted by Lessee subject to all applicable building, zoning and other ordinances and governmental requirements affecting the Premises and to all restrictions, covenants, encumbrances, rights-of-ways, easements, exceptions, reservations and other matters of record encumbering or affecting the Premises. This Lease, to the extent it relates to the Gore Leased Land is also subject to the Lessor’s rights and obligations under the Gore Lease (as applicable). Furthermore, subject to the rights of Lessee hereunder, Lessor reserves the right to grant any, easements, licenses, and other similar agreements affecting the Premises, including, without limitation, utility and pipeline easements, provided that such easements and licenses shall be located in a manner that minimizes interference with the operations of Lessee at the Premises and does not increase any operational cost or risk to Lessee, while also minimizing construction and operational costs and risks for Lessor. The matters referenced in this Section 2.3 are the “Permitted Exceptions”.
2.4 Acceptance of Premises. Lessee acknowledges that it is familiar with the Premises and its condition. Lessee accepts the Premises in its “AS-IS,” “WITH ALL FAULTS” physical condition as of the Commencement Date, subject to the terms and conditions of this Lease. LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, SUITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, AND INCLUDING WITHOUT LIMITATION, (I) THE CONDITION OR SUFFICIENCY OF THE PREMISES FOR LESSEE’S INTENDED USE, (II) THE CONDITION OR ZONING STATUS OF THE PREMISES, OR ANY OTHER FACT OR MATTER RELATING THERETO, OR (III) WHETHER ANY OF THE PREMISES CONTAINS ANY SUBSTANCE OR MATERIAL WHICH IS OR MAY BE IN VIOLATION OF ANY ENVIRONMENTAL LAW. Lessee acknowledges that, except as may be otherwise expressly provided herein, in no event shall Lessor have any obligation for any defects in the Premises or any limitation on its use. The taking of possession of the Premises shall be conclusive evidence that the Premises was in good condition at the time possession was taken.
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Lessor Lessee
ARTICLE 3
TERM
3.1 Term. The initial term of this Lease (the “Initial Term”) shall be for 10 years commencing on March 1, 2015 (the “Commencement Date”). Following the Initial Term the Term of this Lease shall automatically renew for four successive five-year periods (each a “Renewal Term”); provided that the last 5 year renewal Term shall terminate on December 31, 2044. Lessee may terminate this Lease at the end of the Initial Term or any subsequent Renewal Term by delivering written notice to Lessor, on or before 180 days prior to the end of any such period, that Lessee has elected to terminate this Lease. The Initial Term together with any applicable Renewal Terms shall be referred to herein as the “Term”. In addition, at Lessee’s option, Lessee may terminate this Lease, by providing written notice to Lessor on or before 180 days prior to the desired termination date, if Lessee ceases to operate the Tanks, or ceases its business operations. In the event of such termination prior to the end of the Term, Lessor shall retain one half of the remaining Rent (as defined below) for the current 12-month rental period as set forth in Section 4.1 below as its sole and exclusive remedy for such early termination and shall refund to Lessee the remaining Rent. In the event the aforesaid Commencement Date shall occur on a date other than the first day of the calendar month, then the Term of this Lease shall be for the number of full lease years plus the number of days remaining in the month in which the Term commences.
ARTICLE 4
RENT
4.1 Rent. Lessee shall pay to Lessor annual rent (“Rent”) in the initial amount of $4,684,000 per year, payable in equal monthly installments on or before the last day of each month in the amount of $390,333.33. If any installment of Rent falls due on a day that is not a Business Day, then such installment shall be due and payable on the next day that is a Business Day. Rent for any partial lease year and/or month at the beginning and/or end of the Term shall be prorated based on the number of days during such lease year and/or month that this Lease was in effect.
4.2 Accrual and Payment of Rent. All Rent shall be payable in immediately available funds to an account specified in writing by Lessor from time to time, or at Lessor’s address set forth in Section 19.12 (or at such place or places as Lessor may from time to time direct), free from all claims, demands, set offs, or counterclaims against Lessor of any kind or character. Any delinquent payment (that is, any payment not made within five calendar days after the due date) shall, in addition to any other remedy of Lessor, incur a late charge of 5% (which late charge is intended to compensate Lessor for the cost of handling and processing such delinquent payment and should not be considered interest) and bear interest at the Interest Rate, such interest to be computed from and including the date such payment was due through and including the date of the payment; provided, however, in no event shall Lessee be obligated to pay a sum of late charge and interest higher than the maximum rate permitted by Applicable Law.
4.3 Escalation. On July 1, 2016, and on July 1st of each year thereafter during the Term, Lessor shall adjust Rent by multiplying Rent by an amount equal to a maximum of (a) 1.0 plus (b) a fraction, of which (i) the numerator is the positive change, if any, in the Consumer Price Index – All Urban Consumers (Series ID CUUR0300SA0) (such index, the “CPI”) during the 12-month period ending
March 31st of such year, as reported during the month of April of such year and (ii) the denominator is the CPI as of the first day of such 12-month period, provided that if, with respect to any such 12‑month period, the CPI has decreased during such 12-month period, Company may increase fees on the following July 1 only to the extent that the percentage change in the CPI since the most recent previous such increase in fees is greater than the aggregate amount of the cumulative decreases in the CPI during the intervening period or periods.
4.4 Independent Covenant. The obligation of Lessee to pay Rent is an independent covenant, and no act or circumstances whatsoever, whether such act or circumstances constitutes a breach of a covenant by Lessor or not, shall release Lessee of the obligation to pay Rent.
4.5 Rental. Wherever the term “Rental” or “Rent” is used under the terms of this Lease it shall be deemed to refer to the Rent as well as any additional rental due hereunder unless the context specifically states otherwise.
ARTICLE 5
ADDITIONAL LESSOR OBLIGATIONS
5.1 Provision of Lessor Services. During the Term of this Lease, in consideration of the Rent, Lessor shall make available and provide to Lessee, in accordance with the terms and conditions of this Lease, shared use of certain services, utilities, materials and facilities as more fully described on Exhibit D (the “Lessor Services”), located or utilized at the Refinery that are necessary to operate and maintain the Tank Farm Assets as currently operated and maintained.
5.2 Adjustment to Rent for Lessor Services. If the actual cost to Lessor of providing any Lessor Services or any additional Lessor Services exceeds the amount allocated therefor in the Rent (taking into account any increases in Rent pursuant to Section 4.3), Lessor may increase the Rent by an amount equal to such increase. Lessor shall provide Lessee reasonable supporting documentation for any such increase, and if Lessee objects to the amount of any such increase Lessor and Lessee will negotiate in good faith to resolve such dispute. Prior to resolution of any such dispute, Lessee shall continue to pay the Rent prevailing prior to Lessor’s requested adjustment, with a true-up payment to be made by Lessee promptly upon resolution of the dispute (assuming that the parties agree to an increase in Rent).
5.3 Increased Quantities and Additional Lessor Services:
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(a) | If subsequent to the date hereof increased quantities of any Lessor Services are reasonably required by Lessee in connection with its ownership, operation or maintenance of the Tank Farm Assets or any improvements or additions thereto, Lessor shall use commercially reasonable efforts to provide such increased quantities of such Lessor Services on the same terms and conditions set forth in Exhibit D, so long as the provision of such increased quantities does not interfere in any material respect with Lessor’s operations at the Refinery Site or require Lessor to make a capital improvement in order to provide such increased Lessor Services. If the provision by Lessor of increased quantities of any Lessor Services as requested by Lessee would require Lessor to make such a capital improvement, then Lessee may |
submit a request to Lessor. If increased quantities of any Lessor Services is requested by Lessee, and provided by Lessor, the Rent may be increased in accordance with Section 5.2 hereof. Notwithstanding anything to the contrary herein, in the event that (i) Lessee uses the Tank Farm Assets to provide services to third parties, (ii) Lessee’s provision of such third-party services results in a material increase of any Lessor Services required by Lessor Services, and (iii) provision of such Lessor Services is available to Lessee from third-party vendors on commercially reasonable terms, then Lessor may decline to provide such increased and additional Lessor Services.
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(b) | If subsequent to the date hereof Lessor Services not specifically described herein, but which are being produced or utilized by Lessor or its Affiliates in the normal course of their operations at the Refinery Site, are or become reasonably necessary to operate or maintain the Tank Farm Assets and any Improvements, Lessor shall use commercially reasonable efforts to provide such Lessor Services on terms and conditions consistent with the provision of the existing Lessor Services by Lessor. The Rent with respect to such additional Lessor Services may be increased in accordance with Section 5.2 hereof. |
5.4 Disclaimers.
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(a) | FAILURE TO ANY EXTENT TO MAKE AVAILABLE, OR ANY SLOW-DOWN, STOPPAGE OR INTERRUPTION OF ANY LESSOR SERVICES DESCRIBED IN THIS ARTICLE 5 RESULTING FROM ANY CAUSE WHATSOEVER (OTHER THAN LESSOR’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) SHALL NOT RENDER LESSOR LIABLE IN ANY RESPECT FOR DAMAGES, NOR BE CONSTRUED AS AN EVICTION OF LESSEE (ACTUAL OR CONSTRUCTIVE) NOR RELIEVE LESSEE FROM FULFILLMENT OF ANY COVENANT OR AGREEMENT HEREOF. NEITHER LESSOR NOR ANY OF ITS LESSOR INDEMNIFIED PARTIES SHALL BE LIABLE TO LESSEE OR ANY OF THE LESSEE INDEMNIFIED PARTIES FOR ANY LOSSES ARISING OUT OF THE PROVISION AND DELIVERY OF (OR FAILURE TO PROVIDE AND DELIVER) ANY LESSOR SERVICES, AND LESSEE HEREBY RELEASES THE LESSOR INDEMNIFIED PARTIES FROM ALL SUCH LOSSES. |
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(b) | LESSEE ASSUMES ALL RISKS AND LIABILITIES IN CONNECTION WITH ITS USE OF ANY LESSOR SERVICES PROVIDED BY LESSOR PURSUANT TO THE TERMS OF THIS LEASE OTHER THAN TO THE EXTENT ARISING FROM LESSOR’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. LESSEE HAS NOT MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY AND ALL REPRESENTATIONS, WARRANTIES, COVENANTS, AGREEMENTS, OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, OR FUTURE, OF, AS TO, CONCERNING OR |
WITH RESPECT TO THE LESSOR SERVICES SO PROVIDED INCLUDING WITHOUT LIMITATION (A) THE NATURE, QUALITY, CHARACTER OR SUFFICIENCY OF FACILITIES AND EQUIPMENT UTILIZED TO SUPPLY THE LESSOR SERVICES TO LESSEE; (B) THE CONDITION OF THE LESSOR SERVICES; (C) ANY SPECIFIC PRESSURE OR VOLUME OF FIREWATER, IT BEING UNDERSTOOD THAT NO SUCH GUARANTEE IS PROVIDED BY LESSOR, AND THAT THERE MAY BE TIMES WHEN THE FIREWATER SERVICE TO EITHER OR BOTH THE TANKS AND THE REFINERY IS INTERRUPTED OR UNAVAILABLE, (D) THE COMPLIANCE OF OR BY THE LESSOR SERVICES WITH ANY APPLICABLE LAWS; (E) THE MERCHANTABILITY, OR FITNESS OF THE LESSOR SERVICES FOR A PARTICULAR PURPOSE; OR (F) ANY OTHER MATTER WITH RESPECT TO THE LESSOR SERVICES OR THEIR RESPECTIVE DELIVERY FACILITIES COLLECTIVELY THE “DISCLAIMED MATTERS”). LESSEE HEREBY WAIVES ANY SUCH DISCLAIMED MATTERS. FURTHER, LESSOR MAKES NO WARRANTY OR REPRESENTATION THAT THE LESSOR SERVICES CONFORM TO LESSEE’S SPECIFICATIONS OR ANY LEGAL OR INDUSTRY STANDARDS.
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Lessor Lessee
5.5 Third Party Maintenance Providers. Lessor and its Affiliates have contracts with third-party service providers with respect to the maintenance and inspection of certain Refinery Facilities and Shared Access Facilities which contracts have historically related in part to the Tank Farm Assets (the “Third Party Maintenance Contracts”). With respect to those Third Party Maintenance Contracts that have not been assigned to Lessee or its Affiliates or that Lessee or its Affiliates are not a party to, (a) Lessor or its Affiliates shall cause such third-party service providers to perform such services under such Third Party Maintenance Contracts as reasonably requested by Lessee or its Affiliates with respect to the Tank Farm Assets, and (b) Lessee and its Affiliates shall be solely responsible for any costs, fees or expenses or any Losses arising from such requests, and shall indemnify and hold harmless Lessor and its Affiliates therefor.
ARTICLE 6
CONDUCT OF BUSINESS
6.1 Use of Premises. Lessee shall have the right to use the Premises for the purpose of operating, maintaining, repairing and replacing the Tank Farm Assets and for any other lawful purpose associated with the operation and ownership of the Tank Farm Assets (the “Permitted Use”). Lessee shall not use the Premises (or permit the Premises to be used by or under Lessee) for any unlawful purpose. Lessee shall not use the Premises in any manner or for any purpose which will cause the forfeiture of or will violate any Applicable Law or in such a manner as to materially threaten or harm Lessor’s interest in the Premises. No activities or operations performed by or on behalf of Lessee under this Lease shall cause any interference with the operations of Lessor at the Refinery.
6.2 Waste. Lessee shall not commit, or suffer to be committed, any waste upon the Premises, ordinary wear and tear or damages to the extent caused by any Lessor Indemnified Party excepted, and subject to the provisions of Article 14.
6.3 Governmental Regulations. Lessee shall, at Lessee’s sole cost and expense, at all times comply with all Applicable Laws (including, without limitation, requirements under Environmental Laws, zoning laws, building and fire codes, and permitting requirements) now in force, or which may hereafter be in force, pertaining to the Premises or the ownership, operation and maintenance of the Tank Farm Assets.
6.4 Refinery Site-Wide Permits. Lessee and Lessor shall use commercially reasonable efforts to cause the applicable Governmental Authorities, to the extent allowed by Applicable Law, to separate the Tank Farm Assets and the Improvements from the coverage of any Refinery Site-Wide Permits following the Commencement Date in order to provide for separate Permits to be held directly by Lessee with respect to the Tank Farm Assets and the Improvements. To the extent that the Tank Farm Assets and the Improvements remain under any Refinery Site-Wide Permits or other Permits held directly by Lessor, Lessor agrees to allow (to the extent allowed by Applicable Law) such Tank Farm Assets and the Improvements to continue coverage under such Permits.
ARTICLE 7
ALTERATIONS, IMPROVEMENTS AND MAINTENANCE
7.1 Improvements. Lessee may make any alterations, additions, improvements or other changes to the Tank Farm Assets as may be necessary or useful in connection with the Permitted Use in Lessee’s reasonable discretion (collectively, the “Improvements”), without the prior written consent of Lessor, provided Lessee complies with the requirements of this Lease (including, without limitation, Section 6.3 and this Article 7) with respect thereto. If such Improvements require alterations, additions or improvements to the Premises or any of the Shared Access Facilities, Lessee shall notify Lessor in writing in advance and the parties shall negotiate in good faith any increase to the rental paid by Lessee or otherwise provide for reimbursement of any material increase in cost (if any) to Lessor that result from any modifications to the Premises or the Shared Access Facilities necessary to accommodate the Improvements, or as otherwise mutually agreed by the parties. Notwithstanding the foregoing or any other provision to the contrary contained herein, if there is a Partnership Change in Control, then Lessee shall not be permitted to make any Material Improvements (as defined below), without the prior written consent of Lessor, which may not be unreasonably withheld, conditioned or delayed; provided that Lessor’s consent shall not be required hereunder if the Improvements (i) are required by Applicable Law, (ii) are pursuant to Section 14.2 below, or (iii) do not interfere in any material respect with the operations of the Refinery and do not materially increase any of Lessor’s obligations or liabilities under this Lease or any other related agreement. If the Material Improvements cause such interference or materially increase Lessor’s obligations or liabilities under this Lease or any other related agreement, Lessee agrees to indemnify, defend and hold harmless the Lessor Indemnified Parties from and against any Losses resulting from such interference or the increase in Lessor’s obligations or liabilities under this Lease or any other related agreement. For purposes of this paragraph, the term “Material Improvements” mean any Improvements which cost in excess of $15,000,000. If Lessor’s consent is required hereunder,
Lessor shall provide written notice to Lessee of Lessor’s acceptance or rejection of any proposed construction or material alteration within thirty (30) days after Lessor’s receipt of the written request for such consent and adequate written explanation and supporting written information respecting the proposed construction or material alteration. In no way shall Lessee act or represent to any contractor, subcontractor, materialman, supplier or laborer that it is acting on behalf of or as agent of Lessor with regard to any construction, maintenance, repair or other work whatsoever on or about the Premises.
7.2 Maintenance by Lessee. Except as otherwise expressly provided below in Article 14, Lessee shall at its sole cost, risk and expense at all times keep the Premises, the Tank Farm Assets and the Improvements in good order and repair and make all necessary repairs thereto, structural and nonstructural, ordinary and extraordinary, and unforeseen and foreseen (ordinary wear and tear excepted). When used in this Section 7.2, the term “repairs” shall include all necessary replacements, renewal, alterations and additions. All repairs made by Lessee shall be at least equal in quality and class to the original work. Lessor may (but shall not be obligated to) perform any repairs if Lessee fails to do so (following Lessor’s notice to Lessee and Lessee’s opportunity to cure such failure pursuant to Section 13.11(b) hereof, except in the event of an emergency situation), in which event Lessee shall reimburse Lessor for all reasonable costs and expenses incurred by Lessor in connection therewith.
7.3 Requirements for all Construction. In connection with any construction, alteration, repair, maintenance, or other similar work at or about the Premises done by or under Lessee, including any Improvements: (i) all work shall be performed in a good and workmanlike manner, and shall comply with all Applicable Laws; (ii) for construction or alterations requiring Lessor’s consent as described above, all construction and material alteration work shall be performed in accordance with plans and specifications previously approved by Lessor, which approval shall not be unreasonably withheld, conditioned, or delayed (provided that such plans and specifications shall be provided to Lessor in advance for Lessor’s review even if Lessor’s approval is not required under this Lease), and (iii) Lessee shall not permit any mechanics’, materialman’s or other liens to be filed or recorded against the Premises for any work or materials performed for or provided to Lessee (other than a notice of commencement or similar notice of the commencement of statutory lien rights which is not a claim or notice of a failure to pay, and except for liens being contested in good faith by Lessee that Lessee has bonded over or otherwise taken appropriate steps to ensure cannot be foreclosed or otherwise enforced). Without limiting the foregoing, Lessee agrees to indemnify and hold harmless Lessor and the Premises from and against all claims, liens and demands (including, without limitation, mechanic’s and materialman’s liens) by or on behalf of any party, arising from the use, occupancy, conduct or management of or from any work or thing whatsoever done in, on or about the Premises by Lessee or any party acting under Lessee (other than any Lessor Indemnified Party).
7.4 Liability Disclaimer. No review or approval of plans, specifications or other information or documentation by Lessor shall constitute a representation or warranty by Lessor that such plans, specifications or other information or documentation satisfy any applicable laws or other requirements or will provide for a safe operation, and no such review or approval shall make Lessor otherwise liable with respect thereto. Lessee shall be solely responsible for determining whether
its plans, specifications, construction and maintenance meet its needs, satisfy applicable laws and other requirements and will provide for a safe operation.
ARTICLE 8
ACCESS; RELOCATION
8.1 Lessor’s Access. Lessor hereby retains for itself and its Affiliates, agents, employees and contractors, the right of access to all of the Premises, the Tank Farm Assets and the Improvements (i) to determine whether the conditions and covenants contained in this Lease are being kept and performed, (ii) to comply with Environmental Laws, (iii) to inspect, maintain, repair, improve, replace and operate the Refinery Facilities or the Shared Access Facilities and any assets of Lessor located on the Premises or to install or construct any structures or equipment necessary for the maintenance, operation or improvement of any such assets or the installation, construction or maintenance of any connection facilities, (iv) if reasonably necessary for access to an/or the operation, maintenance, replacement, inspection, protection, repair and removal of any of Lessor’s assets, and/or (v) to show the Premises to prospective lenders or purchasers, provided, however, that Lessor’s entry upon, inspection of and/or access to the Premises shall not unreasonably interfere in any material respect with Lessee’s operation of the Premises and complies with Lessee’s reasonable safety requirements.
8.2 Relocation of Tank Farm Assets. Lessor shall have the right to move Lessor’s assets located on the Refinery Site, so long as it is not reasonably foreseeable that such relocation will adversely affect Lessee’s business operations on the Premises and the operation of the Tank Farm Assets or Improvements. If such relocation of Lessor’s assets requires relocation of any of the Tank Farm Assets or Improvements, then such relocation of the Tank Farm Assets or Improvements shall be at Lessor’s sole cost and expense.
ARTICLE 9
TAXES, ASSESSMENTS
9.1 Lessee’s Obligation for Taxes on the Tank Farm Assets. Lessee shall pay and discharge, prior to delinquency all Taxes which are levied or assessed, and/or which become payable during the Term upon all or any part of the Tank Farm Assets and the Improvements or Lessee’s use or operation of the Tank Farm Assets and the Improvements. Upon written request by Lessor, Lessee shall provide Lessor evidence that Lessee has paid all Taxes within thirty (30) days thereafter. In the event Lessee fails to pay any such taxes before the final due date for those sums, Lessor may pay those sums to the taxing authority and any amounts paid by Lessor shall bear interest at the Interest Rate from the date paid by Lessor until repaid by Lessee.
9.2 Lessee’s Obligation for Taxes on the Premises. Lessor and Lessee shall use commercially reasonable efforts to cause the Premises to be separately assessed for purposes of Taxes as soon as reasonably practicable following the Commencement Date (to the extent allowed by Applicable Law). During the Term, Lessee shall pay all Taxes assessed directly against the Premises directly to the applicable taxing authority prior to delinquency and shall promptly thereafter provide Lessor with evidence of such payment. In the event Lessor and Lessee are unable to cause the Premises to be separately assessed as provided above, Lessee shall pay or reimburse Lessor, upon request,
for any such Taxes paid by Lessor to the applicable taxing authorities (the “Tax Reimbursement”). The Tax Reimbursement shall be equal to the total portion of such Taxes attributable to the Premises, as determined in the reasonable discretion of Lessor, provided however, if the Premises are not rendered as a separate tax parcel the Tax Reimbursement as to the Premises shall equal the product of the total portion of Taxes relating to the combined land area of the Refinery and the Premises multiplied by a fraction, the numerator of which is the actual number of square feet of the Premises and the denominator of which is the total number of square feet of the combined land area of the Refinery and the Premises at the time of the assessment. The certificate issued or given by the appropriate officials authorized or designated by applicable Law to issue or give the same or to receive payment of such Taxes shall be prima facie evidence of the existence, payment, nonpayment and amount of such Taxes. Lessee may contest the validity or amount of any such Taxes or the valuation of the Premises, at Lessee’s sole cost and expense, by appropriate proceedings, diligently conducted in good faith in accordance with applicable Law. If Lessee contests such items, then Lessor shall cooperate with Lessee in any such contesting of the validity or amount of any such Taxes or the valuation of the Premises. Taxes for the first and last years of the Term shall be prorated between the parties based on the portions of such years that are coincident with the applicable tax years and for which each applicable party is responsible
ARTICLE 10
ENVIRONMENTAL
10.1 Compliance. During the Term, Lessee shall comply with Environmental Laws applicable to its operations and business at or on the Premises which compliance shall include handling, storing, and disposing of all substances at, in or on the Premises in compliance with all applicable Environmental Laws and satisfying any and all environmental enforcement, permitting, notifications or reporting requirements directly arising out of Lessee’s use of the Premises, as required by Applicable Law. Without limiting the foregoing, Lessee shall not (a) use or knowingly permit the use by or under Lessee or any vendors, equipment lessors, invitees, licensees, carriers, contractors or subcontractors of any tier of any of the Lessee Indemnified Parties (collectively, the “Lessee Responsible Parties”) of the Premises for the on-site disposal of Hazardous Substances or any other activities in violation of Environmental Laws, or (b) Release, or knowingly allow the Release by or under Lessee or any Lessee Responsible Parties, of any Hazardous Substances onto the Premises or adjacent lands or waters in violation of or at concentrations that exceed those allowed by Environmental Laws.
10.2 Hazardous Substances. Lessee may not store any types or quantities of Hazardous Substances on the Premises except for petroleum products used, stored and handled in connection with the operation of the Tank Farm Assets in accordance with the Permitted Use and de minimis quantities of other Hazardous Substances, provided that such Hazardous Substances are used, stored, and otherwise handled in compliance with applicable Environmental Laws.
10.3 Notices.
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(a) | Lessee shall provide Lessor with material safety data sheets (“MSDS”) on all Hazardous Substances brought onto the Premises or stored in the Tanks. |
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(b) | Except with respect to those Hazardous Substances used, stored and otherwise handled by Lessee in conjunction with the operation of the Tank Farm Assets in accordance with the Permitted Use and used, stored, and otherwise handled in compliance with applicable Environmental Laws (Lessor hereby acknowledging that certain Hazardous Substances will be used, handled and stored in the ordinary course of operations), Lessee shall notify Lessor promptly upon the discovery by Lessee of any Hazardous Substances at, on or in the Premises, at concentrations exceeding those allowed by Environmental Laws or upon receipt of written communication from any governmental agency concerning the actual or alleged violation of an applicable Environmental Law in any way related to the Premises. Lessee shall provide notice to Lessor of any suit filed against Lessee or with respect to the Premises by any non-governmental third party alleging violations of applicable Environmental Law by Lessee (or anyone acting on behalf of Lessee) at the Premises. |
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(c) | Lessor shall promptly notify Lessee of any Release of Hazardous Substances at or associated with Lessor’s refinery process to the extent adversely affecting the Premises or that could present an unreasonable risk to Lessee’s employees. |
10.4 Lessee Indemnity. Except to the extent otherwise provided in the Omnibus Agreement or the Contribution Agreement (which shall govern and control in the event of any conflict with this Section 10.4), Lessee shall indemnify, defend and hold harmless the Lessor Indemnified Parties from and against all Losses suffered or incurred by any of the Lessor Indemnified Parties, directly or indirectly, including as a result of any claim by a third party, by reason of or arising out of:
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(a) | Lessee’s failure or alleged failure to comply with Environmental Laws or its obligations under Article 10 hereof; |
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(b) | any violation of Environmental Laws resulting or arising from Lessee’s occupancy of the Premises on or after the Commencement Date; or |
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(c) | any environmental remediation or corrective action that is required by Environmental Law, to the extent resulting or arising from a Release on, under, about or migrating to or from the Premises occurring on or after the Commencement Date: including (A) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation, risk-based closure activities, or other corrective action required or necessary under Environmental Laws, and (B) the cost and expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws. |
ARTICLE 11
INSURANCE
11.1 Lessee agrees to maintain during the Term hereof (i) all risk property insurance with respect to the Tank Farm Assets and all improvements, equipment and other personal property (for the full replacement value thereof) owned by Lessee or used by Lessee on the Premises; (ii) commercial
general liability insurance covering injury or death to persons or damage to property in an amount of not less than One Million and 00/100 Dollars ($1,000,000.00) per occurrence including, but not limited to, the following coverages: Contractual Liability, Products and Completed operations, Coverage for explosion, collapse and underground hazards, and sudden and accidental pollution liability; (iii) Automobile bodily injury and property damage liability insurance, including but not limited to insurance for pollution-related events, which extends to owned, if any, non-owned, and hired automobiles used by Lessee in connection with its operations, the limits of which liability of such insurance shall not be less than One Million and 00/100 Dollars ($1,000,000.00) combined single limit for bodily injury and property damage combined per accident; (iv) Workers’ Compensation Insurance for statutory limits and employer’s liability coverage in an amount not less than One Million and 00/100 Dollars ($1,000,000.00) or as required by applicable law; and (v) excess liability/umbrella coverage in excess of underlying coverages in a limit not less than Fifteen Million and No/100 Dollars ($15,000,000) any one occurrence and in the aggregate.
11.2 All such policies, except for Workers’ Compensation, shall name Lessor and its ultimate parent, Valero and its respective subsidiaries and Affiliates as additional insureds to the fullest extent permitted by applicable Law, such that the breadth of coverage afforded such additional insureds under the policies is at least as broad as that afforded the primary insured under such policies, and in all events such that the policies will respond to losses arising out of any act, omission, failure to act or negligence on the part of any such additional insured relating to the performance of Lessee’s obligations under this Lease, including losses associated with completed operations. All such policies shall also include a provision making them primary over (and not secondary to or contributory with) any insurance carried by Lessor or any other additional insured added pursuant to this Lease. With respect to all policies, Lessee shall waive, and does waive, all rights of subrogation as against the Lessor Indemnified Parties and the Lessee Indemnified Parties. There shall be no gap in the dollar value of the additional insureds’ coverage under the above policies from the policies’ deductible amounts up to the full limits of the policies. Contemporaneously with its execution of this Lease and on each yearly anniversary thereafter, Lessee shall furnish certificates of insurance evidencing that such insurance is in effect, and that the required waivers of subrogation and additional insured endorsements have been provided, and containing the unequivocal agreement on the part of the insurer to notify Lessor of any cancellation or material change in coverage at least 30 days before the effective date of such cancellation or change. The insurance coverage required hereunder shall operate independent and apart from any of Lessee’s indemnity obligations hereunder and shall in no way serve to waive or limit any such obligations.
ARTICLE 12
INDEMNITY
12.1 Indemnification by Lessee. Except in respect of Losses related to environmental matters, which are exclusively addressed in Article 10 hereof, and except to the extent otherwise provided in the Omnibus Agreement, Lessee agrees to indemnify, defend and hold harmless the Lessor Indemnified Parties from and against any and all Losses which may be imposed on, incurred by or asserted against the Lessor Indemnified Parties, in any way and to the extent relating to or arising out of (i) actions taken or omissions any of the Lessee Indemnified Parties or any Lessee Responsible Parties in connection with the ownership, use or operation of the Tank Farm Assets, the
Improvements and/or the Premises or any accident or occurrence in connection therewith, (ii) any failure to perform any covenant or agreement made or undertaken by Lessee in this Lease, (iii) the use and/or occupation of the Premises, by Lessee and any of the Lessee Responsible Parties and/or (iv) any injury or damage to any person or property, occurring in or about the Premises; provided, however, that Lessee shall not be required to indemnify the Lessor Indemnified Parties for any Losses under clauses (i), (ii), (iii) or (iv), to the extent resulting from or arising out of the sole or gross negligence or willful misconduct of any of the Lessor Indemnified Parties. IT IS INTENDED THAT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE FOREGOING INDEMNIFICATION SHALL OPERATE TO PROTECT THE LESSOR INDEMNIFIED PARTIES AGAINST EVEN THOSE LOSSES THAT ARE CAUSED OR ALLEGEDLY CAUSED, IN WHOLE OR IN PART, BY THE SOLE, PARTIAL, JOINT, JOINT AND SEVERAL, SOLIDARY, COMPARATIVE OR CONTRIBUTORY NEGLIGENCE (BUT NOT THE GROSS NEGLIGENCE) OF ANY OF THE LESSOR INDEMNIFIED PARTIES, OR FOR WHICH ANY OF THE LESSOR INDEMNIFIED PARTIES MAY BE LIABLE UNDER ANY SO-CALLED “STRICT LIABILITY” LAW OR ANY OTHER APPLICABLE LAW OR LEGAL THEORY IMPOSING LIABILITY ON A PERSON WITHOUT REGARD TO SUCH PERSON’S ACTUAL DEGREE OF FAULT OR NEGLIGENCE.
12.2 Indemnification by Lessor. Except to the extent otherwise provided in the Omnibus Agreement (which shall govern and control in the event of any conflict with this Section 12.2), and except with respect to Losses related to environmental matters, which are exclusively addressed in Article 10 hereof, Lessor agrees to indemnify, defend and hold harmless the Lessee Indemnified Parties from and against any Losses which may be imposed on, incurred by or asserted against the Lessee Indemnified Parties as a result of, caused by, arising out of, or in any way relating to any injury or damage to any person or property, occurring in or about the Premises as a direct result of the sole negligent act or omission or gross negligence or willful misconduct of any of the Lessor Indemnified Parties.
12.3 Survival. Notwithstanding anything contained in this Lease to the contrary, the provisions of this Article 12 shall survive the expiration or earlier termination of this Lease.
ARTICLE 13
DEFAULTS; REMEDIES; TERMINATION
13.1 Lessee Event of Default. Each of the following events shall be an event of default (“Event of Default”) by Lessee under this Lease:
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(a) | Lessee shall fail to make any payment of Rent or any other sums which are payable under this Lease when due, and such failure shall continue for a period of 10 days after receipt of written notice from Lessor of such failure, provided however, Lessor shall only be required to provide notice under this paragraph once during any calendar year; |
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(b) | Lessee shall fail to comply with any term, provision or covenant of this Lease (other than the preceding subparagraph), and shall not cure, or have commenced to cure and pursue completion of the cure with due diligence, such failure within 30 days |
after written notice thereof to Lessee; provided however, that if any such default is of a nature that cannot reasonably be cured within 30 days and cure of such default has been commenced in good faith within such 30 day period, the commencement of the cure of such default within such 30 day period and the diligent prosecution to completion of such cure within a reasonable amount of time, but in any event within 120 days after the date Lessor sends the above-described notice, shall be deemed to be a cure of such default for purposes of this paragraph; or
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(c) | Lessee or any guarantor or surety of Lessee’s obligations hereunder shall (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “proceeding for relief”); (C) become the subject of any proceeding for relief which is not dismissed within 60 days of its filing or entry; (D) abandon the Premises for a period exceeding 180 days; or (E) be dissolved or otherwise fail to maintain its legal existence. |
13.2 Lessor’s Remedies.
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(a) | Upon the occurrence of any default or Event of Default under this Lease which has not been cured as permitted pursuant to Section 13.1, Lessor shall have the right (without an election of remedies and without in any way limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such default or Event of Default) to do any one or more of the following: exercise all remedies available at law or equity including, without limitation, the bringing of an action for damages or an injunction on account of such default or Event of Default or for specific performance of this Lease, or: |
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(1) | With or without terminating this Lease, may take any reasonable action to remedy any failure of Lessee to comply with or perform this Lease, and may enter the Premises as necessary notwithstanding the foregoing notice requirement described in Section 13.1, in the event of an emergency, to provide Lessee with such notice as is reasonable thereof. Lessee shall reimburse Lessor on written demand for all costs so incurred, plus a reasonable charge to compensate Lessor for the additional administrative burden. |
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(2) | Terminate this Lease, in which event Lessee shall immediately surrender the Premises to Lessor, and if Lessee fails to do so, Lessor may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon (as applicable) and take possession of the Premises and expel or remove Lessee and any other person who may be occupying the Premises or any part thereof, by force if necessary (and Lessee hereby waives any claim for loss or damage by reason of such reentry, repossession, or removal), in |
which event Lessee shall pay to Lessor upon demand the sum of (i) all Rent and other amounts accrued hereunder to the date of termination, (ii) all amounts due under Section 13.2(b) below and (iii) damages in an amount equal to the total Rent that Lessee would have been required to pay for the remainder of the Term discounted to present value at a discount rate reasonably designated by Lessor diminished by any net sums thereafter received by Lessor through reletting the Premises during said period; or
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(3) | Terminate Lessee’s right of possession (but not this Lease), enter and repossess the Premises without further demand or notice of any kind to Lessee and without terminating this Lease, and remove all persons or property therefrom using such lawful force as may be necessary (and Lessee hereby waives any claim for loss or damage by reason of such reentry, repossession, or removal), in which event Lessee shall pay to Lessor upon demand (i) all Rent and other amounts accrued hereunder to the date of termination of possession, (ii) all amounts due from time to time under Section 13.2(b) below, and (iii) all Rent and other sums required hereunder to be paid by Lessee during the remainder of the Term as they become due, diminished by any net sums thereafter received by Lessor through reletting the Premises during said period. Reentry by Lessor in the Premises will not affect the obligations of Lessee hereunder for the unexpired Term. Lessor may bring action against Lessee to collect amounts due by Lessee on one or more occasions, without the necessity of Lessor’s waiting until expiration of the Term. Notwithstanding any such reletting without termination, Lessor may at any time thereafter elect in writing to terminate this Lease for such previous breach. |
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(b) | Upon any Event of Default (after the expiration of any applicable notice and cure period), Lessee shall also pay to Lessor all necessary and reasonable costs and expenses incurred by Lessor, including court costs and reasonable attorneys’ fees, in (i) retaking or otherwise obtaining possession of the Premises, (ii) removing and storing Lessee’s or any other occupant’s property, (iii) repairing, restoring, altering, remodeling or otherwise returning the Premises into its original condition (normal wear and tear and casualty excepted), (iv) reletting all or any part of the Premises, (v) paying or performing the underlying obligation which Lessee failed to pay or perform, and (vi) enforcing any of Lessor ‘s rights or remedies arising as a consequence of the Event of Default. |
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(c) | Any self-help option granted to Lessor hereunder shall not release Lessee from its obligation to perform the terms, provisions, covenants and conditions set forth in this Lease and required to be performed by Lessee hereunder. |
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(d) | The rights, remedies and recourses hereunder upon an Event of Default shall be cumulative and no right, remedy or recourse, whether or not exercised, shall be deemed to be in exclusion of any other right, remedy, or recourse. |
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(e) | As described in Section 4.2 hereof, if Lessee fails to pay any amount due hereunder, as and when due, the amount due and unpaid shall bear interest at the Interest Rate from the date due until paid. |
13.3 No Waiver. Exercise by Lessor of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Lessor, whether by agreement or by operation of law, it being understood that such surrender and/or termination can be effected only by the written agreement of Lessor and Lessee. Any law, usage, or custom to the contrary notwithstanding, Lessor shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Lessor at any time to enforce its rights under this Lease strictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same. Lessee and Lessor further agree that forbearance or waiver by Lessor to enforce its rights pursuant to this Lease or at law or in equity, shall not be a waiver of Lessor’s right to enforce one or more of its rights in connection with any subsequent default. A receipt by Lessor of rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Lessor of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Lessor. The terms “enter,” “re-enter,” “entry” or “re-entry,” as used in this Lease, are not restricted to their technical legal meanings. Any reletting of the Premises shall be on such terms and conditions as Lessor in its sole discretion may determine (including without limitation a term different than the remaining Lease Term, rental concessions, alterations and repair of the Premises, lease of less than the entire Premises to any tenant and leasing any or all other portions of the Project before reletting the Premises). Lessor shall not be liable, nor shall Lessee’s obligations hereunder be diminished because of, Lessor’s failure to relet the Premises or collect rent due in respect of such reletting. Notwithstanding the foregoing, Lessor agrees that it shall use commercially reasonable efforts to mitigate its damages as a result of Lessee’s default under this Lease.
13.4 Lessor Event of Default. If Lessor shall violate, neglect or fail to perform or observe any of the covenants, terms, conditions, agreements, or obligations contained in this Lease on its part to be performed or observed, which default continues for a period of more than thirty (30) days after its receipt of written notice from Lessee specifying such default (provided that if such default is of a nature that cannot reasonably be cured within thirty (30) days, then as long as Lessor commences to cure said default within such thirty (30) day period and thereafter diligently pursues such efforts to completion, but in no event longer than one hundred eighty (180) days after the date Lessee sends the default notice, then Lessor shall be deemed to have cured such default for purposes of this paragraph), Lessee may, at its election (in addition to any other rights or remedies provided Lessee at law, in equity or hereunder), upon further written notice to Lessor: (i) effect such a cure and incur any reasonable expense or cost necessary to perform such obligation of Lessor and bill Lessor for the reasonable cost thereof and Lessor shall pay all such reasonable costs and expenses incurred by Lessee within thirty (30) days after Lessor’s receipt of such notice, which notice shall include an itemization and documentation of the expenses and costs incurred by Lessee; or (ii) notwithstanding the foregoing notice requirement, in the event of an emergency, to provide Lessor with such notice as is reasonable thereof and to effect a cure and incur such expenses as necessary to effect such cure in order to protect and prevent the loss of life and/or risk of loss, life
or property and Lessor shall pay all such reasonable costs and expenses within thirty (30) days after Lessor’s receipt of notice thereof and written itemization and documentation for such expenses; (iii) initiate an action for damages, specific performance or an injunction; (iv) terminate this Lease by the giving of written notice to Lessor; or (v) pursue any remedies available to Lessee at law or in equity.
ARTICLE 14
EMINENT DOMAIN; CASUALTY
14.1 Eminent Domain. If the whole or any substantial part, in Lessor’s reasonable discretion of the Premises should be taken for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a “Taking”), this Lease shall terminate and the Rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of the Premises shall occur. If there is a Taking of less than a substantial part of the Premises, this Lease shall not terminate, but the Rent payable hereunder during the unexpired portion of this Lease shall be reduced to such extent as may be fair and reasonable under all of the circumstances, including the proportion to the reduction in utility of the Premises caused by such Taking. In the event of any such Taking, Lessor and Lessee shall each be entitled to receive and retain such separate awards and/or portion of lump sum awards as may be allocated to their respective interests in any condemnation proceedings. Lessor shall be entitled to any award and all damages payable as a result of any condemnation or taking of the fee of the Premises. Lessee shall have the right to claim and recover from the condemning authority, but not from Lessor, such compensation as may be separately awarded or recoverable by Lessee in Lessee’s own right on account of any and all damage to the Tank Farm Assets and/or Lessee’s business by reason of the condemnation, including loss of value of any unexpired portion of the Term, and for or on account of any cost or loss to which Lessee might be put in removing Lessee’s personal property, fixtures, leasehold improvements and equipment, including, without limitation, the Tank Farm Assets, from the Premises.
14.2 Casualty.
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(a) | Lessee to Repair Improvements. Subject to Section 14.2(b) below, if during the Term all or any portion of the Tank Farm Assets shall be damaged or destroyed by fire or other casualty, Lessee shall repair or restore the Tank Farm Assets. The work of repair or restoration, which shall be completed with due diligence, shall be commenced within a reasonable time after the damage or loss occurs. Rent and Monthly Payment shall not abate while the Tank Farm Assets are being repaired or restored. |
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(b) | Damage at the End of Lease. If, during the last three (3) years of the Term, any portion of the Tank Farm Assets shall be damaged by fire or other casualty in excess of 50% of the replacement cost thereof , then Lessee shall have the option, to be exercised within sixty (60) days after such event, to either (i) repair or restore the Tank Farm Assets as hereinabove provided, or (ii) terminate this Lease by notice to Lessor, which termination shall be deemed to be effective as of the date of the casualty. If Lessee terminates this Lease pursuant to this Section 14.2(b), Lessee |
shall surrender possession of the Premises to Lessor and will, at the request of Lessor from the insurance proceeds otherwise payable to Lessor, cause the Tank Farm Assets to be razed and the Premises to be leveled, cleaned, and otherwise put in good order. No termination of this Lease pursuant to this Section 14.2(b) will be effective until Lessee pays and performs all of Lessee’s duties and obligations in connection with the termination.
ARTICLE 15
SURRENDER OF THE PREMISES
15.1 Surrender of Premises. Lessee shall at the expiration of the Term, or at any earlier termination of this Lease, surrender the Premises to Lessor in as good condition as it received the Premises, ordinary wear and tear and damaged caused by any Lessor Indemnified Parties excepted, and subject to the provisions of Article 14.
15.2 Removal of Improvements. Except as otherwise expressly agreed to by Lessor and Lessee, Lessee shall have the right to remove all Tank Farm Assets and other improvements, fixtures, equipment, materials, supplies and personal property installed by Lessee from the Premises upon the termination or expiration of this Lease, but in no event later than the date that is 120 days following the expiration or termination of this Lease (the “Removal Date”) and Lessor shall provide Lessee with access to the Premises at reasonable times until expiration of the Removal Date for the purpose of removing such items. Lessee shall provide Lessor with written notice of its election to remove the Tank Farm Assets and other improvements, fixtures, equipment, materials, supplies and personal property from the Premises at least 60 days prior to the expiration of the Lease. If Lessee elects to remove the Tank Farm Assets and Improvements from the Premises after such removal Lessee shall restore any damage to the Premises and clean the Premises so as to eliminate therefrom any accumulation (other than any de minimis and non-hazardous accumulation) of foreign substances, materials, or debris, in addition to any Environmental Cleanup that may be required under Article 10. Lessee shall pay Lessor pro rata Rent (based on the amount of Rent applicable during the last month prior to the termination or expiration) through the date of Lessee’s complete removal of all such items. During the period of such removal and clean-up, all terms and conditions of this Lease, including, the indemnity and insurance provisions shall continue in full force and effect. If Lessee elects not to remove all of the Tank Farm Assets and Improvements from the Premises on or before the Removal Date, and provided that such facilities are in good working condition at the expiration of the Term (ordinary wear and tear excepted) then, such Tank Farm Assets and Improvements shall be deemed permanently abandoned to Lessor’s sole ownership, and Lessor may remove and dispose of such facilities in any manner which Lessor may deem appropriate, without any liability whatsoever to Lessee. If Lessee elects not to remove all of the Tank Farm Assets and Improvements from the Premises on or before the Removal Date and such facilities are not in good working condition at the expiration of the term (ordinary wear and tear excepted), or Lessee fails to so remove any or all of the Tank Farm Assets and Improvements from the Premises before the Removal Date, then, in addition to all rights and remedies available at law or in equity, without any prior notice, Lessor may (but shall be under no obligation), at Lessor’s option, deem such Tank Farm Assets and Improvements to be permanently abandoned to Lessor’s sole ownership, and Lessor may remove and dispose of such facilities in any manner which Lessor may deem
appropriate, without any liability whatsoever to Lessee, and Lessee shall reimburse Lessor for all costs of such removal and disposal upon demand from Lessor. If requested by Lessor, Lessee shall execute any and all documents necessary to evidence that title to the Tank Farm Assets and Improvements that Lessee does not remove by the Removal Date is in Lessor and to extinguish and remove any cloud or potential cloud on the title to the Premises and/or such facilities created by Lessee.
15.3 Holding Over. If Lessee retains possession of the Premises after the termination of the Term, unless otherwise agreed in writing or for removal of its facilities during the Removal Period, such possession shall be subject to immediate termination by Lessor at any time, and all of the other terms and provisions of this Lease (excluding any expansion or renewal option or other similar right or option) shall be applicable during such holdover period, except that Lessee shall pay Lessor from time to time, upon demand, as Rent for the holdover period, an amount equal to 150% of the Rent in effect on the termination date computed on a monthly basis for each month or part thereof during such holding over. All other payments shall continue under the terms of this Lease. In addition, Lessee shall be liable for all damages incurred by Lessor as a result of such holding over. No holding over by Lessee, whether with or without consent of Lessor, shall operate to extend this Lease except as otherwise expressly provided, and this Section 15.3 shall not be construed as consent for Lessee to retain possession of the Premises.
ARTICLE 16
LIMITATION OF LIABILITY
16.1 Release of Certain Liability. Without limiting any obligations of Lessor or its Affiliates, under the Omnibus Agreement or the Contribution Agreement, except in the event of sole or gross negligence or willful misconduct on the part of Lessor or its employees or agents, Lessor shall not be liable to Lessee or any of the Lessee Responsible Parties or any other person claiming by, through or under Lessee or entering upon the Premises under or with the express or implied invitation of Lessee for any personal injury, including death, to persons or damage to property due to (i) the condition or design or any defect in the Premises, (ii) any portion of the Premises becoming out of repair or arising from the leaking of gas, water, sewer, steam, pipes, electricity or otherwise. Lessee, with respect to itself and the Lessee Responsible Parties or any other person entering upon the Premises under or with the express or implied invitation of Lessee hereby expressly assumes all risks of personal injury, including death, to persons or damage to property, either proximate or remote, by reason of the present or future condition of the Premises and expressly release Lessor of and from any and all liability for such damage or loss. This assumption of responsibility and liability by Lessee includes without limitation all liability assumable by a tenant under La. Rev. Stat. Ann. §9:3221.
16.2 Exculpation. Any liability of Lessor under the terms of this Lease or in connection with the Premises shall be limited to the interest of Lessor in the Premises and Lessor shall not be personally liable for any deficiency. None of Lessor’s officers, managers, partners, members, employees, agents or representatives will ever have any personal liability to Lessee under or in connection with this Lease, and Lessee hereby waives and releases all claims, causes of action, or other rights of recovery it may ever have against such parties under or in connection with this Lease.
NOTWITHSTANDING ANY PROVISION OF THIS LEASE TO THE CONTRARY, IN NO EVENT SHALL EITHER PARTY HERETO BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, PUNITIVE, EXEMPLARY, CONSEQUENTIAL, INCIDENTAL OR INDIRECT LOSSES OR DAMAGES (IN TORT, CONTRACT OR OTHERWISE) UNDER OR IN RESPECT OF THIS LEASE, EXCEPT TO THE EXTENT ANY SUCH DAMAGES ARE OWED TO A THIRD PARTY AND THE OBLIGATED PARTY IS ENTITLED TO INDEMNIFICATION THEREFOR BY THE OTHER PARTY UNDER THE EXPRESS TERMS OF THIS LEASE.
ARTICLE 17
ASSIGNMENT AND SUBLETTING
17.1 Assignment by Lessor. Lessor may assign or transfer its rights, interests, and obligations under this Lease and in any part of the Premises to any third party (including any Person who acquires the Refinery or any interest therein), provided that an such third party expressly assumes all obligations of Lessor under the Lease for the period on and after the effective date of the assignment and Lessor shall remain liable for the performance and obligations of lessor/landlord hereunder for the period prior to the effective date of such assignment. Upon any such transfer Lessee will attorn to the transferee lessor and look solely to the transferee lessor to perform any obligations of Lessor accruing on or after the effective date of the transfer.
17.2 Assignment and Sublease by Lessee. Lessee shall not assign, pledge or encumber this Lease, or sublet the whole or any part of the Premises without the prior written consent of Lessor. This restriction against assigning or subletting shall be construed to include a restriction against any assignment or subletting by operation of law. For purposes of this paragraph, a transfer of the ownership interests controlling Lessee shall be deemed an assignment of this Lease. In the event any assignment or subletting of this Lease is made with or without Lessor’s consent, Lessee shall nevertheless remain liable for the performance of all of the terms, conditions and covenants of this Lease. Any assignment or subletting without the prior written consent of Lessor shall be void and constitute a breach of the Lease and shall, at the option of the Lessor, terminate the Lease. No consent to any assignment, voluntarily or by operation of law, of this Lease or any subletting of said Premises shall be deemed to be a consent to any subsequent assignment or subletting.
17.3 Permitted Transfers. Notwithstanding the prohibition on assignment in Section 17.2 hereof, Lessee may assign all of its interest in this Lease or sublet all of the Premises only by written instrument evidencing such assignment or sublease to any Affiliate of Lessee or any Person who purchases or acquires all or substantially all of the Tank Farm Assets of Lessee, or any successor to Lessee by merger, consolidation or otherwise (each a “Permitted Transferee”), provided that (i) Lessee shall promptly notify Lessor of any such Permitted Transfer, (ii) Lessee shall remain liable for the performance of all of the obligations of Lessee hereunder, and (iii) if Lessee no longer exists because of a merger, consolidation, or acquisition, the surviving or acquiring entity shall expressly assume in writing the obligations of Lessee hereunder. Additionally, the Permitted Transferee shall assume all of Lessee’s obligations and comply with all of the terms and conditions of this Lease. Promptly after the effective date of any permitted transfer hereunder, Lessee agrees to furnish Lessor with copies of the instrument effecting any of the foregoing transfers and documentation establishing Lessee’s satisfaction of the requirements set forth above applicable to
any such assignment or sublet. The occurrence of a permitted transfer hereunder shall not waive Lessor’s rights as to any subsequent assignment, subletting or other transfer of this Lease or any interest therein. Any subsequent assignment, subletting or other transfer of this Lease or any interest therein by a Permitted Transferee shall be subject to Lessor’s prior written consent (as hereinabove provided).
ARTICLE 18
QUIET ENJOYMENT
18.1 Lessor covenants and warrants that Lessee, upon paying the Rent reserved hereunder and observing and performing all of the covenants, conditions and provisions on Lessee’s part to be observed and performed hereunder, may peaceably and quietly have, hold, occupy, use and enjoy, and shall have the full, exclusive and unrestricted use and enjoyment of, all the Premises during the Term for the Permitted Use and subject to the terms and conditions of this Lease, and Lessor agrees to warrant and forever defend title to the Premises (other than the Permitted Exceptions) against the claims of any and all persons whomsoever lawfully claiming or to claim the same or any part thereof. Lessor’s undertaking in the immediately preceding sentence is made solely for the benefit of Lessee and not for the benefit of any title insurer, and any such title insurer shall not be subrogated to the rights of Lessee hereunder.
ARTICLE 19
GENERAL PROVISIONS
19.1 Estoppel Certificates. Lessee and Lessor shall, at any time and from time to time upon not less than 20 days prior written request from the other party, execute, acknowledge and deliver to the other a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which Rent and other charges are paid, and (ii) acknowledging that there are not, to the executing party’s knowledge, any uncured defaults on the part of the other party hereunder (or specifying such defaults, if any are claimed). Any such statement may be conclusively relied upon by any prospective purchaser of the Premises or the leasehold. Nothing in this Section 19.1 shall be construed to waive the conditions elsewhere contained in this Lease applicable to assignment or subletting of the Premises by Lessee.
19.2 Leasehold Mortgage. Lessee shall at all times and from time to time have the right to encumber by mortgage, deed of trust, or security agreement (the “Mortgage”) Lessee’s leasehold estate in the Premises, together with Lessee’s rights and interests in all buildings, fixtures, equipment, and improvements situated thereon, and all rents, issues, profits, revenues, and other income to be derived by Lessee therefrom, to secure such loans from time to time made by any Person to Lessee; provided, however, that such Mortgage shall in no event encumber Lessor’s fee title or leasehold interest (as applicable) in the Premises, Lessor’s interest under this Lease, or the fee title, leasehold interest or other rights of interest of Lessor under the Gore Lease.
19.3 Subordination, Non-Disturbance and Attornment. Upon request of Lessor or the holder of any Mortgage covering Lessor’s interest in the Premises (a “Mortgagor”), Lessee will enter into a subordination, non-disturbance and attornment agreement in a customary form reasonably
acceptable to the Mortgagor, Lessor and Lessee, evidencing that Lessee’s rights under this Lease are subordinate to the lien of such Mortgage and to all advances made or thereafter to be made upon the security thereof.
19.4 Conflict Between this Lease and the Omnibus Agreement. Notwithstanding any provision to the contrary contained herein, for so long as the Omnibus Agreement remains in full force and effect, to the extent of any conflict between the terms of this Lease and the terms of the Omnibus Agreement, the terms of the Omnibus Agreement shall govern and control. Further, notwithstanding any waiver or agreement of either of the parties hereto contained in this Lease, no such waiver or agreement shall affect or limit the rights or remedies of such party under the Omnibus Agreement, or the obligations and liabilities of the other parties to the Omnibus Agreement.
19.5 Notices. All notices, requests, demands and other communications required or permitted to be given under this Lease shall be deemed to have been duly given if in writing and delivered personally or sent via first class, postage prepaid, registered or certified mail (return receipt requested), or by overnight delivery service or facsimile transmission addressed as follows:
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If to Lessor: |
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Valero Refining-New Orleans, L.L.C. |
One Valero Way |
San Antonio, Texas 78249 |
Attention: General Counsel |
Facsimile: (210) 345-3214 |
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If to Lessee: |
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Valero Partners Louisiana, LLC |
One Valero Way |
San Antonio, Texas 78249 |
Attention: General Counsel |
Facsimile: (210) 345-3214 |
Any party may change the address to which the communications are to be directed to it by giving notice to the other in the manner provided in this Section 19.5. Notice by mail shall be deemed to have been given and received on the third calendar day after posting. Notice by overnight delivery service, facsimile transmission or personal delivery shall be deemed given on the date of actual delivery.
19.6 Mutual Cooperation; Further Assurances. Upon request by either party from time to time during the Term, each party hereto agrees to execute and deliver all such other and additional instruments, notices and other documents and do all such other acts and things as may be necessary to carry out the purposes of this Lease and to more fully assure the parties’ rights and interests provided for hereunder. Lessor and Lessee each agree to cooperate with the other on all matters relating to required permits and regulatory compliance by either Lessee or Lessor in respect of the
Premises so as to ensure continued full operation of the Premises by Lessee pursuant to the terms of this Lease.
19.7 Recording. Upon the request of either Party, Lessor and Lessee shall execute, acknowledge, deliver and record a “short form” memorandum of this Lease in a form mutually acceptable to the Parties and sufficient to provide public notice of the existence of this Lease. Promptly upon request by Lessor at any time following the expiration or earlier termination of this Lease, however such termination may be brought about, Lessee shall execute and deliver to Lessor an instrument, in recordable form, evidencing the termination of this Lease and the release by Lessee of all of Lessee’s right, title and interest in and to the Premises existing under and by virtue of this Lease.
19.8 Force Majeure. In the event of Lessor or Lessee being rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Lease, other than to make payments due hereunder, it is agreed that on such party’s giving notice and full particulars of such Force Majeure to the other party as soon as practicable after the occurrence of the cause relied on, then the obligations of the parties, so far as they are affected by such Force Majeure, shall be suspended during the continuance of any inability so caused but for no longer period, and such cause shall, as far as possible, be remedied with all reasonable dispatch. The term “Force Majeure” as employed herein means any circumstances beyond the reasonable control of the contracting parties experiencing such inability to perform, whether of the kind enumerated herein or not, including but not limited to, acts of God, strikes, lockouts, or other industrial disturbances, curtailments or shutdowns, acts of the public enemy, sabotage, wars (whether or not an official declaration is made thereof), blockades, insurrection, riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, tornadoes, storms, floods, washouts, freezeoffs, civil disturbances, explosions, breakage, accidents to machinery, equipment or lines of pipe, repairs, maintenance, improvements, replacements or alterations to plants or lines of pipe, inability of either party to obtain necessary machinery, materials or permits, or the act of any Governmental Authority. It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirements that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing party when such course is inadvisable in the discretion of the party having the difficulty.
19.9 Entire Agreement; Amendment. Subject to Section 19.4, this Lease, including the exhibits attached hereto, constitutes the entire agreement and understanding between the parties hereto with respect to the lease of the Premises, and supersedes all prior and contemporaneous agreements and undertakings of the parties, in connection herewith. This Lease may be modified in writing only, signed by the parties to interest at the time of modification.
19.10 Binding Effect. Except as herein otherwise expressly provided, this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors, sublessees and assigns. Nothing in this Section 19.10 shall be construed to waive the conditions elsewhere contained in this Lease applicable to assignment or subletting of the Premises by Lessee.
19.11 Waivers. No waiver or waivers of any breach or default or any breaches or defaults by either party of any term, condition or liability of or performance by the other party of any duty or obligation hereunder shall be deemed or construed to be a waiver or waivers of subsequent breaches or defaults
of any kind, character or description under any circumstance. The acceptance of Rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof, other than the failure of Lessee to pay the particular Rent so accepted, regardless of Lessor’s knowledge of such preceding breach at the time of acceptance of such Rent.
19.12 No Partnership. The relationship between Lessor and Lessee at all times shall remain solely that of landlord and tenant and shall not be deemed a partnership or joint venture.
19.13 Choice of law. The provisions of this Lease shall be governed by and construed in accordance with the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might require the application of laws of another jurisdiction.
19.14 Waiver of Jury Trial. LESSEE AND LESSOR WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LESSOR AND LESSEE ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
19.15 Severability. The invalidity or unenforceability of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity or enforceability of any other provision hereof.
19.16 Survival. All obligations of Lessor and Lessee that shall have accrued under this Lease prior to the expiration or earlier termination hereof shall survive such expiration or termination to the extent the same remain unsatisfied as of the expiration or earlier termination of this Lease. Lessor and Lessee further expressly agree that all provisions of this Lease which contemplate performance after the expiration or earlier termination hereof shall survive such expiration or earlier termination of this Lease.
19.17 Time of Essence. Time is of the essence in the performance of all obligations falling due hereunder.
19.18 Captions. The headings to Articles, Sections and other subdivisions of this Lease are inserted for convenience of reference only and will not affect the meaning or interpretation of this Lease. The language in all parts of this Lease shall in all cases be construed as a whole according to its fair meaning and not strictly for nor against either Lessee or Lessor.
19.19 Schedules and Exhibits. All schedules and exhibits hereto which are referred to herein are hereby made a part hereof and incorporated herein by such reference.
19.20 Counterparts. This Lease may be executed in multiple originals and when executed, all such counterparts shall constitute one document.
[Remainder of Page Intentionally Left Blank]
The parties hereto have executed this Lease to be effective as of the Effective Date.
LESSOR:
VALERO REFINING-NEW ORLEANS, L.L.C.
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By: | /s/ R. Lane Riggs |
Name: | R. Lane Riggs |
Title: | Executive Vice President |
LESSEE:
VALERO PARTNERS LOUISIANA, LLC
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By: | /s/ Richard F. Lashway |
Name: | Richard F. Lashway |
Title: | President and Chief Operating Officer |
Signature Page to Lease and Access Agreement (St. Charles Terminal)
EXHIBIT A
TANKS
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St. Charles Tank Ref # | Shell Capacity (bbls) | Diameter | Year Built |
150-22 | 150,000 | 165 | 1995 |
150-23 | 150,000 | 165 | 1996 |
325-5 | 325,000 | 220 | 2009 |
325-6 | 325,000 | 220 | 2009 |
225-1 | 225,000 | 180 | 2014 |
225-2 | 225,000 | 180 | 2014 |
325-1 | 325,000 | 270 | 1981 |
325-2 | 325,000 | 270 | 1981 |
325-3 | 325,000 | 270 | 1981 |
325-4 | 325,000 | 270 | 2005 |
150-1 | 150,000 | 164 | 2013 |
150-2 | 150,000 | 180 | 1957 |
150-27 | 150,000 | 165 | 1996 |
45-1 | 50,000 | 90 | 1996 |
45-2 | 50,000 | 90 | 1984 |
150-26 | 150,000 | 165 | 1996 |
150-5 | 150,000 | 183 | 1973 |
37-1 | 37,000 | 94 | 1975 |
78 | 15,000 | 60 | 1950 |
80-1 | 80,000 | 120 | 1951 |
55-1 | 55,000 | 100 | 1949 |
55-8 | 55,000 | 115 | 1978 |
150-6 | 150,000 | 183 | 2013 |
150-17 | 150,000 | 183 | 1980 |
55-5 | 55,000 | 100 | 1956 |
55-6 | 55,000 | 100 | 1956 |
425-2 | 425,000 | 280 | 1981 |
130-1 | 130,000 | 150 | 1954 |
130-3 | 130,000 | 150 | 1954 |
150-18 | 150,000 | 183 | 1979 |
150-19 | 150,000 | 183 | 1979 |
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325-7 | 325,000 | 220 | 2012 |
625-2 | 625,000 | 306 | 2014 |
130-2 | 130,000 | 150 | 1954 |
130-5 | 130,000 | 150 | 1954 |
425-3 | 425,000 | 280 | 1981 |
425-4 | 425,000 | 270 | 1981 |
150-4 | 150,000 | 183 | 1973 |
150-20 | 150,000 | 183 | 1980 |
80-3 | 80,000 | 134 | 2007 |
80-4 | 80,000 | 134 | 1954 |
67-1 | 67,000 | 110 | NA |
180-9 | 180,000 | 160 | 2008 |
100-3 | 100,000 | 135 | 2014 |
150-7 | 150,000 | 183 | 1973 |
150-8 | 150,000 | 183 | 1973 |
130-8 | 130,000 | 170 | 1972 |
425-1 | 425,000 | 280 | 1981 |
625-1 | 625,000 | 320 | 1981 |
130-6 | 130,000 | 150 | 1995 |
150-24 | 150,000 | 165 | 1995 |
77 | 15,000 | 56 | 1940 |
81 | 25,000 | 75 | 1946 |
150-25 | 150,000 | 165 | 1995 |
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TOTAL | 10,004,000 | | |
EXHIBIT B
DESCRIPTION OF THE REFINERY SITE
PARCEL ONE:
Being a certain portion of ground, situated in Prospect Plantation, in the Parish of St. Charles, State of Louisiana, on the left descending bank of the Mississippi River, in Section 7, T 12 S, R 8 E, Southeastern District of Louisiana, East of the Mississippi River, furthermore being identified as “Section 2”, as described in an “Act of Sale” by Orion Refining Corporation to Valero Refining-New Orleans, L.L.C., dated July 3, 2003 and recorded in COB 620, folio 791 of the records of the Clerk of Court, Parish of St. Charles, State of Louisiana.
The portion of the Premises on Parcel One as depicted on Exhibit C includes the following
Tanks:
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St. Charles Tank # | Shell Capacity (bbls) | Diameter | Year Built |
325-1 | 325,000 | 270 | 1981 |
325-2 | 325,000 | 270 | 1981 |
325-3 | 325,000 | 270 | 1981 |
325-4 | 325,000 | 270 | 2005 |
PARCEL TWO:
Being a leasehold interest in a piece or portion of ground, situated in the State of Louisiana, in the Parish of St. Charles, in Good Hope, in Section 7, Township 12 South, Range 8 East, on the left descending bank of the Mississippi River, furthermore being identified as “The Gore Lease”, as described in an “Act of Sale” by Orion Refining Corporation to Valero Refining-New Orleans, L.L.C., dated July 3, 2003 and recorded in COB 620, folio 791 of the records of the Clerk of Court, Parish of St. Charles, State of Louisiana.
The portion of the Premises on Parcel Two as depicted on Exhibit C includes the following
Tanks:
|
| | | |
St. Charles Tank # | Shell Capacity (bbls) | Diameter | Year Built |
425-2 | 425,000 | 280 | 1981 |
425-3 | 425,000 | 280 | 1981 |
425-4 | 425,000 | 270 | 1981 |
425-1 | 425,000 | 280 | 1981 |
625-1 | 625,000 | 320 | 1981 |
PARCEL THREE:
Being a certain portion of ground, situated in Prospect Plantation, in the Parish of St. Charles, State of Louisiana, on the left descending bank of the Mississippi River, in Section 7, T 12 S, R 8 E, Southeastern District of Louisiana, East of the Mississippi River, furthermore being identified as “Section 3”, as described in an “Act of Sale” by Orion Refining Corporation to Valero Refining-New Orleans, L.L.C., dated July 3, 2003 and recorded in COB 620, folio 791 of the records of the Clerk of Court, Parish of St. Charles, State of Louisiana.
The portion of the Premises on Parcel Three as depicted on Exhibit C includes the following
Tanks:
|
| | | |
St. Charles Tank # | Shell Capacity (bbls) | Diameter | Year Built |
325-5 | 325,000 | 220 | 2009 |
325-6 | 325,000 | 220 | 2009 |
225-1 | 225,000 | 180 | 2014 |
225-2 | 225,000 | 180 | 2014 |
150-1 | 150,000 | 164 | 2013 |
150-2 | 150,000 | 180 | 1957 |
150-5 | 150,000 | 183 | 1973 |
150-6 | 150,000 | 183 | 2013 |
150-17 | 150,000 | 183 | 1980 |
55-5 | 55,000 | 100 | 1956 |
55-6 | 55,000 | 100 | 1956 |
130-1 | 130,000 | 150 | 1954 |
130-3 | 130,000 | 150 | 1954 |
150-18 | 150,000 | 183 | 1979 |
150-19 | 150,000 | 183 | 1979 |
325-7 | 325,000 | 220 | 2012 |
625-2 | 625,000 | 306 | 2014 |
130-2 | 130,000 | 150 | 1954 |
130-5 | 130,000 | 150 | 1954 |
150-4 | 150,000 | 183 | 1973 |
150-20 | 150,000 | 183 | 1980 |
80-3 | 80,000 | 134 | 2007 |
80-4 | 80,000 | 134 | 1954 |
180-9 | 180,000 | 160 | 2008 |
100-3 | 100,000 | 135 | 2014 |
150-7 | 150,000 | 183 | 1973 |
150-8 | 150,000 | 183 | 1973 |
|
| | | |
130-8 | 130,000 | 170 | 1972 |
130-6 | 130,000 | 150 | 1995 |
PARCEL FOUR:
Being a certain portion of ground, situated in the State of Louisiana, Parish of St. Charles, Section 7, Township 12 South – Range 8 East, in that part known as Good Hope Realty Subdivision, designated as Parcel B1-A, being a part of the resubdivision of Parcel B-1 and also being all that certain called 12.529 acre tract of land, identified as “Parcel B1-A, Good Hope Subdivision”, as described in an “Act of Sale” by Orion Refining Corporation to Valero Refining-New Orleans, L.L.C., dated July 3, 2003 and recorded in COB 620, folio 791 of the records of the Clerk of Court, Parish of St. Charles, State of Louisiana.
The portion of the Premises on Parcel Four as depicted on Exhibit C includes the following
Tanks:
|
| | | |
St. Charles Tank # | Shell Capacity (bbls) | Diameter | Year Built |
150-22 | 150,000 | 165 | 1995 |
150-23 | 150,000 | 165 | 1996 |
150-27 | 150,000 | 165 | 1996 |
45-1 | 50,000 | 90 | 1996 |
45-2 | 50,000 | 90 | 1984 |
150-26 | 150,000 | 165 | 1996 |
67-1 | 67,000 | 110 | 0 |
150-24 | 150,000 | 165 | 1995 |
150-25 | 150,000 | 165 | 1995 |
PARCEL FIVE:
Being a certain portion of ground, situated in Good Hope Plantation, Section 6, Township 12 South, Range 8 East, St. Charles Parish, State of Louisiana, furthermore being identified as “Parcel 1”, as described in an “Act of Sale” by Orion Refining Corporation to Valero Refining-New Orleans, L.L.C., dated July 3, 2003 and recorded in COB 620, folio 791 of the records of the Clerk of Court, Parish of St. Charles, State of Louisiana.
The portion of the Premises on Parcel Five as depicted on Exhibit C includes the following
Tanks:
|
| | | |
St. Charles Tank # | Shell Capacity (bbls) | Diameter | Year Built |
37-1 | 37,000 | 94 | 1975 |
55-1 | 55,000 | 100 | 1949 |
55-8 | 55,000 | 115 | 1978 |
PARCEL SIX:
Being a certain portion of ground, situated in the State of Louisiana, Parish of St. Charles, Section 6 & 7, T 12 S – R 8 E in that part known as Prospect Subdivision, designated as Lot B2-C1 and also being all that certain called 1.852 acre tract of land, identified as “Lot B2-C1, Prospect Subdivision”, as described in an “Act of Sale” by Orion Refining Corporation to Valero Refining-New Orleans, L.L.C., dated July 3, 2003 and recorded in COB 620, folio 791 of the records of the Clerk of Court, Parish of St. Charles, State of Louisiana.
The portion of the Premises on Parcel Six as depicted on Exhibit C includes the following
Tanks:
|
| | | |
St. Charles Tank # | Shell Capacity (bbls) | Diameter | Year Built |
78 | 15,000 | 60 | 1950 |
80-1 | 80,000 | 120 | 1951 |
77 | 15,000 | 56 | 1940 |
81 | 25,000 | 75 | 1946 |
EXHIBIT C
DEPICTION OF THE PREMISES
EXHIBIT D
LESSOR SERVICES
Lessor will supply the Lessor Services listed on this Exhibit D to Lessee with respect to Lessee’s ownership, operation and maintenance of the Tank Farm Assets, together with such additional services and/or Refinery Facilities as the Parties may agree from time to time.
| |
• | Utilities – All utilities (including gas, water, steam, industrial gases, electricity and telephone) will be furnished by Lessor for Lessee’s operation of the Tank Farm Assets consistent with past practice. If Lessee’s electrical load or use of other utilities at the Tank Farm Assets increases above historical rates, Lessor will only be required to supply the increased load to the extent Lessor’s existing utility infrastructure is capable of doing so without detriment to the safe and reliable operation of the Refinery. Lessee shall reimburse Lessor for all utilities consumed at the Tank Farm Assets, calculated in a manner mutually reasonably agreed to by the parties, at the same rates that Lessor is required to pay its provider, plus any taxes and other applicable fees (but without any markup by Lessor). If Lessor’s actual cost of providing electricity materially changes or Lessee’s use of electricity materially changes, Lessor or Lessee may request an adjustment to the Rent by an appropriate amount, and the other party will not unreasonably refuse to grant such adjustment. Lessee agrees to reasonably cooperate with Lessor, if requested by Lessor or required by Applicable Law or the rules of the utility provider, to cause all electricity used at the Tank Farm Assets to be separately metered or sub-metered at Lessee’s sole cost and expense. |
| |
• | Wastewater Processing – To the extent allowed by Applicable Law, all waste water treatment will be supplied to Lessee by Lessor from existing Refinery Site sources. This treatment pertains to dock and sump materials generated during the normal course of operations and includes sump generated waste materials. The Parties acknowledge that Governmental Authorities may impose pre-treatment standards on any waste waters Lessee releases to Lessor for processing. If such pre-treatment standards are imposed, Lessor shall be responsible for ensuring that the relevant Lessee personnel are adequately trained to comply with such standards and for submitting any related and required reports with the applicable Governmental Authority. Lessee will supply field data to Lessor to fulfill any such reposting requirements. |
| |
• | Fire and Emergency Protection – Lessor will provide response support in the event of an emergency. Lessor will maintain the existing tank farm fire water and emergency response system and any necessary improvements will be made by Lessor. As further provided below, Lessor does not make, and hereby expressly disclaims, any and all representations or warranties (whether express, implied or statutory) as to the delivery pressure or volume of firewater that may be available to the Tank Farm Assets, or as to any other aspects of any firewater services provided hereunder, and Lessee acknowledges that there may be times when the firewater service to the Tank Farm Assets is interrupted or unavailable. Lessee agrees that Lessor shall have access to the Tank Farm Assets to operate, repair, inspect and maintain portions of the Refinery firewater system located therein. |
| |
• | Groundwater Monitoring. Lessor currently operates any existing groundwater monitoring and remedial systems and will retain the obligation to maintain the existing systems until such time as the applicable Governmental Authority grants closure or Lessee and Lessor mutually agree that further operation is not necessary. As set forth in the Omnibus Agreement, in the event that Lessee has a Release following the Effective Date of this Lease and the Release has a material adverse impact on the existing remedial system or triggers new remedial obligations, Lessee shall reimburse Lessor for the additional costs incurred as a result of the Release. |
| |
• | Solid/Hazardous Waste Processing. Lessor shall provide solid/hazardous waste processing consistent with Applicable Law. |
| |
• | LDAR Monitoring and Reporting. Lessor will provide to Lessee services necessary to perform leak detection, monitoring and reporting on all Tank Farm Assets within the Refinery Site as required by Applicable Law and any applicable consent decree. Lessor’s and Lessee’s employees will be included in the Refinery LDAR training program, which training program shall comply with the Clean Air Act and any applicable consent decree. Lessor will provide data to Lessee on all LDAR surveillance activities. |
| |
• | Security. Lessor shall provide routine security patrols, general monitoring and surveillance, provided however Lessor be responsible for the loss of or damage to the Tank Farm Assets and Improvements. |
| |
• | IT/Controls Infrastructure. – Lessee will be entitled to access and use all necessary IT/Controls infrastructures for the operation of the Tank Farm Assets. Lessor shall maintain all IT/Controls infrastructures. |
| |
• | Laydown Areas/Storage for Spares. Lessor will provide laydown areas and storage for spares on an as-needed basis. |
| |
• | Landscape Maintenance. Lessor will provide or cause to be provided landscape maintenance services to the Premises. |
| |
• | Janitorial Services. Lessor will provide or cause to be provided janitorial services to the Premises. |
| |
• | Non-hazardous Waste Handling and Collection. Lessor will provide or cause to be provided non-hazardous waste handling and collection services to the Premises, including vacuum truck services. |
EXHIBIT 10.10
EXECUTION VERSION
SUBORDINATED CREDIT AGREEMENT
dated as of March 2, 2015
among
VALERO ENERGY PARTNERS LP,
as the Borrower
The GUARANTORS Party Hereto,
and
VALERO ENERGY CORPORATION,
as the Lender
ARTICLE I
DEFINITIONS
|
| | | |
Section 1.01 | Defined Terms | 1 |
|
Section 1.02 | Classification of Borrowings | 16 |
|
Section 1.03 | Terms Generally | 16 |
|
Section 1.04 | Accounting Terms; GAAP | 16 |
|
ARTICLE II
THE CREDITS
|
| | | |
Section 2.01 | Term Loan | 17 |
|
Section 2.02 | Borrowing Mechanics | 17 |
|
Section 2.03 | Requests for Fundings | 17 |
|
Section 2.04 | Interest Elections | 18 |
|
Section 2.05 | Repayment of Term Loan; Evidence of Debt | 19 |
|
Section 2.06 | Prepayment of Term Loan | 19 |
|
Section 2.07 | Interest | 19 |
|
Section 2.08 | Alternate Rate of Interest | 20 |
|
Section 2.09 | Taxes | 20 |
|
Section 2.10 | Payments Generally | 21 |
|
ARTICLE III
REPRESENTATIONS AND WARRANTIES
|
| | | |
Section 3.01 | Corporate Existence and Power | 21 |
|
Section 3.02 | Corporate and Governmental Authorization; Contravention | 21 |
|
Section 3.03 | Enforceability | 22 |
|
Section 3.04 | Financial Information | 22 |
|
Section 3.05 | Litigation; No Material Adverse Effect | 22 |
|
Section 3.06 | Environmental Matters | 22 |
|
Section 3.07 | Taxes | 23 |
|
Section 3.08 | Solvency | 23 |
|
Section 3.09 | Compliance with Laws | 23 |
|
Section 3.10 | Title to Properties | 23 |
|
ARTICLE IV
CONDITIONS
TABLE OF CONTENTS
(Continued)
Page
ARTICLE V
AFFIRMATIVE COVENANTS
|
| | |
Section 5.01 | Financial Reporting Requirements | 24 |
Section 5.02 | Notices | 25 |
Section 5.03 | Existence; Conduct of Business | 25 |
Section 5.04 | Payment of Taxes | 25 |
Section 5.05 | Maintenance of Property; Insurance | 25 |
Section 5.06 | Compliance with Laws | 26 |
Section 5.07 | Books and Records; Inspection Rights | 26 |
Section 5.08 | Use of Proceeds | 26 |
Section 5.09 | First Tier Subsidiaries; Additional Guarantors | 26 |
Section 5.10 | Designation and Conversion of Restricted and Unrestricted Subsidiaries; Certain other Matters Pertaining to Unrestricted Subsidiaries | 26 |
Section 5.11 | Employee Matters | 27 |
ARTICLE VI
NEGATIVE COVENANTS
|
| | |
Section 6.01 | Liens | 28 |
Section 6.02 | Fundamental Changes; Dispositions | 31 |
Section 6.03 | Indebtedness; Securitization Transactions; Sale/Leaseback Transactions | 31 |
Section 6.04 | Restricted Payments | 34 |
Section 6.05 | Changes in Organization Documents | 34 |
Section 6.06 | Restrictive Agreements | 34 |
Section 6.07 | Change in Nature of Business | 35 |
Section 6.08 | Consolidated Leverage Ratio | 35 |
ARTICLE VII
EVENTS OF DEFAULT
ARTICLE VIII
SUBORDINATION TERMS
TABLE OF CONTENTS
(Continued)
Page
ARTICLE IX
MISCELLANEOUS
|
| | |
Section 9.01 | Notices | 41 |
Section 9.02 | Waivers; Amendments | 42 |
Section 9.03 | Successors and Assigns | 42 |
Section 9.04 | Counterparts; Integration; Effectiveness | 42 |
Section 9.05 | Severability | 42 |
Section 9.06 | Governing Law; Consent to Service of Process | 43 |
Section 9.07 | Headings | 43 |
Section 9.08 | Interest Rate Limitation | 43 |
Section 9.09 | No Liability of General Partner | 43 |
ARTICLE X
SUBSIDIARY GUARANTEE
|
| | |
Section 10.01 | Guarantee | 43 |
Section 10.02 | Waiver of Subrogation | 44 |
Section 10.03 | Amendments, Etc., with respect to the Guaranteed Obligations | 44 |
Section 10.04 | Guarantee Absolute and Unconditional | 44 |
Section 10.05 | Reinstatement | 45 |
Section 10.06 | Payments | 45 |
Section 10.07 | Additional Guarantors | 45 |
Section 10.08 | Guaranty Release Matters | 45 |
ANNEXES:
| |
Annex A | – Leverage-Based Pricing Grid |
| |
Annex B | – Ratings-Based Pricing Grid |
EXHIBITS:
| |
Exhibit A | – Form of Promissory Note |
| |
Exhibit B | – Form of Guarantee Joinder |
SUBORDINATED CREDIT AGREEMENT, dated as of March 2, 2015, among VALERO ENERGY PARTNERS LP, the Guarantors party hereto from time to time and VALERO ENERGY CORPORATION.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
“Acquisition Period” means the period beginning with the date on which payment of the purchase price for a Specified Acquisition is made and ending on the earlier of (a) the last day of the second full fiscal quarter following the fiscal quarter in which such payment is made, and (b) the date on which the Borrower notifies the Lender that it desires to end the Acquisition Period for such Specified Acquisition; provided that once any Acquisition Period is in effect, the next Acquisition Period may not commence until the termination of such Acquisition Period then in effect. As used above, “Specified Acquisition” means any one or more transactions (i) pursuant to which the Borrower or any Restricted Subsidiary acquires for an aggregate purchase price of not less than $50,000,000 (x) more than 50% of the Equity Interests in any other Person or (y) other property or assets (other than acquisitions of Equity Interests of a Person, capital expenditures and acquisitions of inventory or supplies in the ordinary course of business) of, or of an operating division or business unit of, any other Person, and (ii) which is designated by the Borrower (by written notice to the Lender) as a “Specified Acquisition”.
“Agreement” means this Subordinated Credit Agreement, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Applicable Rate” means, for any day, with respect to any Prime Rate Borrowing or Eurodollar Borrowing, (a) at all times prior to the Rating Date, the applicable rate per annum set forth in the Leverage-Based Pricing Grid based upon the Consolidated Leverage Ratio under the caption “Prime Rate Margin,” or “LIBOR Margin”, as the case may be, and (b) at all times from and after the Rating Date, the applicable rate per annum set forth in the Ratings-Based Pricing Grid based upon the Designated Rating under the caption “Prime Rate Margin” or “LIBOR Margin”, as the case may be.
“Attributable Debt” means in respect of a Sale/Leaseback Transaction, as at the time of determination, the present value of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended); provided, however, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of and will constitute “Capital Lease Obligations.” Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.
“Authorized Officer” means a duly authorized officer of a Loan Party or the General Partner acting on behalf of such Loan Party.
“Borrower” means Valero Energy Partners LP, a Delaware limited partnership.
“Borrowing” means, with respect to any portion of the Term Loan, such portion that is of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Borrowings, as to which a single Interest Period is in effect.
“Borrowing Request” means a request by the Borrower for funding the Term Loan in accordance with Section 2.03.
“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in San Antonio, Texas or New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Borrowing, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.
“Capital Lease Obligations” as to any Person, means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP; provided that any lease that would have been considered an operating lease under the provisions of GAAP in effect as of December 31, 2013 shall be treated as an operating lease for all purposes under this Agreement.
“Change in Control” means (a) Valero Energy Corporation ceases to own, directly or indirectly, a majority of the Equity Interests of, or ceases to Control, the General Partner; (b) the Borrower ceases to own, directly or indirectly, 100% of the Equity Interests of the Initial Guarantor; or (c) the General Partner ceases to be the sole general partner of, or ceases to Control, the Borrower.
“Closing Date” means the date upon which this Agreement has been executed by all parties hereto and all conditions precedent set forth in Article IV have been satisfied.
“Commercial Operation Date” means the date on which a Qualified Project is substantially complete and commercially operable.
“Consolidated EBITDA” means for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus, (b) to the extent reducing Consolidated Net Income for such period, and without duplication: (i) net federal, state, local or foreign income or franchise tax expense; (ii) net interest expense (including amortization or write-off of debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness), amortization of capitalized interest and the net amount accrued (whether or not actually paid) pursuant to any interest rate protection agreement during such period (or minus the net amount receivable (whether or not actually received) during such period); (iii) depreciation, depletion and
amortization expense, including amortization of intangibles; (iv) extraordinary expenses or loss and unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, (A) losses from dispositions not in the ordinary course of business and (B) goodwill or intangible asset impairment); (v) transaction expenses directly related to the Transactions; and (vi) any non-cash charges to income not included in the foregoing clauses (i) through (v); minus, (c) to the extent included in the calculation of Consolidated Net Income for such period, without duplication, the sum of: (i) any extraordinary income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on dispositions not in the ordinary course of business); (ii) any cash expenditures during such period on account of any non-cash item which was added back to Consolidated EBITDA during any prior period with respect to which a calculation of Consolidated EBITDA was made under this Agreement (and; provided that the cash expenditure does not impact Consolidated Net Income in the period paid); and (iii) any other unusual or non-recurring income or gains, all as determined for the Borrower and its Restricted Subsidiaries on a consolidated basis.
In the event Borrower or any of its Restricted Subsidiaries acquires (x) more than 50% of the Equity Interests in any other Person or (y) other property or assets (other than acquisitions of Equity Interests of a Person, capital expenditures and acquisitions of inventory or supplies in the ordinary course of business) of, or of an operating division or business unit of, any other Person, at Borrower’s option, Consolidated EBITDA for the relevant period shall be calculated after giving effect, on a pro forma basis, to such acquisition as if such acquisition occurred on the first day of the period. Any such pro forma adjustments shall be calculated in good faith by the Borrower and shall be supported by reasonably detailed calculations furnished together with the compliance certificate delivered pursuant to Section 5.01(c) for the applicable period.
Further, in connection with any Qualified Project, Consolidated EBITDA, as used in determining the Consolidated Leverage Ratio, may be modified so as to include Qualified Project EBITDA Adjustments, as provided in Section 6.08.
“Consolidated Leverage Ratio” means as of any date of determination, the ratio of Consolidated Total Debt as of such date to Consolidated EBITDA for the four fiscal quarter period ending on such date.
“Consolidated Net Assets” means at any date, the total amount of assets of the Borrower and its Restricted Subsidiaries after deducting therefrom (a) all current liabilities of the Borrower and its Restricted Subsidiaries (excluding any thereof which are by their terms extendible or renewable at the option of the Borrower or a Restricted Subsidiary to a time more than 12 months after the time as of which the amount thereof is being computed), and (b) total prepaid expenses and deferred charges of the Borrower and its Restricted Subsidiaries. For purposes of the definition of “Material Subsidiaries” and Section 5.10(f), the references to Restricted Subsidiaries in this definition shall be deemed to be references to all Subsidiaries.
“Consolidated Net Income” means for any period, the net income (loss) of the Borrower and its Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP, provided that there shall be excluded from such net income (to the extent otherwise included
therein), the income (or loss) of any entity other than a Restricted Subsidiary in which the Borrower or any Restricted Subsidiary has an ownership interest, except to the extent that any such income has been actually received by the Borrower or such Restricted Subsidiary in the form of cash dividends or similar cash distributions. Further, when determining Consolidated Net Income for any fiscal quarter, Consolidated Net Income shall not include any undistributed net income of a Restricted Subsidiary to the extent that the ability of such Restricted Subsidiary to make Restricted Payments to the Borrower or to a Restricted Subsidiary is, as of the date of determination of Consolidated Net Income, prohibited by its Organization Documents, or restricted by any Contractual Obligation (other than pursuant to this Agreement) or any applicable law.
“Consolidated Net Tangible Assets” means at any date, (a) Consolidated Net Assets minus (b) goodwill and other intangible assets of the Borrower and its Restricted Subsidiaries, in each case determined on a consolidated basis in accordance with GAAP, all as reflected in the consolidated financial statements most recently delivered to the Lender pursuant to Section 5.01(a) or Section 5.01(b) (or with respect to the periods prior to the initial delivery of financial statements under Section 5.01, as reflected on the Initial Financial Statements). For purposes of the definition of “Material Subsidiaries” and Section 5.10(f), the references to Restricted Subsidiaries in this definition shall be deemed to be references to all Subsidiaries.
“Consolidated Total Debt” means at any date, without duplication the aggregate amount of the Indebtedness of the Borrower and its Restricted Subsidiaries of the type specified in clause (a), (b), (c), (d), (e) or (h), clause (g) (so long as obligations specified in such clause are not contingent) or clause (f) (if the Guarantees specified in such clause are of Indebtedness of the type referred to above) of the definition of “Indebtedness” as of such date determined on a consolidated basis.
“Contractual Obligation” means as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Designated Rating” means with respect to any Rating Agency, (i) the rating assigned by such Rating Agency to the Borrower’s Senior Debt, or (ii) if and only if such Rating Agency does not have in effect a rating described in the preceding clause (i), the rating assigned by such Rating Agency to the facility evidenced by this Agreement at any time such a rating is in effect, or (iii) if and only if such Rating Agency does not have in effect a rating described in the preceding clauses (i) or (ii), the Borrower’s “company” or “corporate credit” rating (or its equivalent) assigned by such Rating Agency.
“dollars” or “$” refers to lawful money of the United States of America.
“Elective Guarantor” means a Restricted Subsidiary that becomes a Guarantor pursuant to Section 5.09(b). A First Tier Subsidiary that is an Elective Guarantor shall cease to be an “Elective Guarantor” and shall become a “Required Guarantor” from and after the date that it becomes a Material Subsidiary.
“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Materials or to health and safety matters arising from the exposure to Hazardous Materials.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Restricted Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Equity Interests” means with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such securities (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“Eurodollar”, when used in reference to the Term Loan, refers to whether the portion of the Term Loan comprising a Borrowing, is bearing interest at a rate determined by reference to the LIBO Rate.
“Event of Default” has the meaning assigned to such term in Article VII.
“Excluded Subsidiary Debt” means (a) Unsecured Acquired Debt and refinancings, extensions, renewals, or refundings thereof provided that the principal amount thereof is not increased (other than by amounts incurred to pay the costs of such refinancing, extension, renewal or refunding and any premiums paid in connection therewith), (b) Indebtedness that is owed by a Restricted Subsidiary to the Borrower or to another Restricted Subsidiary; (c) amounts owing by a Restricted Subsidiary pursuant to Securitization Transactions as permitted by Section 6.03(b)(ii); and (d) Indebtedness in an amount not to exceed $150,000,000, outstanding on the Investment Grade Rating Date.
“Excluded Taxes” means, with respect to the Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise Taxes imposed on (or measured by) its net income and/or net worth by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which the Borrower is located.
“Financial Officer” means the chief financial officer, principal accounting officer, financial vice president, treasurer or controller of a Loan Party or of the General Partner acting on behalf of a Loan Party.
“First Tier Subsidiary” means any direct Restricted Subsidiary.
“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.
“General Partner” means Valero Energy Partners GP LLC, a Delaware limited liability company.
“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Guarantee” means as to any Person, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.
“Guarantee Joinder” means a Guarantee Joinder, substantially in the form of Exhibit B.
“Guaranteed Obligations” has the meaning assigned such term in Section 10.01.
“Guarantor” means the Initial Guarantor, each additional Required Guarantor (if any), and each Elective Guarantor (if any).
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“Hedging Agreement” means any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions.
“Hedging Obligations” means obligations in respect of Hedging Agreements.
“Indebtedness” means as to any Person, at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (d) all Capital Lease Obligations of such Person, (e) all Indebtedness of others secured by a Lien on any asset of such Person (other than a Lien on Equity Interests in an Unrestricted Subsidiary owned by such Person securing Non-Recourse Debt on which such Unrestricted Subsidiary is an obligor), whether or not such Indebtedness is assumed by such Person (provided, that for purposes of this clause (e), if such Person has not assumed or otherwise become personally liable for any such Indebtedness, the amount of Indebtedness of such Person in connection therewith shall be limited to the lesser of (i) the fair market value of such asset(s) and (ii) the amount of Indebtedness secured by such Lien), (f) all Indebtedness of others Guaranteed by such Person, (g) all obligations of such Person in respect of bankers’ acceptances, (h) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument (other than trade letters of credit and documentary letters of credit), provided, however that in the case of letters of credit, reimbursement obligations shall not be considered Indebtedness unless they have not been reimbursed within three Business Days after becoming due, and (i) all production payments, proceeds production payments or similar obligations of such Person. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.
“Indemnified Taxes” means Taxes other than Excluded Taxes.
“Initial Financial Statements” means, collectively, (a) the audited annual consolidated financial statements of the Borrower dated as of December 31, 2013 and (b) the unaudited quarterly consolidated financial statements of the Borrower dated as of September 30, 2014.
“Initial Guarantor” means Valero Partners Operating Co. LLC, a Delaware limited liability company and any successor Guarantor thereto permitted pursuant to Section 6.02 hereof.
“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.04.
“Interest Payment Date” means (a) with respect to any Prime Rate Borrowing, the last day of each March, June, September and December and (b) with respect to any Eurodollar Borrowing, the last day of the Interest Period applicable to the Borrowing of which such Eurodollar Borrowing is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.
“Interest Period” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or, with the consent of the Lender, such other periods for which LIBO Rates are available at the time the Borrowing Request for such Eurodollar Borrowing is made), as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made, and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
“Investment Grade Rating” means a Designated Rating of (a) BBB- or higher by S&P or (b) Baa3 or higher by Moody’s.
“Investment Grade Rating Date” means the date on which the Borrower first obtains an Investment Grade Rating.
“Laws” means all ordinances, statutes, rules, regulations, orders, injunctions, writs, treaties or decrees of any governmental or political subdivision or agency thereof, or of any court or similar entity established by any thereof.
“Lender” means Valero Energy Corporation and its successors and assigns.
“Leverage-Based Pricing Grid” means the Leverage-Based Pricing Grid attached hereto as Annex A.
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Lender
from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent under the Revolving Credit Agreement in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.
“Lien” means with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset (including any production payment, proceeds production payment or similar financing arrangement with respect to such asset). For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.
“Loan Documents” means this Agreement, including schedules and exhibits hereto, any Guarantee Joinder, any Note, and any other document executed by the Borrower or a Guarantor that states by its terms that it is a Loan Document, and amendments, modifications or supplements thereto or waivers thereof.
“Loan Party” means each of the Borrower and each Guarantor.
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations or condition, financial or otherwise, of the Borrower and its Restricted Subsidiaries taken as a whole, or (b) the ability of the Borrower to perform any of its obligations under this Agreement.
“Material Subsidiary” means, at any time, a Subsidiary whose Net Tangible Assets represent 15% or more of Consolidated Net Tangible Assets for the Borrower’s most recently completed fiscal quarter.
“Maturity Date” means March 1, 2020.
“Moody’s” means Moody’s Investors Service, Inc.
“Net Assets” of a Person at any date, means the total amount of assets of such Person and its Subsidiaries after deducting therefrom (a) all current liabilities of such Person and its Subsidiaries (excluding any thereof which are by their terms extendible or renewable at the option of such Person or a Subsidiary of such Person to a time more than 12 months after the time as of which the amount thereof is being computed), and (b) total prepaid expenses and deferred charges of such Person and its Subsidiaries.
“Net Tangible Assets” of a Person at any date, means (a) Net Assets of such Person and its Subsidiaries minus (b) goodwill and other intangible assets of such Person and its Subsidiaries, in each case determined on a consolidated basis in accordance with GAAP, for the
fiscal quarter for which financial statements have been most recently delivered to the Lender pursuant to Section 5.01(a) or Section 5.01(b) (or with respect to periods prior to the delivery of the initial financial statements required under Section 5.01, as reflected on the Initial Financial Statements).
“Non-Guarantor Subsidiary” means a Restricted Subsidiary that is not a Guarantor.
“Non-Recourse Debt” means Indebtedness: (a) as to which neither the Borrower nor any of its Restricted Subsidiaries (i) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) or (ii) is directly or indirectly liable as a guarantor or otherwise, in either case, other than a pledge of the Equity Interests of an Unrestricted Subsidiary that is an obligor on such Indebtedness; and (b) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Borrower or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of such other Indebtedness to be accelerated or payable prior to its maturity. For purposes of determining compliance with Section 6.03 hereof, in the event that any Non-Recourse Debt of any of the Borrower’s Unrestricted Subsidiaries ceases to be Non-Recourse Debt of such Unrestricted Subsidiary, such event will be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Borrower.
“Note” means a promissory note in substantially the form of Exhibit A hereof.
“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to the Term Loan, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Subsidiary thereof of any proceeding under any applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
“Organization Documents” means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws; (b) with respect to any limited liability company, the certificate of formation and operating or limited liability company agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation with the secretary of state or other department in the state of its formation, in each case as amended from time to time.
“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.
“Prime Rate Borrowing”, when used in reference to the Term Loan, refers to whether the portion of the Term Loan comprising a Borrowing is bearing interest at a rate determined by reference to the Prime Rate.
“Priority Debt” has the meaning assigned such term in Section 6.03(b)(i).
“Qualified Project” means the construction or expansion of any capital project of the Borrower or any of its Restricted Subsidiaries, the aggregate actual or budgeted capital cost of which (in each case, including capital costs expended by the Borrower or any such Restricted Subsidiaries prior to the construction or expansion of such project) exceeds $50,000,000.
“Qualified Project EBITDA Adjustments” means with respect to each Qualified Project:
(a) prior to the Commercial Operation Date of a Qualified Project (but including the fiscal quarter in which such Commercial Operation Date occurs), a percentage (based on the then-current completion percentage of such Qualified Project) of an amount to be approved by the Lender (such approval not to be unreasonably withheld or delayed) as the projected Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Qualified Project for the first 12-month period following the scheduled Commercial Operation Date of such Qualified Project (such amount to be determined based on customer contracts relating to such Qualified Project, the creditworthiness of the other parties to such contracts, and projected revenues from such contracts, capital costs and expenses, scheduled Commercial Operation Date, commodity price assumptions and other reasonable factors deemed appropriate by the Lender), which may, at the Borrower’s option, be added to actual Consolidated EBITDA for the Borrower and its Restricted Subsidiaries for the fiscal quarter in which construction of such Qualified Project commences and for each fiscal quarter thereafter until the Commercial Operation Date of such Qualified Project (including the fiscal quarter in which such Commercial Operation Date occurs, but net of any actual Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Qualified Project following such Commercial Operation Date); provided that if the actual Commercial Operation Date does not occur by the scheduled Commercial Operation Date, then the foregoing amount shall be reduced, for quarters ending after the scheduled Commercial Operation Date to (but excluding) the first full quarter after its actual Commercial Operation Date, by the following percentage amounts depending on the period of delay (based on the period of actual delay or then-estimated delay, whichever is longer): (i) 90 days or less, 0%, (ii) longer than 90 days, but not more than 180 days, 25%, (iii) longer than 180 days but not more than 270 days, 50%, (iv) longer than 270 days but not more than 365 days, 75% and (v) longer than 365 days, 100%; and
(b) thereafter, actual Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Qualified Project for each full fiscal quarter after the Commercial Operation Date, plus the amount approved by the Lender pursuant to clause (a) above as the projected Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Qualified Project for the fiscal quarters constituting the balance of the four full fiscal quarter period following such Commercial Operation Date; provided that in the event the actual Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Qualified Project for any full fiscal quarter after the Commercial Operation Date shall materially differ from the projected Consolidated EBITDA approved by the Lender pursuant to clause (a) above for such fiscal quarter, the projected Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Qualified Project for any remaining fiscal quarters included in the foregoing calculation shall be redetermined in the same manner as set forth in clause (a) above, such amount to be approved by the Lender (such approval not to be unreasonably withheld or delayed), which may, at the Borrower’s option, be added to actual Consolidated EBITDA for the Borrower and its Restricted Subsidiaries for such fiscal quarters.
Notwithstanding the foregoing:
(A) no such additions shall be allowed with respect to any Qualified Project unless:
(1) not later than 30 days prior to the delivery of any certificate required by the terms and provisions of Section 5.01(c) to the extent Qualified Project EBITDA Adjustments are requested be made to Consolidated EBITDA in determining compliance with Section 6.08, the Borrower shall have delivered to the Lender (i) written pro forma projections of Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Qualified Project and (ii) a certificate of the Borrower certifying that all written information provided to the Lender for purposes of approving such pro forma projections (including information relating to customer contracts relating to such Qualified Project, the creditworthiness of the other parties to such contracts, and projected revenues from such contracts, capital costs and expenses, scheduled Commercial Operation Date, commodity price assumptions) was prepared in good faith based upon assumptions that were reasonable at the time they were made; and
(2) prior to the date such certificate is required to be delivered, the Lender shall have approved (such approval not to be unreasonably withheld) such projections and shall have received such other information and documentation as the Lender may reasonably request, all in form and substance satisfactory to the Lender; and
(B) the aggregate amount of all Qualified Project EBITDA Adjustments during any period shall be limited to 20% of the total actual Consolidated EBITDA of the Borrower and its Restricted Subsidiaries for such period (which total actual Consolidated EBITDA shall be determined without including any Qualified Project EBITDA Adjustments).
“Rating Agency” means S&P and/or Moody’s.
“Rating Date” means the first date after the Closing Date upon which the Borrower obtains a Designated Rating.
“Ratings-Based Pricing Grid” means the Ratings-Based Pricing Grid attached hereto as Annex B.
“Required Guarantor” means any Material Subsidiary that is a First Tier Subsidiary; collectively the “Required Guarantors”.
“Restricted Payment” by a Person means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest in such Person, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such equity interest or of any option, warrant or other right to acquire any such equity interest.
“Restricted Subsidiary” means any Subsidiary of the Borrower other than an Unrestricted Subsidiary.
“Revolving Credit Agreement” has the meaning assigned to such term in Article VIII.
“S&P” means Standard & Poor’s Ratings Services, a division of McGraw-Hill Companies, Inc.
“Sale/Leaseback Transaction” means an arrangement whereby the Borrower or a Restricted Subsidiary transfers property owned by it to a Person and the Borrower or a Restricted Subsidiary leases it from such Person.
“SEC” means the United States Securities and Exchange Commission, or any Governmental Authority succeeding to the functions thereof.
“Securitization Entity” means any Person engaged solely in the business of effecting Securitization Transactions and related activities.
“Securitization Indebtedness” means any Indebtedness under any Securitization Transaction that does not permit or provide recourse for principal or interest (other than Standard Securitization Undertakings) to the Borrower or any Restricted Subsidiary of the Borrower (other than a Securitization Entity) or any property or asset of the Borrower or any Restricted Subsidiary of the Borrower (other than the property or assets of a Securitization Entity or any Equity Interests or securities issued by a Securitization Entity).
“Securitization Transaction” means any transaction in which the Borrower or a Restricted Subsidiary sells or otherwise transfers accounts receivable or other rights to payment (whether existing or arising in the future) and assets related thereto (a) to one or more purchasers or (b) to a special purpose entity that (i) borrows under a loan secured by or issues securities payable from such accounts receivable or other rights to payment (or undivided interests therein) and related assets or (ii) sells or otherwise transfers such accounts receivable or other rights to payment (or undivided interests therein) and related assets to one or more purchasers, whether or not amounts
received in connection with the sale or other transfer of such accounts receivable or other rights to payment and related assets to an entity referred to in clause (a) or (b) above would under GAAP be accounted for as liabilities on a consolidated balance sheet of the Borrower. The amount of any Securitization Transaction shall be deemed at any time to be (1) the aggregate outstanding principal or stated amount of the borrowings or securities in connection with the transactions referred to in clause (b)(i) of the preceding sentence; (2) the outstanding amount of capital invested in or unrecovered outstanding purchase price paid in connection with a transaction referred to in clause (b)(ii) of the preceding sentence; or (3) if there shall be no such principal or stated amount or outstanding capital invested or unrecovered purchase price, the uncollected amount of the accounts receivable transferred to such purchaser(s) pursuant to such Securitization Transaction net of any such accounts receivable that have been written off as uncollectible and any discount in the purchase price thereof.
“Senior Debt” means the Borrower’s senior unsecured, non-credit enhanced, long term debt for which a rating has been established by Moody’s and/or S&P.
“Solvent” means with respect to any Person and its Subsidiaries on a consolidated basis, as of a particular date, that on such date (a) such Person and its consolidated Subsidiaries are able to pay their debts and other liabilities, contingent obligations and other commitments, on a consolidated basis, as they mature in the normal course of business, (b) such Person and its consolidated Subsidiaries do not intend to, and do not believe that they will, incur debts or liabilities on a consolidated basis beyond their ability to pay as such debts and liabilities mature in their ordinary course, (c) such Person and its consolidated Subsidiaries are not engaged in a business or a transaction, and are not about to engage in a business or a transaction, for which their consolidated assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Persons are engaged or are to engage, (d) the fair value of the assets of such Person and its consolidated Subsidiaries is greater than the total amount of consolidated liabilities, including contingent liabilities, of such Person and its consolidated Subsidiaries and (e) the present fair saleable value of the consolidated assets of such Person and its consolidated Subsidiaries is not less than the amount that will be required to pay the probable consolidated liability of such Person and its consolidated Subsidiaries on their consolidated debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed as the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“Standard Securitization Undertakings” means any representations, warranties, servicer obligations, covenants and indemnities entered into by the Borrower or any Restricted Subsidiary of the Borrower of a type that are reasonably customary in securitizations.
“Subsidiary” means with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which
securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, or held by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.
“Subsidiary Guarantee” has the meaning assigned to such term in Section 10.01.
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.
“Term Loan” means the term loan of up to $160,000,000 made by the Lender to the Borrower pursuant to this Agreement.
“Transactions” means any incurrence of Indebtedness by the Borrower and the Guarantors under this Agreement on the Closing Date.
“Type”, when used in reference to any Borrowing, refers to whether the rate of interest on such Borrowing is determined by reference to the LIBO Rate or the Prime Rate.
“Unrestricted Subsidiary” means any Subsidiary, other than a Material Subsidiary, formed or acquired after the Closing Date that is designated by the Borrower as an Unrestricted Subsidiary; provided that: (a) such Subsidiary has no Indebtedness other than Non-Recourse Debt; (b) no Loan Party nor any Restricted Subsidiary Guarantees any Indebtedness of such Subsidiary or grants a Lien on any assets to secure any Indebtedness or other obligations of such Subsidiary except Liens on Equity Interests in Unrestricted Subsidiaries permitted by (or permitted under Section 6.01(a)(i) to be incurred as described in) Section 6.01(b)(xix); (c) except as permitted by the Lender, such Subsidiary is not party to any agreement, contract, arrangement or understanding with the Borrower or any Restricted Subsidiary of the Borrower; (d) such Subsidiary is a Person with respect to which neither the Borrower nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to make capital contributions to such Person or to subscribe for additional Equity Interests or (y) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; (e) such Subsidiary is not a Guarantor and has not Guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Borrower or any Restricted Subsidiaries; (f) such designation complies with Section 5.10; and (g) such Subsidiary has not been redesignated as an Unrestricted Subsidiary under Section 5.10. Any designation of a Subsidiary as an Unrestricted Subsidiary will be evidenced to the Lender by a certificate from a Financial Officer of the Borrower certifying that such designation complies with the preceding conditions. As of the Closing Date there are no Unrestricted Subsidiaries.
“Unsecured Acquired Debt” means unsecured Indebtedness of a Person that (a) exists at the time such Person becomes a Restricted Subsidiary as a result of an acquisition, merger or other combination, in each case, consummated after the Closing Date, or at the time such Person is merged or consolidated with or into, or otherwise acquired by, a Restricted Subsidiary, in each
case, after the Closing Date, or (b) is assumed in connection with the acquisition of assets after the Closing Date; provided that, (x) in each case, such unsecured Indebtedness was not incurred or granted in contemplation of such acquisition, merger, or other combination, and (y) in no event shall such unsecured Indebtedness exceed the value of the Person or property so acquired.
“Valero Energy Corporation” means Valero Energy Corporation, a Delaware corporation.
Section 1.02 Classification of Borrowings. Borrowings may be classified and referred to by Type (e.g., a “Eurodollar Borrowing”).
Section 1.03 Terms Generally. Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any other Loan Document or any certificate or other document made or delivered pursuant hereto. The definitions of terms herein and in any other Loan Document or any certificate or other document made or delivered pursuant hereto shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun used herein or in any other Loan Document or any certificate or other document made or delivered pursuant hereto shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” when used herein or in any other Loan Document or any certificate or other document made or delivered pursuant hereto shall be deemed to be followed by the phrase “without limitation”. The word “will” when used herein or in any other Loan Document or any certificate or other document made or delivered pursuant hereto shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, when used herein or in any other Loan Document or any certificate or other document made or delivered pursuant hereto (a) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (b) any reference to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof’ and “hereunder”, and words of similar import, shall be construed to refer to this Agreement, any other Loan Document or any certificate or other document made or delivered pursuant hereto, as the case may be, in its entirety and not to any particular provision hereof or thereof, (d) all references herein or in any other Loan Document or any certificate or other document made or delivered pursuant hereto, as the case may be, to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement or such other Loan Document or certificate or document, as the case may be and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
Section 1.04 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Lender that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision, regardless
of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Financial Accounting Standards Board Accounting Standards Codification 825 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at “fair value”, as defined therein.
ARTICLE II
THE CREDITS
Section 2.01 Term Loan. The Lender agrees, on the terms and conditions hereinafter set forth, to make a term loan (the “Term Loan”) to the Borrower, which Term Loan may, at the option of the Borrower, be made (a) in a single advance on the Closing Date or (b) to the extent that the full amount of the Term Loan is not fully borrowed on the Closing Date, on one or more occasions (which shall occur on a Business Day) thereafter on or prior to May 1, 2015, in an aggregate principal amount for the Term Loan not to exceed $160,000,000. Amounts repaid or prepaid in respect of the Term Loan may not be reborrowed.
Section 2.02 Borrowing Mechanics.
(a) The Term Loan shall be made in dollars. Subject to Section 2.08, the Term Loan (or any portion thereof) may be comprised of Prime Rate Borrowings or Eurodollar Borrowings as the Borrower may request in accordance herewith; provided that there shall not at any time be more than a total of ten Eurodollar Borrowings outstanding.
(b) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Eurodollar Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
Section 2.03 Requests for Funding. To request a funding of any portion of the Term Loan, the Borrower shall notify the Lender of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 p.m., New York City time, three Business Days before the date of the proposed funding or (b) in the case of a Prime Rate Borrowing, not later than 12:00 p.m., New York City time, on the date of the proposed funding. Each such telephonic Borrowing Request shall be irrevocable and, if so requested by the Lender, shall be confirmed promptly by hand delivery or telecopy to the Lender of a written Borrowing Request. Each such telephonic or written Borrowing Request shall specify the following information in compliance with Section 2.02:
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(i) | the aggregate amount of the requested funding; |
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(ii) | the date of such funding, which shall be a Business Day; |
(iii) whether the portion of the Term Loan to be funded is to be a Prime Rate Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and
(v) the location and number of the Borrower’s account to which funds are to be disbursed.
If no election as to the Type of Borrowing is specified, then the requested funding shall be a Prime Rate Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
Section 2.04 Interest Elections.
(a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall notify the Lender of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and, if requested by the Lender, shall be confirmed promptly by hand delivery or telecopy to the Lender of a written Interest Election Request in a form approved by the Lender and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be a Prime Rate Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
(d) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to a Prime Rate Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Lender so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to a Prime Rate Borrowing at the end of the Interest Period applicable thereto.
Section 2.05 Repayment of Term Loan; Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay to the Lender the then unpaid principal amount of the Term Loan on the Maturity Date.
(b) The Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to the Lender resulting from the Term Loan, including the amounts of principal and interest payable and paid to the Lender from time to time hereunder.
(c) The entries made in the accounts maintained pursuant to paragraph (b) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of the Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Term Loan in accordance with the terms of this Agreement.
Section 2.06 Prepayment of Term Loan. The Borrower shall have the right at any time and from time to time to prepay the Term Loan in whole or in part, subject to at least three Business Days prior notice. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.07.
Section 2.07 Interest. (a) The portion of the Term Loan comprising each Prime Rate Borrowing shall bear interest at the Prime Rate plus the Applicable Rate.
(b) The portion of the Term Loan comprising each Eurodollar Borrowing shall bear interest at the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on the Term Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of the Term Loan, 2.00% plus the rate otherwise applicable to the Term Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2.00% plus the rate applicable to Prime Rate Borrowings as provided in paragraph (a) of this Section.
(d) Accrued interest on the Term Loan shall be payable in arrears on each Interest Payment Date and on the Maturity Date; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Borrowing comprising part of the Term Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Borrowing prior to the end of the current Interest Period therefor, accrued interest on such Eurodollar Borrowing shall be payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Prime Rate or LIBO Rate shall be determined by the Lender, and such determination shall be conclusive absent manifest error.
Section 2.08 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing the Lender determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period, then the Lender shall give notice thereof to the Borrower by telephone or telecopy as promptly as practicable thereafter and, until the Lender notifies the Borrower that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as a Prime Rate Borrowing; provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted.
Section 2.09 Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
Section 2.10 Payments Generally. (a) Except with respect to Excluded Taxes, the Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or other amounts payable under this Agreement) prior to 2:00 p.m., New York City time, on the date when due, in immediately available funds, without deduction, setoff or counterclaim (other than any deduction or setoff in respect of Excluded Taxes as explicitly described herein). Any amounts received after such time on any date may, in the discretion of the Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Lender at its offices set forth in Section 9.01. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available to the Lender to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder and (ii) second, towards payment of principal then due hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of the Borrower and each Guarantor, with respect to representations and warranties pertaining to it, represents and warrants to the Lender, as of the Closing Date, and thereafter as of the date of each advance of any portion of the Term Loan not borrowed on the Closing Date, that:
Section 3.01 Corporate Existence and Power. Each Loan Party is a corporation, partnership or limited liability company duly incorporated or organized, as applicable, validly existing and in good standing under the laws of its jurisdiction of organization, and has all organizational powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.
Section 3.02 Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by each Loan Party of this Agreement and any other Loan Documents to which it is a party (a) are within its organizational powers, have been duly authorized by all necessary organizational action, (b) require no consent or approval of, or other action by or in respect of, or registration or filing with, any Governmental Authority, (c) do not contravene, or constitute a breach or a default under, any provision of its Organization Documents, (d) do not contravene any applicable Law or regulation, and (e) will not violate or result in a default under any indenture, agreement or other instrument binding upon any Loan Party or any of its Restricted Subsidiaries or by which any property or asset of any Loan Party or any of its Restricted Subsidiaries is bound, except, in the case of clauses (b), (d) and (e) as would not reasonably be expected to result in a Material Adverse Effect.
Section 3.03 Enforceability. The Loan Documents to which it is a party constitute the legal, valid and binding obligations of such Loan Party, enforceable against such Loan Party in accordance with their respective terms, except as may be limited by applicable bankruptcy, moratorium, insolvency or similar Laws affecting the rights of creditors generally and general principles of equity.
Section 3.04 Financial Information.
(a) The Initial Financial Statements present fairly, in all material respects, the combined financial position and combined results of operations and cash flows of the Borrower as of such dates and for such periods in conformity with GAAP and were prepared in good faith based on the assumptions that were believed to be reasonable in light of the then-existing conditions (subject to the proviso that it is understood that such pro forma financial statements are based upon professional opinions, estimates and adjustments and that the Loan Parties do not warrant that such opinions, estimates and adjustments will ultimately prove to have been accurate).
(b) Beginning with the initial delivery of the financial information required under Section 5.01(a) and Section 5.01(b), the financial information delivered to the Lender pursuant to such sections fairly presents, in all material respects, in conformity with GAAP, the consolidated financial position of the Borrower and its consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows as of such date (subject, in the case of interim statements, to normal year-end adjustments and the absence of footnotes).
Section 3.05 Litigation; No Material Adverse Effect.
(a) As of the Closing Date, there is no litigation, arbitration or governmental investigation, proceeding or inquiry pending against or, to the knowledge of the Borrower, threatened in writing against or affecting the Borrower or any Restricted Subsidiary as to which there is a reasonable possibility of an adverse determination (i) which could reasonably be expected to have a material adverse effect on the business, assets, financial condition, or operations of the Borrower and its Restricted Subsidiaries, taken as a whole, or (ii) which seeks to prevent, enjoin or delay the making of the Term Loan hereunder.
(b) As of the Closing Date, since December 31, 2013, there has been no Material Adverse Effect.
Section 3.06 Environmental Matters. Except with respect to any matter that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Restricted Subsidiaries (a) has failed to comply with any applicable Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any applicable Environmental Law, (b) has become subject to any Environmental Liability, (c) has received notice of any claim with respect to any Environmental Liability or (d) knows of any basis for any Environmental Liability. This Section 3.06 is the sole and exclusive representation and warranty of the Loan Parties with respect to Environmental Laws, Environmental Liabilities and Hazardous Materials contained in this Article III and no other
provision hereof shall be construed to constitute such a representation or warranty; provided that the foregoing does not limit the provisions of Section 3.04 or Section 3.05.
Section 3.07 Taxes. (a) The Borrower and its Restricted Subsidiaries have filed all material United States federal income tax returns and all other material tax returns have been filed on or before the applicable due date (as such due date may have been timely extended), and (b) all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Restricted Subsidiary have been paid (other than those which are currently being contested in good faith by appropriate proceedings or to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect or materially adversely affect the performance by the Borrower of its payment obligations under this Agreement or any Notes). The charges, accruals and reserves on the books of the Borrower and its Restricted Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate.
Section 3.08 Solvency. As of the Closing Date, the Borrower and its consolidated Subsidiaries taken as a whole are, and after the consummation of the Transactions will be, Solvent.
Section 3.09 Compliance with Laws. Such Loan Party and its Restricted Subsidiaries are in compliance with all applicable Laws, except to the extent that the failure to comply therewith would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 3.10 Title to Properties. As of the Closing Date, each Loan Party and each of its Restricted Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property necessary or otherwise material to the business of the Loan Parties and their respective Restricted Subsidiaries, taken as a whole, except for Liens permitted hereby and except where the failure to have such title or leasehold interest would not reasonably be expected to result in a Material Adverse Effect.
ARTICLE IV
CONDITIONS
Conditions to Effectiveness of this Agreement (Closing Date). This Agreement shall be effective upon satisfaction of the following conditions precedent set forth in this Article 4:
(a) Loan Documents. The Lender shall have received (i) this Agreement, executed and delivered by an Authorized Officer of each Loan Party and (ii) a Note substantially in the form of Exhibit A hereto and executed by an Authorized Officer of the Borrower.
(b) Representations and Warranties; Defaults. As of the Closing Date, (i) the accuracy of each of the representations and warranties made by each Loan Party in this Agreement in all material respects on and as of such date, provided that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof and (ii) the absence of any Default or Event of Default.
(c) Approvals. All material governmental and third party approvals necessary in connection with the Transactions shall have been obtained and be in full force and effect.
ARTICLE V
AFFIRMATIVE COVENANTS
From and after the Closing Date and until the principal of and interest on the Term Loan and all fees payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lender that:
Section 5.01 Financial Reporting Requirements. The Borrower will:
(a) make available its Form 10-K via the EDGAR system of the SEC (“EDGAR”) on the internet as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, which will in each case include an audited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and the related audited consolidated statements of income, cash flows and changes in partners’ capital for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year of the Borrower, all reported on in a manner acceptable to the SEC by KPMG LLP or other independent public accountants of nationally recognized standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit);
(b) make available its Form 10-Q via EDGAR on the internet as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, which will, in each case, include, a consolidated balance sheet of the Borrower and its Subsidiaries, as of the end of such quarter and the related (i) consolidated statement of income for such quarter and for the portion of the Borrower’s fiscal year ended at the end of such quarter, and (ii) consolidated statement of cash flows for the portion of the Borrower’s fiscal year ended at the end of such quarter, setting forth in each case in comparative form (A) for the consolidated balance sheet, the figures as of the end of the Borrower’s previous fiscal year, (B) for the consolidated statement of income, the figures for the corresponding quarter and the corresponding portion of the Borrower’s previous fiscal year and (C) for the consolidated statement of cash flows, the figures for the corresponding portion of the Borrower’s previous fiscal year, and the making available of such financial statements shall constitute a certification (subject to normal year-end adjustments) as to fairness of presentation and GAAP;
(c) furnish to the Lender within 10 days of making available via EDGAR each set of financial statements referred to in clauses (a) and (b) above, a certificate of a Financial Officer of the Borrower (i) stating whether there exists on the date of such certificate any Default or Event of Default and, if any Default or Event of Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto, and (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 6.08 and from and after the Investment Grade Rating Date, Section 6.03(b);
(d) furnish to the Lender within 10 days of making available via EDGAR the financial statements referred to in clauses (a) and (b) above, a certificate of a Financial Officer of
the Borrower certifying which Subsidiaries of the Borrower are Material Subsidiaries (which certificate may be combined with the certificate being delivered pursuant to clause (c) above on such date);
(e) furnish to the Lender from time to time such additional information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Lender may reasonably request; and
(f) promptly upon the Borrower first obtaining a Designated Rating, provide to the Lender written notice thereof.
Section 5.02 Notices. The Borrower will promptly furnish, or cause to be furnished, to the Lender, notice of: (a) the occurrence of any (i) Default or (ii) Event of Default hereunder; and (b) the institution of any litigation or proceeding involving it or a Restricted Subsidiary that has had or is reasonably expected to have a Material Adverse Effect (whether or not the claim asserted therein is considered to be covered by insurance). Each notice delivered under this Section 5.02 shall be accompanied by a statement of a Financial Officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
Section 5.03 Existence; Conduct of Business. The Borrower will, and will cause each Required Guarantor to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises necessary or desirable in the normal conduct of its business; provided that the foregoing shall not prohibit any merger or consolidation of the Borrower permitted under Section 6.02 or any merger, consolidation, liquidation or dissolution of any Subsidiary that is not otherwise prohibited by the terms of this Agreement; and provided further, that neither the Borrower nor any of its Restricted Subsidiaries shall be required to preserve, renew or keep in full force and effect any right, license, permit, privilege or franchise to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect.
Section 5.04 Payment of Taxes. The Borrower will pay and discharge, and will cause each Material Subsidiary to pay and discharge, at or before maturity, all their respective material tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain and will cause each Material Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same.
Section 5.05 Maintenance of Property; Insurance. The Borrower will keep, and will cause each Material Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; will maintain, and will cause each Material Subsidiary to maintain (either in the name of the Borrower or in such Material Subsidiary’s own name), with financially sound and reputable insurance companies, insurance on all their property in at least such amounts and against such risks as are usually insured against in the same general area by companies of similar size and established repute engaged in the same or a similar business.
Section 5.06 Compliance with Laws. The Borrower will comply, and cause each Restricted Subsidiary to comply, with all applicable laws, ordinances, rules, regulations, and requirements of any Governmental Authority, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
Section 5.07 Books and Records; Inspection Rights. The Borrower will keep, and will cause each Material Subsidiary to keep, proper books of record and account in which complete and accurate entries are made of its financial and business transactions to the extent required by GAAP.
Section 5.08 Use of Proceeds. The proceeds of the Term Loan will be used for general partnership, corporate or company purposes, as applicable, of the Loan Parties and their Subsidiaries, including, without limitation, acquisitions.
Section 5.09 First Tier Subsidiaries; Additional Guarantors.
(a) In the event any Material Subsidiary is or becomes a First Tier Subsidiary, the Borrower will, within 30 days thereof, cause such Material Subsidiary to become a party to this Agreement and guarantee the Obligations by executing and delivering to the Lender a Guarantee Joinder substantially in the form of Exhibit B.
(b) Any Restricted Subsidiary may, at its election, become a Guarantor by delivery to the Lender of a Guarantee Joinder.
(c) Upon delivery of a Guarantee Joinder by a Restricted Subsidiary, notice of which is hereby waived by each Loan Party, such Restricted Subsidiary shall be a Guarantor and shall be a party hereto (including being bound by the provisions of Article VIII) as if an original signatory hereto. Each Loan Party expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Loan Party hereunder. This Agreement shall be fully effective as to each Loan Party that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Loan Party hereunder.
Section 5.10 Designation and Conversion of Restricted and Unrestricted Subsidiaries; Certain other Matters Pertaining to Unrestricted Subsidiaries.
(a) Unless designated after the Closing Date in writing to the Lender pursuant to this Section, any Person that becomes a Subsidiary of the Borrower or any of its Restricted Subsidiaries shall be classified as a Restricted Subsidiary.
(b) The Borrower may designate a Subsidiary (other than the Initial Guarantor or any Required Guarantor) as an Unrestricted Subsidiary if (i) the requirements set forth in the definition of “Unrestricted Subsidiary” have been met with respect to such Subsidiary, (ii) immediately before and after such designation, no Default or Event of Default exists or would exist, (iii) after giving effect to such designation on a pro forma basis, the Borrower and its Subsidiaries would have been in compliance with all of the covenants contained in this Agreement, including Section 6.08, as of the end of the most recent fiscal quarter, (iv) a certificate of a Financial
Officer is delivered to the Lender as provided in the definition of “Unrestricted Subsidiary”, and (v) no Subsidiary may be designated as an Unrestricted Subsidiary if it will be treated as a “restricted subsidiary” for purposes of any indenture, credit agreement, or similar agreement.
(c) The Borrower may designate an Unrestricted Subsidiary to be a Restricted Subsidiary if (i) immediately before and after such designation, no Default or Event of Default exists or would exist, (ii) if such Unrestricted Subsidiary has outstanding Indebtedness, Liens and/or Attributable Debt under any Sale/Leaseback Transaction, it would be permitted to incur such Indebtedness, Debt and/or Attributable Debt pursuant to Section 6.01 and Section 6.03, (iii) after giving effect to such designation on a pro forma basis, the Borrower and its Subsidiaries would have been in compliance with all of the covenants contained in this Agreement, including Section 6.08, as of the end of the most recent fiscal quarter, (iv) the representations and warranties with respect to such Subsidiary set forth in Article III of this Agreement (other than the representations and warranties that are made only as of the Closing Date) are true and correct in all material respects with respect to such Subsidiary after giving effect to such designation (provided that the foregoing materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) and (v) the Borrower has provided to the Lender a certificate of a Financial Officer to the effect that each of the foregoing conditions has been satisfied. Immediately after such designation, such Subsidiary shall cease to be an Unrestricted Subsidiary. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness, Liens and Attributable Debt under Sale/Leaseback Transactions of such Subsidiary existing at such time.
(d) The Borrower shall cause all Subsidiaries of an Unrestricted Subsidiary to satisfy the requirements set forth in the definition of “Unrestricted Subsidiaries” and such Subsidiaries shall also be Unrestricted Subsidiaries. The Borrower will not permit any Unrestricted Subsidiary to hold any Equity Interests in, or any Indebtedness of, the Borrower or any Restricted Subsidiary. Neither the Borrower nor any Restricted Subsidiary shall make any investment in (including any acquisition of Equity Interests or loans, advances or capital contributions to) an Unrestricted Subsidiary if a Default or Event of Default exists immediately before or immediately after making such investment.
(e) If, at any time, any Unrestricted Subsidiary would fail to meet the requirements of the definition of Unrestricted Subsidiary or the applicable requirements set forth in this Section, (i) it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement, (ii) any Indebtedness, Liens and Attributable Debt under Sale/Leaseback Transactions of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary as of such date, and (iii) the Borrower shall notify the Lender, pursuant to a certificate or other notice given by a Financial Officer, that such Unrestricted Subsidiary is no longer an Unrestricted Subsidiary.
(f) The Borrower will not permit at any time the aggregate Net Tangible Assets of all Unrestricted Subsidiaries to exceed 20% of Consolidated Net Tangible Assets.
Section 5.11 Employee Matters. The Borrower shall notify the Lender in writing at least 30 days prior to hiring any employees. Upon such notification, the Borrower shall execute and deliver to the Lender an amendment to this Agreement incorporating provisions that are
substantially identical to those in Section 3.06 and clause (i) of Article VII of the Revolving Credit Agreement (including the defined terms used in such provisions).
ARTICLE VI
NEGATIVE COVENANTS
From and after the Closing Date and until the principal of and interest on the Term Loan and all fees payable hereunder have been paid in full, each Loan Party covenants and agrees with the Lender that:
Section 6.01 Liens. Neither the Borrower nor any Restricted Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except:
(a) Prior to the Investment Grade Rating Date:
(i) Liens described in Section 6.01(b)(vi) through (vii), and Section 6.01(b)(ix) through (xix);
(ii) Liens under any Sale/Leaseback Transaction permitted under Section 6.03(a)(iii);
(iii) Liens on cash and cash equivalents securing Hedging Obligations permitted under the Revolving Credit Agreement;
(iv) Liens not otherwise permitted by the other clauses of this Section 6.01(a) securing Indebtedness or other obligations of the Loan Parties or any of their respective Restricted Subsidiaries, provided that the sum, without duplication, of (1) the aggregate principal amount of all such Indebtedness and obligations plus (2) the outstanding Attributable Debt under all Sale/Leaseback Transactions of the Loan Parties and Restricted Subsidiaries permitted under Section 6.03(a)(iii), does not exceed an amount equal to 15% of Consolidated Net Tangible Assets at the time of creation, incurrence or assumption of such Lien or such Attributable Debt, as applicable; and
(v) Liens existing on the Closing Date.
(b) From and after the Investment Grade Rating Date:
(i) any Lien existing on any asset of any Person at the time such Person becomes a Restricted Subsidiary of the Borrower and not created in contemplation of such event, provided that such Lien attaches only to such asset and proceeds thereof;
(ii) any Lien on any asset securing Indebtedness (including Liens in respect of Capital Lease Obligations) incurred or assumed for the purpose of financing all or any part of the cost of acquiring, constructing, repairing or improving such asset, provided that (i) such Lien attached to such asset concurrently with or within 90 days after the acquisition
thereof or the date of completion of such construction, repair or improvement, and (ii) all such Liens attach only to the assets purchased, constructed, repaired or improved with the proceeds of the Indebtedness secured thereby and improvements, accessions, general intangibles and proceeds related thereto;
(iii) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower or a Restricted Subsidiary and not created in contemplation of such event, provided that such Lien attaches only to such asset and proceeds thereof;
(iv) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Restricted Subsidiary and not created in contemplation of such acquisition, provided that such Lien attaches only to such asset and proceeds thereof;
(v) any Lien arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section 6.01(b), provided that the principal amount of such Indebtedness is not increased (other than by amounts incurred to pay the costs of such refinancing, extension, renewal or refunding and any premiums paid in connection therewith) and such Lien does not attach to any additional assets;
(vi) Liens in favor of (x) the Administrative Agent securing Indebtedness or other obligations existing pursuant to the Revolving Credit Agreement and Liens in favor of a Credit Party (as defined in the Revolving Credit Agreement) on cash or cash equivalents required by the terms of the Revolving Credit Agreement and (y) the Lender securing Indebtedness or other obligations pursuant to this Agreement;
(vii) Liens to secure Indebtedness incurred or assumed in connection with pollution control, industrial revenue bond or similar types of financing, and Liens on property in favor of the United States or any state thereof, or any department, agency, instrumentality or political subdivision of any such jurisdiction, to secure Indebtedness incurred for the purpose of financing all or any part of the purchase price or cost of constructing, repairing or improving the property subject thereto;
(viii) Liens granted on accounts receivable or other rights to payment and related assets in connection with Securitization Transactions permitted by Section 6.03(b)(ii);
(ix) Liens on precious metals catalysts in connection with lease transactions and Liens under any Sale/Leaseback Transaction, in each case to the extent permitted by this Agreement;
(x) Liens on cash collateral granted to an Issuing Bank (as defined in the Revolving Credit Agreement) in connection with the replacement of such Issuing Bank under the Revolving Credit Agreement;
(xi) Liens for taxes that (i) are not yet due, (ii) are not more than sixty (60) days past due and not subject to penalties for non-payment, or (iii) are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;
(xii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s, or other similar types of Liens arising in the ordinary course of business securing amounts which are not overdue for a period of more than 60 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;
(xiii) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by the Employee Retirement Income Security Act of 1974, as amended from time to time;
(xiv) Liens to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(xv) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;
(xvi) Liens securing judgments for the payment of money not constituting an Event of Default under clause (g) of Article VII;
(xvii) Liens in favor of banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Borrower or any of its Restricted Subsidiaries on deposit with or in the possession of such bank, in each case in the ordinary course of business;
(xviii) customary netting and offset provisions in Hedging Agreements;
(xix) Liens on Equity Interests in an Unrestricted Subsidiary to secure Non-Recourse Debt on which such Unrestricted Subsidiary is an obligor; and
(xx) Liens not otherwise permitted by the foregoing clauses of this Section 6.01(b) securing Indebtedness and Hedging Obligations, provided that Priority Debt shall not exceed the amount permitted by Section 6.03(b)(i) as of the last day of any fiscal quarter (beginning with the last day of the fiscal quarter in which the Investment Grade Rating Date occurs).
Section 6.02 Fundamental Changes; Dispositions.
(a) A Loan Party will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer (in one transaction or in a series of transactions) all or substantially all of its assets to any other Person; provided that (A) any Person may consolidate or merge with or into the Borrower in a transaction in which the Borrower is the surviving Person; (B) any Loan Party (other than the Borrower) may merge into or consolidate with or sell, lease or otherwise transfer all or substantially all of its assets to (x) the Borrower or (y) a Restricted Subsidiary, provided that any such merger, consolidation, sale, lease or other transfer by the Initial Guarantor pursuant to this clause (y) shall be with, into or to a Guarantor or a Restricted Subsidiary that becomes a Guarantor contemporaneously with such merger, consolidation, sale, lease or other transfer; and (C) any Loan Party (other than the Borrower) may merge into, or consolidate with, any Person other than the Borrower or a Restricted Subsidiary if (x) such Loan Party is the surviving entity or (y) such other Person is the surviving entity and becomes a Restricted Subsidiary and a Guarantor contemporaneously with such merger or consolidation.
(b) Upon the occurrence and during the continuance of a Default or Event of Default, the Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, convey, sell, transfer, or otherwise dispose of assets (including interests in any Person) in any transaction or series of related transactions for consideration in excess of $5,000,000; provided, that, notwithstanding the foregoing and subject to Section 6.02(a) above, the Borrower and its Restricted Subsidiaries may enter into (i) sales of inventory in the ordinary course of business, (ii) leases of transportation capacity, storage capacity, processing capacity, and marine and/or dock usage capacity, in the ordinary course of business, (iii) conveyances, sales, transfers, or other dispositions of obsolete, surplus or unusable equipment or equipment no longer used or useful in their respective businesses, (iv) conveyances, sales, transfers and other dispositions between or among the Borrower and/or its Restricted Subsidiaries and (v) sales of receivables in connection with any Securitization Transaction permitted hereby.
Section 6.03 Indebtedness; Securitization Transactions; Sale/Leaseback Transactions.
(a) Prior to the Investment Grade Rating Date:
(i) Indebtedness. No Loan Party will, nor will it permit its Restricted Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, except:
(A) Indebtedness (x) under this Agreement and (y) under the Revolving Credit Agreement and the Loan Documents defined therein;
(B) Indebtedness of a Loan Party owing to another Loan Party or a Restricted Subsidiary of a Loan Party;
(C) other Indebtedness of the Loan Parties and their Restricted Subsidiaries in an aggregate principal amount not to exceed at any time outstanding, when added to the sum of (1) the outstanding amount of Attributable Debt under all
Sale/Leaseback Transactions of the Loan Parties and their Restricted Subsidiaries permitted under Section 6.03(a)(iii) plus (2) the outstanding principal amount of all Indebtedness of the Loan Parties under the Loan Documents, an amount equal to 25% of Consolidated Net Tangible Assets plus the Aggregate Commitment Amount (as defined in the Revolving Credit Agreement) in effect at the time of the incurrence of such Indebtedness;
(D) Indebtedness of a Loan Party or any Restricted Subsidiary as an account party in respect of trade letters of credit;
(E) Indebtedness of a Loan Party owing to Valero Energy Corporation or any of its Subsidiaries; and
(F) Indebtedness existing on the Closing Date.
(ii) Securitization Transactions. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any Securitization Transaction.
(iii) Sale/Leaseback Transactions. A Loan Party will not, and will not permit any Restricted Subsidiary to, enter into or incur any Attributable Debt under any Sale/Leaseback Transaction unless, after giving effect to such Sale/Leaseback Transaction, the sum, without duplication, of (A) the aggregate amount of Attributable Debt under all Sale/Leaseback Transactions of the Loan Parties and their Restricted Subsidiaries, plus (B) the outstanding principal amount of all Indebtedness of the Loan Parties and their Restricted Subsidiaries secured by liens permitted by Section 6.01(a)(iv), does not exceed an amount equal to 15% of Consolidated Net Tangible Assets at the time of consummation of such Sale/Leaseback Transaction.
(b) From and after the Investment Grade Rating Date:
(i) Priority Debt. The Borrower shall not permit the outstanding principal amount of Priority Debt, as of the last day of any fiscal quarter, beginning with the last day of the fiscal quarter in which the Investment Grade Rating Date occurs, to exceed an amount equal to 15% of Consolidated Net Tangible Assets as of such date. As used herein, “Priority Debt” means:
(A) the aggregate outstanding principal amount of secured Indebtedness and the aggregate amount of secured Hedging Obligations of the Borrower and its Restricted Subsidiaries; provided that Priority Debt shall not include Indebtedness secured by:
(1) Liens existing on any asset transferred by Valero Energy Corporation or a subsidiary of Valero Energy Corporation to the Borrower or a Restricted Subsidiary and Liens existing on any asset of any Person the ownership of which is transferred by Valero Energy Corporation or a subsidiary of Valero Energy Corporation to the Borrower or a Restricted
Subsidiary (collectively, “Transferred Liens”), to the extent that the aggregate outstanding principal amount of Indebtedness secured by such Liens does not exceed $10,000,000; or
(2) (I) Liens permitted pursuant to Section 6.01(b)(i) on assets of Persons that become Restricted Subsidiaries of the Borrower after the Closing Date (and proceeds thereof);
(II) Liens permitted pursuant to Section 6.01(b)(ii) on assets purchased, constructed, repaired or improved by the Borrower or a Restricted Subsidiary after the Closing Date (and improvements, accessions, general intangibles and proceeds related thereto) securing Indebtedness incurred or assumed by the Borrower or such Restricted Subsidiary after the Closing Date for the purpose of financing all or any part of the cost of acquiring, constructing, repairing or improving such assets;
(III) Liens permitted pursuant to Section 6.01(b)(iii) on assets of a Person merged or consolidated with or into the Borrower or a Restricted Subsidiary after the Closing Date (and proceeds thereof);
(IV) Liens permitted pursuant to Section 6.01(b)(iv) on assets acquired by the Borrower or a Restricted Subsidiary after the Closing Date (and proceeds thereof);
(V) Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section 6.03(b)(i), provided that the principal amount of such Indebtedness is not increased (other than by amounts incurred to pay the costs of such refinancing, extension, renewal or refunding and any premiums paid in connection therewith) and such Lien does not attach to any additional assets;
(VI) Liens permitted pursuant to Section 6.01(b)(vi);
(VII) Liens permitted pursuant to Section 6.01(b)(vii) on assets purchased, constructed, repaired or improved by the Borrower or a Restricted Subsidiary after the Closing Date for the purposes of financing all or part of the price or cost of constructing, repairing or improving such property;
(VIII) Liens permitted pursuant to Section 6.01(b)(viii);
(IX) Liens permitted pursuant to Section 6.01(b)(ix);
(X) Liens permitted pursuant to Section 6.01(b)(x); and
(XI) Liens permitted pursuant to Section 6.01(b)(xix); plus
(B) Attributable Debt of the Borrower and its Restricted Subsidiaries in respect of Sale/Leaseback Transactions to the extent that such Attributable Debt exceeds $100,000,000, plus
(C) the aggregate outstanding principal amount of unsecured Indebtedness of Non-Guarantor Subsidiaries (other than Excluded Subsidiary Debt).
For the avoidance of doubt, to the extent that a Guarantee constitutes Priority Debt and the Indebtedness Guaranteed thereby also constitutes Priority Debt, the amount of Priority Debt outstanding at such time shall be calculated without duplication and shall include only the amount of such Guaranteed Indebtedness constituting Priority Debt and shall not include the amount of such Guarantee.
(ii) Securitization Transactions. The Borrower will not permit the aggregate outstanding amount of Securitization Transactions to exceed $300,000,000 at any time.
Section 6.04 Restricted Payments. Prior to the Investment Grade Rating Date, the Borrower will not declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, during the occurrence and continuance of an Event of Default, or if an Event of Default would result therefrom.
Section 6.05 Changes in Organization Documents. No Loan Party shall make any changes to its Organization Documents that would reasonably be expected to have a Material Adverse Effect.
Section 6.06 Restrictive Agreements. The Borrower will not, and will not permit any Material Subsidiary to, enter into or permit to exist any agreement or other consensual arrangement that explicitly prohibits or restricts the ability of any Material Subsidiary to make any payment of any dividend or other distribution, direct or indirect, on account of any shares (or equivalent) of any class of Equity Interest of such Material Subsidiary, now or hereafter outstanding; provided that the foregoing shall not prohibit financial incurrence, maintenance and similar covenants that indirectly have the practical effect of prohibiting or restricting the ability of a Material Subsidiary to make such payments or provisions that require that a certain amount of capital be maintained, or prohibit the return of capital to shareholders above certain dollar limits; provided further, that the foregoing shall not apply to (i) prohibitions and restrictions imposed by law or by this Agreement, (ii) prohibitions and restrictions contained in, or existing by reason of, any agreement or instrument (A) existing on the Closing Date, (B) relating to any Indebtedness of, or otherwise to, any Person at the time such Person first becomes a Material Subsidiary, so long as such prohibition or restriction was not created in contemplation of such Person becoming a Material Subsidiary, and (C) effecting a renewal, extension, refinancing, refund or replacement (or successive extensions, renewals, refinancings, refunds or replacements) of Indebtedness or other obligations issued or outstanding under an agreement or instrument referred to in clauses (ii)(A) and (ii)(B) above, so long as the prohibitions or restrictions contained in any such renewal, extension, refinancing, refund or replacement agreement, taken as a whole, are not materially more restrictive than the prohibitions and restrictions contained in the original agreement or instrument, as determined in good faith by the Borrower or such Subsidiary, (iii) any prohibitions or restrictions
with respect to a Material Subsidiary imposed pursuant to an agreement that has been entered into in connection with a disposition of all or substantially all of the Equity Interests of such Subsidiary or assets thereof, (iv) restrictions contained in joint venture agreements, partnership agreements and other similar agreements with respect to a joint ownership arrangement restricting the disposition or distribution of assets or property of, or the activities of, such joint venture, partnership or other joint ownership entity, or any of such entity’s subsidiaries, if such restrictions are not applicable to the property or assets of any other entity and (v) any prohibitions or restrictions on any Securitization Entity pursuant to a Securitization Transaction permitted hereunder.
Section 6.07 Change in Nature of Business. The Borrower will not, and will not permit any Material Subsidiary to, engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Material Subsidiaries on the Closing Date or any business substantially related or incidental thereto or logical extensions thereof (including (a) the oil and gas refining (including alternative fuels, fuels from biomaterials, development and exploration of gas-to-liquids technology (including actual utilization and production)), marketing, processing and distribution businesses, (b) the natural gas gathering, processing, and transport, and NGL fractionation and marketing, businesses, (c) the chemical manufacturing, processing and marketing businesses, and (d) the operation of crude oil and refined petroleum products pipelines, terminals and other transportation and logistics assets.
Section 6.08 Consolidated Leverage Ratio. The Borrower shall maintain, as of the last day of each fiscal quarter commencing with the last day of the first full fiscal quarter ending after the Closing Date, a Consolidated Leverage Ratio of no greater than (x) during an Acquisition Period, 5.5 to 1.0 and (y) at all other times, 5.0 to 1.0. For purposes of calculating compliance with the foregoing Consolidated Leverage Ratio, Consolidated EBITDA may include, at the Borrower’s option, any Qualified Project EBITDA Adjustments as provided in the definition thereof.
ARTICLE VII
EVENTS OF DEFAULT
If any of the following events (“Events of Default”) shall occur on or after the Closing Date:
(a) the Borrower shall fail to pay (i) any principal of the Term Loan, or any Guarantor shall fail to make any payments due under the Subsidiary Guarantee, in each case, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise, in accordance with the terms hereof; (ii) any interest on the Term Loan, when and as the same shall become due and payable in accordance with the terms hereof, and such failure shall continue unremedied for a period of five Business Days; or (iii) any other amount payable hereunder, when and as the same shall become due and payable in accordance with the terms hereof, and such failure shall continue unremedied for a period of ten Business Days;
(b) any representation or warranty made by the Loan Parties in Article III or in any certificate, financial or other statement furnished by the Loan Parties pursuant to this Agreement shall prove to have been incorrect in any material respect when made;
(c) the Borrower shall fail to perform or observe any of its covenants or agreements contained in Section 5.02(a)(ii), Section 5.03 (with respect to the existence of the Borrower), Section 5.08, or Article VI;
(d) the Borrower or any Guarantor shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or any other Loan Document, and any such failure shall remain unremedied for 30 days;
(e) (i) the Borrower, any Guarantor, any Material Subsidiary or any combination thereof shall default beyond any applicable period of grace in any payment of principal of or interest on any Indebtedness (other than Securitization Indebtedness of any Securitization Entity) on which the Borrower, any Guarantor or any Material Subsidiary or any combination thereof is or are liable in an aggregate principal amount then outstanding of $50,000,000 or more or (ii) an event of default (other than a failure to pay principal or interest) as defined in any mortgage, indenture, agreement or instrument under which there may be issued, or by which there may be secured or evidenced, any such Indebtedness shall happen and shall result in such Indebtedness becoming or being declared due and payable prior to the date on which it could otherwise become due and payable;
(f) the General Partner, the Borrower, any Guarantor or any Material Subsidiary shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of all or a substantial part of its property, (ii) become unable, admit in writing its inability or fail to pay its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) commence a voluntary case under the federal bankruptcy laws of the United States of America or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or action shall be taken by it for the purpose of effecting any of the foregoing, or (vi) if without the application, approval or consent of such Guarantor, the General Partner, the Borrower or any of its Material Subsidiaries, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of such Guarantor, the General Partner, the Borrower or any of its Material Subsidiaries an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of such Guarantor, the General Partner, the Borrower or such Material Subsidiaries or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by such Guarantor, the General Partner, the Borrower or such Material Subsidiaries in good faith, the same shall (A) result in the entry of an order for relief or any such adjudication or appointment or (B) continue undismissed or unstayed for any period of 90 consecutive days;
(g) one or more judgments or decrees shall be entered against the Borrower, any of its Material Subsidiaries, any Guarantor or any combination thereof involving in the aggregate liability (not paid or fully covered by insurance) of $50,000,000 or more with respect to any Guarantor, the Borrower or any of its Material Subsidiaries and such judgments or decrees shall
not have been vacated, dismissed, discharged, stayed or bonded pending appeal within 45 days from the entry thereof;
(h) a Change in Control shall occur; or
(i) this Agreement, the Subsidiary Guarantee or any Note shall fail to be in full force and effect other than in accordance with its terms or as permitted hereby or any action is taken by the Borrower or any Guarantor to assert the invalidity or unenforceability of any of the foregoing;
then, and in every such event (other than an event with respect to the Borrower described in clauses (iv), (v) or (vi) of clause (f) of this Article), and at any time thereafter during the continuance of such event, the Lender may, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) refuse to fund any portion of the Term Loan not funded on the Closing Date (whereupon any commitment to fund such portion of the Term Loan shall immediately terminate), and (ii) declare the outstanding principal amount of the Term Loan to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Term Loan so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clauses (iv), (v) or (vi) of clause (f) of this Article, any commitment to fund the portion of the Term Loan not funded on the Closing Date shall automatically terminate and the principal of the Term Loan then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind (including notice of intent to accelerate or notice of acceleration), all of which are hereby waived by the Borrower.
ARTICLE VIII
SUBORDINATION TERMS
Section 8.01 Defined Terms. As used in this Article VIII:
(a) “Administrative Agent” has the meaning set forth in the definition of “Revolving Credit Agreement” in part (d) of this Section 8.01.
(b) “Person” when used in this Article VIII, has the meaning set forth in the Revolving Credit Agreement.
(c) “Proceeding” means any of the following in respect of a Subordinated Obligor or its assets or property: insolvency or bankruptcy proceedings, any receivership, reorganization or other similar proceedings, any distribution of assets, an assignment for the benefit of creditors or a marshalling of assets and liabilities, or proceedings for voluntary or involuntary liquidation, dissolution or other winding up of a Subordinated Obligor, whether or not involving insolvency or bankruptcy.
(d) “Revolving Credit Agreement” means that certain Credit Agreement dated as of November 14, 2013, among the Borrower, the Initial Guarantor, the lenders from time to time party thereto (the “Revolving Lenders”), and JPMorgan Chase Bank, N.A., as administrative agent for the Revolving Lenders (in such capacity, including any successors thereto, the “Administrative Agent”), as amended, restated, supplemented or otherwise modified from time to time.
(e) “Revolving Lenders” has the meaning set forth in the definition of “Revolving Credit Agreement” in part (d) of this Section 8.01.
(f) “Revolving Obligations” means the “Obligations” as defined in the Revolving Credit Agreement.
(g) “Subordinated Debt” means the Term Loan made by the Lender (as used in this Article VIII, the “Payee”) to any Subordinated Obligor (as defined below), which Term Loan may (but need not) be evidenced by notes made by a Subordinated Obligor (as defined below) to the order of Payee, as such loans may be renewed, consolidated, amended, extended, or otherwise modified, together with interest and premium, if any, thereon and other amounts payable in respect thereof, including any interest accruing after the date of filing of any Proceeding as hereinafter defined;
(h) “this Subordination Agreement” means the provisions of this Article VIII;
(i) “payment in full” or “paid in full” when used in respect of the Senior Obligations means such time as the Revolving Lenders (as defined below) have no further commitments to lend or issue Letters of Credit (as defined in the Revolving Credit Agreement defined below), all Revolving Obligations (other than contingent indemnification obligations not yet due and payable) have been paid in full in cash and all Letters of Credit have terminated or have been cash collateralized in accordance with the terms of the Revolving Credit Agreement; and
(j) “including” means “including without limitation”.
Section 8.02 Subordination.
(a) Senior Obligations. The payment of any amounts owing in respect of the Subordinated Debt shall be subordinated, to the extent and in the manner hereinafter set forth, to the following (the “Senior Obligations”): (A) all Revolving Obligations, (B) all obligations under the Subsidiary Guarantee contained in (and as defined in) the Revolving Credit Agreement, made by the Initial Guarantor in favor of the Administrative Agent and the Revolving Lenders, and (C) all obligations under any other guaranty made by any Subsidiary (as defined in the Revolving Credit Agreement) in favor of the Administrative Agent and the Revolving Lenders (the makers of any such guaranty, together with the Initial Guarantor, collectively, the “Revolving Credit Agreement Guarantors” and together with the Borrower, collectively, the “Subordinated Obligors” and each, a “Subordinated Obligor”), as each such agreement or guaranty described in the foregoing clauses (A) through (C) may be amended, renewed, extended, increased, substituted, refinanced, restructured, replaced, supplemented or otherwise modified from time to time, and in each case
including interest thereon accruing after the commencement of any Proceeding, whether or not such interest is an allowed claim in such Proceeding.
(b) Proceedings. In the event of a Proceeding, then:
(i) the holders of the Senior Obligations shall be entitled to receive payment in full of all Senior Obligations before Payee shall receive any payment or distribution on account of Subordinated Debt, and
(ii) any payment by, or on behalf of, or distribution of the assets of, a Subordinated Obligor of any kind or character on account of the Subordinated Debt, whether in cash, securities, property or otherwise, to which Payee would be entitled except for the provisions of this Subordination Agreement shall be paid or delivered by the Person making such payment or distribution (whether a trustee in bankruptcy, a receiver, custodian, liquidating trustee or any other Person) or by Payee to the extent such payment is received by Payee directly to the holders of the Senior Obligations or the Administrative Agent acting on their behalf, payable in accordance with the terms of the Revolving Credit Agreement, until the payment in full of all Senior Obligations.
(c) Default or Event of Default. (i) Upon the occurrence and during the continuation of a Default or Event of Default (each as defined in the Revolving Credit Agreement), Payee agrees not to ask, demand, sue for or take or receive from any Subordinated Obligor in cash, securities, property or otherwise, or by setoff, purchase, redemption (including from or by way of collateral) or otherwise, payment of all or any part of the Subordinated Debt, until payment in full of all Senior Obligations and Payee further agrees to turn over to the Administrative Agent for application in accordance with the Revolving Credit Agreement any such payment received in respect of the Subordinated Debt during the continuance of an Event of Default (as defined in the Revolving Credit Agreement) so long as payment in full of all Senior Obligations has not occurred. This Section 8.02(c)(i) shall cease to be applicable on the Investment Grade Rating Date as defined in the Revolving Credit Agreement (the “Revolving Credit Agreement Investment Grade Rating Date”).
(ii) This Section 8.02(c)(ii) shall be applicable from and after the Revolving Credit Agreement Investment Grade Rating Date. Upon the occurrence and during the continuation of an Event of Default as defined in the Revolving Credit Agreement, Payee agrees not to ask, demand, sue for or take or receive from any Subordinated Obligor in cash, securities, property or otherwise, or by setoff, purchase, redemption (including from or by way of collateral) or otherwise, payment of all or any part of the Subordinated Debt, until payment in full of all Senior Obligations.
(d) No Subrogation. Payee agrees that no payment or distribution to holders of Senior Obligations pursuant to the provisions of this Subordination Agreement shall entitle Payee to exercise any rights of subrogation in respect thereof, all of which are expressly waived herein, until the Senior Obligations have been paid in full.
(e) No Liens. Without the prior written consent of the Administrative Agent, no Subordinated Obligor shall give, or permit to be given and Payee shall not receive, accept or demand, any lien to secure any Subordinated Obligations, on any cash, securities, property or other assets, whether now existing or hereafter acquired, of any Subordinated Obligor.
Section 8.03 Waivers and Consents.
(a) Payee waives (i) promptness, diligence, notice of acceptance and any other notice with respect to the Senior Obligations and this Subordination Agreement and any requirement that the Administrative Agent or any Revolving Lender exhaust any right or take any action against any Subordinated Obligor or any other Person or any of their respective assets.
(b) All rights and interests of the holders of Senior Obligations hereunder, and all agreements and obligations of Payee and Subordinated Obligors under this Subordination Agreement, shall remain in full force and effect irrespective of: (i) any lack of validity or enforceability of any Revolving Credit Agreement or any other Loan Document as therein defined, or any agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, the Revolving Obligations, or any other amendment or waiver of or any consent to or departure from the Revolving Credit Agreement or any other Loan Document (as defined in the Revolving Credit Agreement), including any increase in the Senior Obligations or extension of the maturity thereof; (iii) any holder of Senior Obligations releasing any Subordinated Obligor from all or any part of the Senior Obligations by operation of law or otherwise, (iv) any enforcement or failure to enforce, or any delay in enforcing, any Loan Document (as defined in the Revolving Credit Agreement); or (v) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Subordinated Obligor or Payee or third party guarantor or surety other than payment in full of the Senior Obligations.
(c) No present or future holder of Senior Obligations shall be prejudiced in its right to enforce subordination of Payee by any act or failure to act on the part of any Subordinated Obligor whether or not such act or failure shall give rise to any right of rescission or other claim or cause of action on the part of Payee.
Section 8.04 Reinstatement. This Subordination Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any Senior Obligations is rescinded or must otherwise be returned by any holder of Senior Obligations in connection with any Proceeding, all as though such payment had not been made.
Section 8.05 Termination. This Subordination Agreement shall in all respects be a continuing agreement and shall remain in full force and effect until the earlier of (a) the payment in full of the Senior Obligations and (b) the payment in full in cash of the Subordinated Debt. Upon such payment in full, this Subordination Agreement shall terminate (subject to Section 8.04); provided that the parties hereto agree to each execute such instruments as may be reasonably requested by any other party hereto to further evidence such termination.
Section 8.06 Amendments, Etc. No amendment or waiver of any provision of this Subordination Agreement nor consent to any departure by Payee or any Subordinated Obligor
therefrom shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
Section 8.07 Rights of Payee. The provisions of the foregoing paragraphs with respect to subordination are solely for the purpose of defining the relative rights of the holders of Senior Obligations on the one hand, and Payee on the other hand, and none of such provisions shall impair, as between any Subordinated Obligor and Payee, the obligation of such Subordinated Obligor, which is unconditional and absolute, to pay to Payee the principal and interest under the Subordinated Debt in accordance with its terms, nor shall anything in such provisions prevent Payee from exercising all remedies otherwise permitted by applicable law or hereunder upon default hereunder, subject to the rights of holders of Senior Obligations under such provisions.
Section 8.08 Third-Party Beneficiaries. The holders of Senior Obligations are entitled to the benefits of the foregoing subordination provisions and are third-party beneficiaries thereof.
Section 8.09 Governing Law. THIS SUBORDINATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Notices.
(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:
(i) if to the Borrower, to it at Valero Energy Partners LP, One Valero Way, San Antonio, Texas 78249, Attention of Donna M. Titzman, Chief Financial Officer (Facsimile No. (210) 345-2267); and
(ii) if to the Lender, to it at Valero Energy Corporation, One Valero Way, San Antonio, Texas 78249, Attention of Michael S. Ciskowski, Executive Vice President and Chief Financial Officer.
(b) Electronic Communications. Notices and other communications to the parties hereunder may be delivered or furnished by electronic communication (including email and Internet or intranet websites).
Notices and other communications (i) sent to an email address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return email or other written acknowledgement); provided
that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, (ii) posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its email address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor and (iii) transmitted by telecopier or facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient).
Section 9.02 Waivers; Amendments. (a) No failure or delay by the Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Lender hereunder are cumulative and are not exclusive of any rights or remedies that it would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.
(b) Neither this Agreement or the Notes nor any provision of either of the foregoing may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Lender.
Section 9.03 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void).
Section 9.04 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents together constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective when it shall have been executed by the Lender and the Borrower, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 9.05 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
Section 9.06 Governing Law; Consent to Service of Process. This Agreement shall be construed in accordance with and governed by the law of the State of New York. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
Section 9.07 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
Section 9.08 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to the Term Loan, together with all fees, charges and other amounts which are treated as interest on the Term Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender in accordance with applicable law, the rate of interest payable in respect of the Term Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate.
Section 9.09 No Liability of General Partner. It is hereby understood and agreed that the General Partner shall have no liability, as general partner or otherwise, for the payment of any amount owing or to be owing hereunder or under the other Loan Documents. The Lender agrees that no claim arising against the Borrower or any other Loan Party under any Loan Document with respect to the Obligations shall be asserted against the General Partner or its assets. Notwithstanding the foregoing, nothing in this Section 9.09 shall be construed so as to prevent the Lender from commencing any action, suit or proceeding with respect to or causing legal papers to be served upon the General Partner for the purpose of obtaining jurisdiction over the Borrower or another Loan Party.
ARTICLE X
SUBSIDIARY GUARANTEE
Section 10.01 Guarantee. Each Guarantor, jointly and severally, hereby unconditionally and irrevocably guarantees to the Lender (the “Subsidiary Guarantee”), as primary obligor and not merely as surety, the prompt and complete payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of the Borrower, now or hereafter existing under this Agreement and any other Loan Document, and all other Obligations, whether for principal, interest, fees, expenses or otherwise, including obligations which, but for an automatic stay under Section 362(a) of the Bankruptcy Code or any other insolvency law or other proceeding, would become due (such obligations being hereinafter referred to as the “Guaranteed Obligations”), and agrees to pay any and all expenses (including the legal fees, charges and disbursements of counsel) incurred by the Lender in enforcing any rights under the Subsidiary Guarantee. No amendment or modification of the Subsidiary Guarantee may be made without the prior written consent of each Guarantor. Notwithstanding anything contained herein to the contrary, the obligations of the each Guarantor under the Subsidiary Guarantee shall be limited to an aggregate amount equal to the largest amount that would not render its obligations under the Subsidiary Guarantee subject to
avoidance under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any comparable provisions of any applicable state law.
Section 10.02 Waiver of Subrogation. Notwithstanding any payment or payments made by a Guarantor hereunder, or any set-off or application of funds of any Guarantor by the Lender, such Guarantor shall not be entitled to be subrogated to any of the rights of the Lender against the Borrower or against any collateral security or guarantee or right of offset held by the Lender for the payment of the Guaranteed Obligations, nor shall any Guarantor seek any reimbursement from the Borrower in respect of payments made by the Guarantor hereunder, until all amounts owing to the Lender by the Borrower are paid in full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Guaranteed Obligations shall not have been paid in full, such amount shall be held by such Guarantor, in trust for the Lender, segregated from other funds of such Guarantor and shall, forthwith upon receipt by such Guarantor, be turned over to the Lender, in the exact form received by such Guarantor (duly indorsed by such Guarantor, if required), to be applied against the Guaranteed Obligations, whether mature or unmatured, in such order as the Lender may determine.
Section 10.03 Amendments, Etc., with respect to the Guaranteed Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against such Guarantor, and without notice to or further assent by any Guarantor, any demand for payment of any of the Guaranteed Obligations made by the Lender may be rescinded by the Lender, and any of the Guaranteed Obligations continued, and the Guaranteed Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Lender, and this Agreement, and any Note and any other document in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Lender may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Lender for the payment of the Guaranteed Obligations may be sold, exchanged, waived, surrendered or released. The Lender shall have no obligation to protect, secure, perfect or insure any Lien or security interest at any time held by it as security for the Guaranteed Obligations or for this Subsidiary Guarantee or any property subject thereto.
Section 10.04 Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Lender upon this Subsidiary Guarantee or acceptance of this Subsidiary Guarantee; the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Subsidiary Guarantee; and all dealings between the Borrower and the Guarantors, on the one hand, and the Lender, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Subsidiary Guarantee. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower, such Guarantor or any other Guarantor with respect to the Guaranteed Obligations. This Subsidiary Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to, and each Guarantor hereby expressly waives any defenses to its obligations hereunder based upon (a) the
validity or enforceability of this Agreement, any Note, any of the Guaranteed Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Lender, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Guaranteed Obligations of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise, (c) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Lender, or (d) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or any Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Guaranteed Obligations, or of any Guarantor under this Subsidiary Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the Guarantors, the Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or guarantee for the Guaranteed Obligations or any right of offset with respect thereto, and any failure by the Lender to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security, or guarantee or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Lender against each Guarantor.
Section 10.05 Reinstatement. This Subsidiary Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of its property, or otherwise, all as though such payments had not been made.
Section 10.06 Payments. Each of the Guarantors and the Borrower hereby agrees that the Guaranteed Obligations will be paid to the Lender, without set-off or counterclaim in Dollars as expressed to be payable hereunder and under any Note, in immediately available funds at the office of the Lender specified in Section 9.01.
Section 10.07 Additional Guarantors. Upon the execution and delivery by any Person of a Guarantee Joinder and other required documents as provided in Section 5.09, such Person shall be a Guarantor and shall be a party hereto as if an original signatory hereto.
Section 10.08 Guaranty Release Matters. The Lender shall release any Guarantor from its obligations as a Guarantor under this Agreement pursuant to a written request made by the Borrower, if (a) such Guarantor ceases to be a Subsidiary of the Borrower or a Material Subsidiary of the Borrower that is a First Tier Subsidiary as a result of a transaction permitted under this Agreement, (b) such Guarantor is an Elective Guarantor at the time of such release or (c) at any time on or after the Investment Grade Rating Date, and only for so long as the Borrower maintains
an Investment Grade Rating, after giving pro forma effect to any such release occurring on or after the Investment Grade Rating Date, the Borrower is in compliance with Section 6.03(b)(i) and Section 6.08 and no Event of Default has occurred and is then continuing; provided that, for the avoidance of doubt, if the Borrower ceases to have an Investment Grade Rating, each Subsidiary that would have otherwise been required to be a Guarantor hereunder prior to giving effect to this Section 10.08, shall promptly, but in any event, within 10 Business Days of the loss of such Investment Grade Rating, execute and deliver to the Lender a joinder agreement in the form of Exhibit B hereto and become a Guarantor hereunder. Any such request shall be accompanied by a certificate of a Financial Officer of the Borrower certifying (which certification shall constitute a representation and warranty by the Borrower hereunder) that (i) no Event of Default then exists or will exist after giving effect to such release, (ii) after giving pro forma effect to any such release occurring on or after the Investment Grade Rating Date, the Borrower is in compliance with Section 6.03(b)(i) and Section 6.08, and (iii) the conditions for release set forth in this Section 10.08 have been satisfied.
(Signature Pages Begin Next Page)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
VALERO ENERGY PARTNERS LP, as Borrower
By: Valero Energy Partners GP LLC, its General
Partner
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By: /s/ Donna M. Titzman |
| Name: | Donna M. Titzman |
| Title: | Senior Vice President, Chief Financial |
| | Officer, and Treasurer |
VALERO PARTNERS OPERATING CO. LLC, as
a Guarantor
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By: /s/ Donna M. Titzman |
| Name: | Donna M. Titzman |
| Title: | Senior Vice President and Treasurer |
VALERO ENERGY CORPORATION, as Lender
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By: /s/ Michael S. Ciskowski |
| Name: | Michael S. Ciskowski |
| Title: | Executive Vice President and Chief |
| | Financial Officer |
ANNEX A
LEVERAGE-BASED PRICING GRID
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Consolidated Leverage Ratio | Level 1 | Level 2 | Level 3 | Level 4 |
≤ 2.75:1.00 | > 2.75:100 but ≤ 3.50:1.00 | > 3.50:100 but ≤ 4.25:1.00 | > 4.25:1.00 |
LIBOR Margin | 1.250% | 1.500% | 1.750% | 2.00% |
Prime Rate Margin | 0.250% | 0.500% | 0.750% | 1.00% |
Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date of delivery of a compliance certificate pursuant to Section 5.01(c), provided, however, that if any such compliance certificate is not delivered when due in accordance with such Section 5.01(c), then the Applicable Rate shall remain at the level determined by the most recently delivered compliance certificate and shall continue to apply until the first Business Day immediately following the date a compliance certificate is delivered in accordance with Section 5.01(c), whereupon the Applicable Rate shall be adjusted based upon the calculation of the Consolidated Leverage Ratio contained in such compliance certificate, and if the Applicable Rate would have been set at a higher level during the period of non-delivery of the compliance certificate, the Borrower shall pay to the Lender, on demand all amounts which would have accrued hereunder had the compliance certificate been delivered when due. The Applicable Rate in effect on the Closing Date shall be based on Pricing Level 1 until the first calculation date following the receipt by the Lender of the financial information and related compliance certificate for the first fiscal quarter ending after the Closing Date.
ANNEX B
RATINGS-BASED PRICING GRID
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Designated Ratings | Level 1 | Level 2 | Level 3 | Level 4 | Level 5 |
≥BBB+/Baa1 | BBB/Baa2 | BBB-/Baa3 | BB+/Ba1 | ≤BB+/Ba1 |
LIBOR Margin | 1.125% | 1.250% | 1.500% | 1.750% | 2.00% |
Prime Rate Margin | 0.125% | 0.250% | 0.500% | 0.750% | 1.00% |
Ratings in the above Ratings-Based Pricing Grid are based on the Designated Ratings issued by the Rating Agencies.
For purposes of the foregoing, (i) if the Designated Ratings are split, the higher of such ratings shall apply, provided that if the higher rating is two or more levels above the lower rating, the rating next below the higher of the two shall apply; (ii) if only one Rating Agency issues a Designated Rating, such rating shall apply; and (iii) if the Designated Rating established by Moody’s or S&P shall be changed (other than as a result of a change in the rating system of Moody’s or S&P), such change shall be effective as of the date on which it is first announced by the applicable Rating Agency. If the rating system of S&P or Moody’s shall change, or if any of S&P or Moody’s shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lender shall negotiate in good faith if necessary to amend this provision to reflect such changed rating system or the unavailability of Designated Ratings from such Rating Agencies and, pending the effectiveness of any such amendment, the LIBOR Margin and the Prime Rate Margin shall be determined by reference to the Designated Rating of such Rating Agency most recently in effect prior to such change or cessation.
THIS NOTE AND THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF THE “SENIOR OBLIGATIONS” (AS DEFINED IN THE HEREINAFTER DESCRIBED CREDIT AGREEMENT) AND ARE SUBJECT, IN ALL RESPECTS, TO THE TERMS AND CONDITIONS OF ARTICLE VIII OF THE CREDIT AGREEMENT. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE TERMS OF THIS NOTE AND THE TERMS OF ARTICLE VIII OF THE CREDIT AGREEMENT, THE TERMS OF ARTICLE VIII OF THE CREDIT AGREEMENT SHALL CONTROL.
EXHIBIT A
FORM OF PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, VALERO ENERGY PARTNERS LP, a Delaware limited partnership (the “Borrower”), hereby unconditionally promises to pay to ________________________ (the “Lender”) at the office of the Lender located at One Valero Way, San Antonio, Texas 78249, in lawful money of the United States of America and in same day funds, on the Maturity Date the principal amount of (a)____________ DOLLARS ($___________), or, if less, (b) the aggregate unpaid principal amount of the Term Loan made by the Lender to the Borrower pursuant to the Credit Agreement, as hereinafter defined. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in the Credit Agreement.
The holder of this Promissory Note (this “Note”) is authorized to, and prior to any transfer hereof shall, endorse on Schedule A attached hereto that is part of this Promissory Note, the amount of the Term Loan owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof; provided that the failure to make a notation of any such Term Loan or payment made on this Promissory Note shall not limit or otherwise affect the obligations of the Borrower hereunder with respect to payments of principal of or interest on this Promissory Note.
This Note (a) is one of the Notes referred to in the Subordinated Credit Agreement, dated as of March 2, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower and the Lender, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional prepayment in whole or in part as provided in the Credit Agreement.
Reference is made to the Credit Agreement for provisions for the acceleration of the maturity hereof.
All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest, notice of intent to accelerate, notice of acceleration and all other notices of any kind except those expressly required under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
VALERO ENERGY PARTNERS LP
By: VALERO ENERGY PARTNERS GP LLC,
its General Partner
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By:_______________________________________ |
| Name: | |
| Title: | |
SCHEDULE A
to
Promissory Note
TERM LOAN AND PAYMENTS OF PRINCIPAL
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Date | Amount of Term Loan | Amount of Principal Paid or Prepaid | Unpaid Principal Balance | Notation Made By |
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Exhibit B
FORM OF GUARANTEE JOINDER
This Guarantee Joinder is dated as of ___________ and is made by _____________, a _____________ (“Additional Guarantor”), in favor of VALERO ENERGY CORPORATION, a Delaware corporation (the “Lender”). All capitalized terms not defined herein shall have the meaning ascribed to them in the Credit Agreement hereinafter referenced.
RECITALS
WHEREAS, VALERO ENERGY PARTNERS LP, a Delaware limited partnership (the “Borrower”), is party to that certain Subordinated Credit Agreement dated as of March 2, 2015, between the Borrower and the Lender (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”); and
WHEREAS, Additional Guarantor has agreed to execute and deliver this Guarantee Joinder in order to become a party to the Credit Agreement as a Guarantor thereunder.
NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Additional Guarantor, for the benefit of the Lender (and, in respect of Article VIII of the Credit Agreement, for the benefit of the holders of Senior Obligations, as defined in such Article VIII of the Credit Agreement), hereby agrees as follows:
1. Additional Guarantor shall be a Guarantor for purposes of the Credit Agreement, effective from the date hereof, and agrees to perform all of the obligations of a Guarantor under, and to be bound in all respects by the terms of, the Credit Agreement applicable to Guarantors including, without limitation, the provisions of Article VIII thereof (including all waivers, releases, indemnifications and submissions set forth in the Credit Agreement), all of which terms are incorporated herein by reference, as if Additional Guarantor were a signatory party thereto; and, accordingly, Additional Guarantor hereby, jointly and severally with the other Guarantors party to the Credit Agreement, unconditionally and irrevocably guarantees the prompt and complete payment when due, whether at stated maturity, by acceleration or otherwise, of the Guaranteed Obligations, and further agrees to pay any and all expenses (including the legal fees, charges and disbursements of counsel) incurred by the Lender in enforcing any rights under the Subsidiary Guarantee, in all respects upon the terms set forth in the Credit Agreement. Notwithstanding anything contained herein or in the Subsidiary Guarantee to the contrary, the obligations of Additional Guarantor under the Subsidiary Guarantee shall be limited to an aggregate amount equal to the largest amount that would not render its obligations under the Subsidiary Guarantee subject to avoidance under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any comparable provisions of any applicable state law.
2. From and after the date hereof, all references to the “Guarantors,” or each individual “Guarantor,” in the Credit Agreement and the other Loan Documents shall be deemed to include Additional Guarantor, in addition to the other Guarantors, as if Additional Guarantor were a signatory party to the Credit Agreement. In addition, all references to [“Required Guarantors”] [“Elective
Guarantors”] in the Credit Agreement and the other Loan Documents shall be deemed to include Additional Guarantor (which references may change after the date hereof in accordance with the terms of the Credit Agreement).
3. Additional Guarantor hereby represents and warrants that the representations and warranties set forth in the Credit Agreement pertaining to it are true and correct in all material respects on and as of the date hereof (immediately after giving effect hereto), except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties are true and correct as of such specified earlier date; provided that, in each case, the representations and warranties contained in Section 3.05(b), Section 3.08 and Section 3.10 are made only on and as of the Closing Date, and none of the representations and warranties described in the foregoing shall be made on the date hereof if such date occurs after the Closing Date, as if set forth herein in their entirety.
4. This Guarantee Joinder and the rights and obligations of the parties hereunder shall be governed by and construed and interpreted in accordance with the laws of the State of New York. Acceptance and notice of acceptance hereof are hereby waived in all respects.
5. This Guarantee Joinder may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Guarantee Joinder shall become effective when the Lender shall have received counterparts hereof that, when taken together, bear the signatures of Additional Guarantor and the Lender. Delivery of an executed signature page to this Guarantee Joinder by facsimile transmission or other electronic imaging means (e.g. “pdf’ or “tif’) shall be effective as delivery of a manually signed counterpart hereof.
6. This Guarantee Joinder is a Loan Document.
7. All communications and notices hereunder shall be in writing and given as provided in the Credit Agreement. All communications and notices hereunder to Additional Guarantor shall be given to it at the address set forth under its signature.
8. This Guarantee Joinder and the Credit Agreement set forth the entire agreement of the parties hereto with respect to the subject matter hereof, and supersede all previous understandings, written or oral, with respect thereto.
[Signature Page to Follow]
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused this Guarantee Joinder to be duly executed and delivered as of the date first set forth above.
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[NAME OF ADDITIONAL GUARANTOR] |
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By: | ________________________________ |
Name: | ________________________ |
Title: | _________________________ |
Address for Notices:
ACKNOWLEDGED AND ACCEPTED,
as of the date above first written:
VALERO ENERGY CORPORATION,
By ____________________________
Name:
Title:
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Unitholders of Valero Energy Partners LP and
the Board of Directors of Valero Energy Partners GP LLC
We consent to the incorporation by reference in the Registration Statement (No.333-193348) on Form S-8 of Valero Energy Partners LP of our report dated March 5, 2015, with respect to the combined sheets of the Houston and St. Charles Terminal Services Business as of December 31, 2014 and 2013, and the related combined statements of operations, changes in net investment, and cash flows for the years then ended, which report appears in the Form 8‑K of Valero Energy Partners LP dated March 5, 2015.
/s/ KPMG LLP
San Antonio, Texas
March 5, 2015
EXHIBIT 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Unitholders of Valero Energy Partners LP and
the Board of Directors of Valero Energy Partners GP LLC
We have audited the accompanying combined balance sheets of the Houston and St. Charles Terminal Services Business as of December 31, 2014 and 2013, and the related combined statements of operations, changes in net investment, and cash flows for the years then ended. These combined financial statements are the responsibility of the Houston and St. Charles Terminal Services Business’ management. Our responsibility is to express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Houston and St. Charles Terminal Services Business as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
San Antonio, Texas
March 5, 2015
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
COMBINED BALANCE SHEETS
(In Thousands)
|
| | | | | | | | |
| | December 31, |
| | 2014 | | 2013 |
ASSETS | | | | |
Cash and cash equivalents | | $ | — |
| | $ | — |
|
Total current assets | | — |
| | — |
|
Property and equipment, at cost | | 344,261 |
| | 286,339 |
|
Accumulated depreciation | | (48,570 | ) | | (38,430 | ) |
Property and equipment, net | | 295,691 |
| | 247,909 |
|
Total assets | | $ | 295,691 |
| | $ | 247,909 |
|
LIABILITIES AND NET INVESTMENT | | | | |
Commitments and contingencies | | | | |
Net investment | | $ | 295,691 |
| | $ | 247,909 |
|
Total liabilities and net investment | | $ | 295,691 |
| | $ | 247,909 |
|
See Notes to Combined Financial Statements.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
COMBINED STATEMENTS OF OPERATIONS
(In Thousands)
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2014 | | 2013 |
Operating revenues | | $ | — |
| | $ | — |
|
Costs and expenses: | | | | |
Operating expenses | | 38,788 |
| | 36,324 |
|
General and administrative expenses | | 267 |
| | 261 |
|
Depreciation expense | | 10,502 |
| | 8,906 |
|
Total costs and expenses | | 49,557 |
| | 45,491 |
|
Net loss | | $ | (49,557 | ) | | $ | (45,491 | ) |
See Notes to Combined Financial Statements.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
COMBINED STATEMENTS OF CHANGES IN NET INVESTMENT
(In Thousands)
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2014 | | 2013 |
Balance as of beginning of year | | $ | 247,909 |
| | $ | 168,140 |
|
Net loss | | (49,557 | ) | | (45,491 | ) |
Net transfers from Valero | | 97,339 |
| | 125,260 |
|
Balance as of end of year | | $ | 295,691 |
| | $ | 247,909 |
|
See Notes to Combined Financial Statements.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2014 | | 2013 |
Cash flows from operating activities: | | | | |
Net loss | | $ | (49,557 | ) | | $ | (45,491 | ) |
Adjustment to reconcile net loss to net cash used in operating activities: | | | | |
Depreciation expense | | 10,502 |
| | 8,906 |
|
Net cash used in operating activities | | (39,055 | ) | | (36,585 | ) |
Cash flows from investing activities: | | | | |
Capital expenditures | | (58,701 | ) | | (87,918 | ) |
Net cash used in investing activities | | (58,701 | ) | | (87,918 | ) |
Cash flows from financing activities: | | | | |
Net transfers from Valero | | 97,756 |
| | 124,503 |
|
Net cash provided by financing activities | | 97,756 |
| | 124,503 |
|
Net change in cash and cash equivalents | | — |
| | — |
|
Cash and cash equivalents as of beginning of year | | — |
| | — |
|
Cash and cash equivalents as of end of year | | $ | — |
|
| $ | — |
|
See Notes to Combined Financial Statements.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
| |
1. | BUSINESS AND BASIS OF PRESENTATION |
References in this report to “we,” “us,” or “our” refer to the Houston and St. Charles Terminal Services Business as described below. References in this report to the “Partnership,” refer to Valero Energy Partners LP, one or more of its consolidated subsidiaries, or all of them taken as a whole. References in this report to “Valero” refer collectively to Valero Energy Corporation and its subsidiaries, other than Valero Energy Partners LP, any of its subsidiaries, or its general partner.
Business
The Houston and St. Charles Terminal Services Business is engaged in the business of terminaling crude oil, intermediates, and refined petroleum products at terminals located in Texas and Louisiana as more fully described below:
| |
• | Houston Terminal. The Houston Terminal operates a crude oil, intermediates, and refined petroleum products terminal that supports Valero’s Houston, Texas refinery. The terminal is located on the Houston ship channel and has storage tanks with 3.6 million barrels of storage capacity. |
| |
• | St. Charles Terminal. The St. Charles Terminal operates a crude oil, intermediates, and refined petroleum products terminal that supports Valero’s St. Charles Refinery located in Norco, Louisiana. The terminal is located on the Mississippi River and has storage tanks with 10 million barrels of storage capacity. |
Our assets currently do not generate revenues. Because we do not take ownership of or receive any payments based on the value of the crude oil, intermediates, or refined petroleum products that we handle and do not engage in the trading of any commodities, we have no direct exposure to commodity price fluctuations. Our operations consist of one reportable segment.
Effective March 1, 2015, the Partnership entered into a contribution agreement with Valero to acquire two of Valero’s subsidiaries, Valero Partners Houston, LLC and Valero Partners Louisiana, LLC, (the Acquisition). The assets of the Houston and St. Charles Terminal Services Business were contributed to these subsidiaries just prior to the Acquisition. The Partnership acquired these subsidiaries for total consideration of $671.2 million consisting of (i) cash of $571.2 million and (ii) the issuance of 1,908,100 common units representing limited partner interests in the Partnership and 38,941 general partner units representing general partner interests in the Partnership to the General Partner having an aggregate value, collectively of $100.0 million. The cash distribution was funded with $211.2 million of the Partnership’s cash on hand, $200.0 million of borrowings under the Partnership’s revolving credit facility, and $160.0 million of proceeds from a subordinated loan agreement entered into with Valero.
Basis of Presentation
These combined financial statements were derived from the consolidated financial statements and accounting records of Valero. These combined financial statements reflect the combined historical financial position, results of operations, and cash flows of the Houston Terminal business and the St. Charles Terminal business, including an allocable portion of Valero’s corporate costs.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
These combined financial statements are presented as if the operations of the Houston Terminal and St. Charles Terminal had been combined for all periods presented. There were no transactions between the operations of the Houston Terminal and St. Charles Terminal; therefore, there were no intercompany transactions or accounts to be eliminated in connection with the combination of these operations. The assets and liabilities in the combined balance sheets have been reflected on a historical cost basis as all of the assets and liabilities presented were wholly owned by Valero and will be transferred within Valero’s consolidated group. The combined statements of operations also include expense allocations for certain corporate functions historically performed by Valero and not allocated to the Houston and St. Charles Terminal Services Business, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, procurement, information technology, and operational support services such as engineering and logistics. These allocations were based primarily on specific identification of time and/or activities associated with the Houston and St. Charles Terminal Services Business, employee headcount, or capital expenditures. Our management believes the assumptions underlying the combined financial statements, including the assumptions regarding the allocation of general corporate expenses from Valero, are reasonable. Nevertheless, the combined financial statements may not include all of the expenses that would have been incurred had we been a stand-alone company during the periods presented and may not reflect our financial position, results of operations, and cash flows had we been a stand-alone company during the periods presented.
Valero uses a centralized approach to the cash management and financing of its operations. We transfer cash to Valero daily and Valero funds our operating and investing activities as needed. Accordingly, cash held by Valero at the corporate level was not allocated to us for any of the periods presented. We reflected transfers of cash to and from Valero’s cash management system as a component of net investment on our combined balance sheets, and these net transfers of cash are reflected as a financing activity in our combined statements of cash flows. We have also not included any interest expense on the net cash transfers from Valero.
We have evaluated events that occurred after December 31, 2014 through the date the audited combined financial statements were issued. Any material subsequent events that occurred during this time have been properly recognized or disclosed in these combined financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Investment
Net investment represents Valero’s historical investment in us, our accumulated net earnings after taxes, and the net effect of transactions with, and allocations from, Valero.
Use of Estimates
The preparation of financial statements in conformity with United States (U.S.) generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
Property and Equipment
The cost of property and equipment purchased or constructed, including betterments of property assets, is capitalized. However, the cost of repairs and normal maintenance of property and equipment is expensed when incurred. Betterments of property and equipment are those that extend the useful lives of the property and equipment or improve the safety of our operations. The cost of property and equipment constructed includes certain interest and overhead costs allocable to the construction activities.
When property and equipment are retired or replaced, the cost and related accumulated depreciation are eliminated, with any gain or loss reflected in depreciation expense, unless such amounts are reported separately due to materiality.
Depreciation of property and equipment is recorded on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the related asset.
Revenue Recognition
We are part of the consolidated operations of Valero and have not historically recognized revenue on transactions with Valero.
Income Taxes
Income taxes are accounted for under the asset and liability method, as if we were a separate taxpayer rather than a member of Valero’s consolidated tax return. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred amounts are measured using enacted tax rates expected to apply to taxable income in the year those temporary differences are expected to be recovered or settled.
Our taxable loss was included in the consolidated U.S. federal income tax returns of Valero and in certain consolidated state income tax returns. Following the Acquisition, our operations will be treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its share of the taxable income or loss. Therefore, we have excluded income taxes from these financial statements, except with respect to taxes incurred by our business activities in Texas. Texas apportions taxable income based upon gross revenue and Louisiana does not have a state partnership tax. Our Houston Terminal assets did not generate revenues; therefore, we did not recognize income taxes for the years ended December 31, 2014 and 2013, respectively.
Comprehensive Income
We have not reported comprehensive income due to the absence of items of other comprehensive income in the periods presented.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
| |
3. | RELATED-PARTY TRANSACTIONS |
Our operations consist of terminaling crude oil, intermediates, and refined petroleum products. We are part of the consolidated operations of Valero and have not historically recognized revenue on transactions with Valero.
Valero provides substantial labor and overhead support to us for the operation of business and management oversight of our day-to-day operations. Employee benefit expenses such as medical insurance, life insurance, and employee benefit plan expenses, including stock-based compensation, were allocated to us based on Valero’s determination of actual costs attributable to employees who provide services to us and were recorded as components of operating expenses and general and administrative expenses. As discussed in Note 1, Valero also charged us for certain corporate functions performed on our behalf that were recorded as general and administrative expenses.
Our management believes the charges allocated to us are a reasonable reflection of the utilization of services provided. However, those allocations may not fully reflect the expenses that would have been incurred had we been a stand-alone company during the periods presented and cannot be presumed to be carried out on an arm’s-length basis as the requisite conditions of competitive, free-market dealings may not exist.
The following table reflects significant transactions with Valero (in thousands):
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2014 | | 2013 |
Operating expenses | | $ | 16,144 |
| | $ | 15,842 |
|
General and administrative expenses | | 267 |
| | 261 |
|
For purposes of these financial statements, payables and receivables related to transactions between us and Valero are included as a component of net investment on our combined balance sheets.
Net Investment
The following is a reconciliation of the amounts presented as net transfers from Valero on our statements of net investment and statements of cash flows (in thousands):
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2014 | | 2013 |
Net transfers from Valero per statements of changes in net investment | | $ | 97,339 |
| | $ | 125,260 |
|
Less: Noncash transfers from (to) Valero | | (417 | ) | | 757 |
|
Net transfers from Valero per statements of cash flows | | $ | 97,756 |
| | $ | 124,503 |
|
Noncash transfers primarily represent the change in amounts accrued for capital expenditures as we do not reflect capital expenditures in our statements of cash flows until such amounts are paid.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
Major classes of property and equipment consisted of the following (in thousands):
|
| | | | | | | | |
| | December 31, |
| | 2014 | | 2013 |
Terminals and related assets | | $ | 321,725 |
| | $ | 184,158 |
|
Construction-in-progress | | 22,536 |
| | 102,181 |
|
Property and equipment, at cost | | 344,261 |
| | 286,339 |
|
Accumulated depreciation | | (48,570 | ) | | (38,430 | ) |
Property and equipment, net | | $ | 295,691 |
| | $ | 247,909 |
|
5. COMMITMENTS AND CONTINGENCIES
Operating Lease
Valero has an operating lease commitment with a third party for land occupied by certain of our property and equipment at our St. Charles Terminal. This lease expires January 1, 2045; however, we expect Valero will replace this lease with other arrangements in the future.
Rental expense under this operating lease for the parcel of land on which our tanks are located was $81,000 and $70,000 for the years ended December 31, 2014 and 2013, respectively, which was allocated to us by Valero and was included in operating expenses.
Litigation Matters
From time to time, we are party to claims and legal proceedings arising in the ordinary course of business. We also may be required by existing laws and regulations to report the release of hazardous substances and begin a remediation study. We have not recorded a loss contingency liability as there are no matters for which we have determined that a loss has been incurred. We re-evaluate and update our loss contingency liabilities as matters progress over time, and we believe that any changes to the recorded liabilities will not be material to our financial position, results of operations, or liquidity.
Pension and Retirement Savings Plans
Employees of Valero who directly or indirectly support our operations participate in the pension, postretirement health and life insurance, and defined contribution benefit plans sponsored by Valero. Costs associated with these benefit plans were included in the costs allocated to us from Valero and were included in operating expenses or general and administrative expenses, depending on the nature of the employee’s role in our operations.
HOUSTON AND ST. CHARLES TERMINAL SERVICES BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
Stock-based Compensation
We do not have any stock compensation plans. Eligible Valero employees that supported our operations participated in Valero’s 2011 Omnibus Stock Incentive Plan (the OSIP), which authorizes the grant of various stock and stock-based awards. Awards available under the OSIP include options to purchase shares of common stock of Valero, performance awards that vest upon the achievement of an objective performance goal, stock appreciation rights, and restricted stock that vests over a period determined by Valero’s compensation committee. Prior to the approval of the OSIP by Valero’s stockholders, most of the equity awards granted to Valero employees were made under Valero’s 2005 Omnibus Stock Incentive Plan and 2003 Employee Stock Incentive Plan. Certain Valero employees supporting our operations were historically granted these types of awards. Stock-based compensation costs were allocated to us from Valero and were included in operating expenses and general and administrative expenses.
Summary of Employee Benefit Plan Costs
Our share of pension and postretirement costs, defined contribution plan costs, and stock-based compensation costs was as follows (in thousands):
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2014 | | 2013 |
Pension and postretirement costs | | $ | 12 |
| | $ | 22 |
|
Defined contribution plan costs | | 10 |
| | 8 |
|
Stock-based compensation costs | | 2 |
| | 2 |
|
EXHIBIT 99.2
VALERO ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Set forth on the following pages are the unaudited pro forma consolidated balance sheet as of December 31, 2014 and the unaudited pro forma consolidated statements of income for each of the years in the three-year period ended December 31, 2014, together with the notes to the unaudited pro forma consolidated financial statements, of Valero Energy Partners LP. Unless otherwise stated or the context otherwise indicates, all references to “Valero Energy Partners LP,” the “Partnership,” “us,” “our,” “we,” or similar expressions for time periods prior to the initial public offering (the Offering) of common units of Valero Energy Partners LP on December 16, 2013, refer to Valero Energy Partners LP Predecessor, our “Predecessor” for accounting purposes. For time periods subsequent to the Offering, these terms refer to Valero Energy Partners LP, one or more of its consolidated subsidiaries, or all of them taken as a whole. The pro forma consolidated financial statements have been prepared based on the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 with certain pro forma adjustments made to those financial statements as further discussed below. The pro forma consolidated financial statements should be read in conjunction with such historical consolidated financial statements, including the related financial statement notes.
Effective March 1, 2015, the Partnership entered into a contribution agreement with Valero to acquire two of Valero’s subsidiaries, Valero Partners Houston, LLC and Valero Partners Louisiana, LLC, (the Acquisition). The assets of the Houston and St. Charles Terminal Services Business were contributed to these subsidiaries just prior to the Acquisition. The Partnership acquired these subsidiaries for total consideration of $671.2 million consisting of (i) cash of $571.2 million and (ii) the issuance of 1,908,100 common units representing limited partner interests in the Partnership and 38,941 general partner units representing general partner interests in the Partnership to the General Partner having an aggregate value, collectively of $100.0 million. We funded the cash distribution to Valero with $211.2 million of our cash on hand, $200.0 million of borrowings under our revolving credit facility, and $160.0 million of proceeds from a subordinated loan agreement with Valero. The board of directors also approved the Partnership’s entry into various agreements with Valero related to the contribution agreement, including amended and restated schedules to our omnibus agreement, an amended and restated services and secondment agreement, additional schedules to our commercial agreements with respect to the related logistics assets, and lease agreements.
The Acquired Business is engaged in the terminaling of crude oil, intermediates, and refined petroleum products at terminals located in Texas and Louisiana as more fully described below:
| |
• | Houston Terminal. The Houston Terminal operates a crude oil, intermediates, and refined petroleum products terminal that supports Valero’s Houston, Texas refinery. The terminal is located on the Houston ship channel and has storage tanks with 3.6 million barrels of storage capacity. |
| |
• | St. Charles Terminal. The St. Charles Terminal operates a crude oil, intermediates, and refined petroleum products terminal that supports Valero’s St. Charles Refinery located in Norco, Louisiana. The terminal is located on the Mississippi River and has storage tanks with 10 million barrels of storage capacity. |
The Partnership owns and operates all of the Acquired Business and began receiving fees for services commencing on March 1, 2015. Pursuant to the terms of the amended and restated services and secondment agreement, the Partnership reimburses Valero for the costs (including wages and benefits) of certain personnel
VALERO ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Continued)
seconded to our general partner to provide certain operational services to us in support of our pipeline, terminaling, and storage facilities, including the Acquired Business. Pursuant to the terms of the amended and restated schedules to our omnibus agreement, the operational and administrative support fee owed by us to Valero increased from $9.3 million to $10.4 million annually as of March 1, 2015 for additional services provided in connection with the Acquired Business.
The assets of the Acquired Business are recorded at historical cost as the Acquisition is considered to be a reorganization of entities under common control. The pro forma adjustments are based on currently available information and certain estimates and assumptions; therefore, actual results may differ from the pro forma amounts. However, our management believes the assumptions are reasonable for presenting the significant effects of the transactions and that the pro forma adjustments give appropriate effect to those assumptions, are factually supportable, and are properly applied in the pro forma financial statements.
The pro forma adjustments have been prepared as if the transactions effected as of the date of the Acquisition had taken place on December 31, 2014 in the case of the unaudited pro forma consolidated balance sheet, and as of January 1, 2013 in the case of the unaudited pro forma consolidated statements of income for the years ended December 31, 2014 and 2013. Pro forma adjustments were not applied to the unaudited pro forma consolidated statement of income for the year ended December 31, 2012, as the presentation of pro forma transactions cannot meaningfully or accurately depict what operating results would have been had the Acquisition occurred at a date earlier than January 1, 2013.
The pro forma financial statements give pro forma effect to the matters described in the accompanying notes, including:
| |
• | the acquisition of the Houston and St. Charles Terminal Services Business from Valero for total consideration of $671.2 million consisting of (i) a cash distribution of $571.2 million and (ii) 1,908,100 common units and 38,941 general partner units having an aggregate value, collectively, of $100.0 million. We funded the cash distribution to Valero with $211.2 million of our cash on hand, $200.0 million of borrowings under our revolving credit facility, and $160.0 million of proceeds from a subordinated loan agreement with Valero. |
| |
• | our entry into additional schedules to our commercial agreements with Valero, and the recognition of terminaling revenue under those schedules for the volumes throughput and handled by the Acquired Business during the periods presented; |
| |
• | our entry into amended and restated schedules to our omnibus agreement with Valero; |
| |
• | our general partner’s entry into an amended and restated services and secondment agreement with Valero; |
| |
• | the payment of insurance premiums in excess of those allocated by Valero in the combined financial statements of the Acquired Business for business interruption, property, and third-party liability insurance coverage; |
| |
• | the payment of rent expense on land located at Valero’s Houston Refinery and St. Charles Refinery; |
VALERO ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| |
• | the estimated interest expense that would have been incurred had we borrowed $160.0 million under the subordinated loan agreement with Valero and $200.0 million under the revolving credit facility; and |
| |
• | the reduction in the deferred tax liability related to a reduction in the apportionment rate of the Texas margin tax and associated adjustment for the tax basis in the Acquired Business. |
The pro forma financial statements may not be indicative of the results that actually would have occurred if the Acquisition had occurred on the dates indicated, or the results that will be obtained in the future.
VALERO ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2014
(In Thousands)
|
| | | | | | | | | | | | | | | | | | |
| | Historical | | Acquired Business | | Pro Forma Adjustments | | | | Pro Forma |
| | (Audited) | | (Audited) | | | | | | |
ASSETS | | | | | | | | | | |
Current assets: | | | | | | | | | | |
Cash and cash equivalents | | $ | 236,579 |
| | $ | — |
| | $ | (211,551 | ) | | (a) | | $ | 25,028 |
|
Receivables from related party | | 8,499 |
| | — |
| | — |
| | | | 8,499 |
|
Prepaid expenses and other | | 727 |
| | — |
| | — |
| | | | 727 |
|
Total current assets | | 245,805 |
| | — |
| | (211,551 | ) | | | | 34,254 |
|
Property and equipment, at cost | | 474,843 |
| | 344,261 |
| | — |
| | | | 819,104 |
|
Accumulated depreciation | | (125,960 | ) | | (48,570 | ) | | — |
| | | | (174,530 | ) |
Property and equipment, net | | 348,883 |
| | 295,691 |
| | — |
| | | | 644,574 |
|
Deferred charges and other assets, net | | 1,385 |
| | — |
| | — |
| | | | 1,385 |
|
Total assets | | $ | 596,073 |
| | $ | 295,691 |
| | $ | (211,551 | ) | | | | $ | 680,213 |
|
LIABILITIES AND PARTNERS’ CAPITAL | | | | | | | | | | |
Current liabilities: | | | | | | | | | | |
Current portion of capital lease obligations | | $ | 1,200 |
| | $ | — |
| | $ | — |
| | | | $ | 1,200 |
|
Accounts payable – related parties | | 4,297 |
| | — |
| | — |
| | | | 4,297 |
|
Accrued liabilities | | 1,054 |
| | — |
| | — |
| | | | 1,054 |
|
Taxes other than income taxes | | 765 |
| | — |
| | — |
| | | | 765 |
|
Deferred revenue from related party | | 124 |
| | — |
| | — |
| | | | 124 |
|
Total current liabilities | | 7,440 |
| | — |
| | — |
| | | | 7,440 |
|
Capital lease obligations, net of current portion | | 1,519 |
| | — |
| | — |
| | | | 1,519 |
|
Debt, less current portion | | — |
| | — |
| | 360,000 |
| | (b) | | 360,000 |
|
Deferred income taxes | | 830 |
| | — |
| | (144 | ) | | (c) | | 686 |
|
Other long-term liabilities | | 1,065 |
| | — |
| | — |
| | | | 1,065 |
|
Partners’ capital: | | | | | | | | | | |
Common unitholders – public | | 374,954 |
| | — |
| | (100 | ) | | (d) | | 374,854 |
|
Common unitholder – Valero | | 58,844 |
| | — |
| | (18,250 | ) | | (d) | | 40,594 |
|
Subordinated unitholder – Valero | | 146,804 |
| | — |
| | (248,871 | ) | | (d) | | (102,067 | ) |
General partner – Valero | | 4,617 |
| | — |
| | (8,495 | ) | | (d) | | (3,878 | ) |
Net investment | | — |
| | 295,691 |
| | (295,691 | ) | | (e) | | — |
|
Total partners’ capital | | 585,219 |
| | 295,691 |
| | (571,407 | ) | | | | 309,503 |
|
Total liabilities and partners’ capital | | $ | 596,073 |
| | $ | 295,691 |
| | $ | (211,551 | ) | | | | $ | 680,213 |
|
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
VALERO ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2014
(In Thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Historical | | Acquired Business | | Pro Forma Adjustments | | | | Pro Forma | |
| | (Audited) | | (Audited) | | | | | | | |
Operating revenues – related party | | $ | 129,180 |
| | $ | — |
| | $ | 108,726 |
| | (f) | | $ | 237,906 |
| |
Costs and expenses: | | | | | | | | | | | |
Operating expenses | | 31,719 |
| | 38,788 |
| | 1,766 |
| | (g) | | 72,273 |
| |
General and administrative expenses | | 12,330 |
| | 267 |
| | 833 |
| | (h) | | 13,430 |
| |
Depreciation expense | | 16,451 |
| | 10,502 |
| | — |
| | | | 26,953 |
| |
Total costs and expenses | | 60,500 |
| | 49,557 |
| | 2,599 |
| | | | 112,656 |
| |
Operating income (loss) | | 68,680 |
| | (49,557 | ) | | 106,127 |
| | | | 125,250 |
| |
Other income, net | | 1,504 |
| | — |
| | — |
| | | | 1,504 |
| |
Interest expense | | (872 | ) | | — |
| | (4,706 | ) | | (i) | | (5,578 | ) | |
Income (loss) before income taxes | | 69,312 |
| | (49,557 | ) | | 101,421 |
| | | | 121,176 |
| |
Income tax expense | | 548 |
| | — |
| | 175 |
| | (j) | | 723 |
| |
Net income (loss) | | 68,764 |
| | (49,557 | ) | | 101,246 |
| | | | 120,453 |
| |
Less: Net income (loss) attributable to Predecessor | | 9,483 |
| | (49,557 | ) | | 49,557 |
| | | | 9,483 |
| |
Net income attributable to partners | | 59,281 |
| | — |
| | 51,689 |
| | | | 110,970 |
| |
Less: General partner’s interest in net income | | 1,379 |
| | — |
| | 1,041 |
| | (k) | | 2,420 |
| |
Limited partners’ interest in net income | | $ | 57,902 |
| | $ | — |
| | $ | 50,648 |
| | | | $ | 108,550 |
| |
| | | | | | | | | | | |
Net income per limited partner unit – basic and diluted: | | | | | | | | | | | |
Common units | | $ | 1.01 |
| | | | | | | | $ | 1.83 |
| (l) |
Subordinated units | | $ | 1.01 |
| | | | | | | | $ | 1.83 |
| (l) |
| | | | | | | | | | | |
Weighted-average limited partner units outstanding: | | | | | | | | | | | |
Common units – basic | | 28,790 |
| | | | 1,908 |
| | (l) | | 30,698 |
| |
Common units – diluted | | 28,791 |
| | | | 1,908 |
| | (l) | | 30,699 |
| |
Subordinated units – basic and diluted | | 28,790 |
| | | | — |
| | | | 28,790 |
| |
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
VALERO ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2013
(In Thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | Historical | | Acquired Business | | Pro Forma Adjustments | | | | Pro Forma | |
| | (Audited) | | (Audited) | | | | | | | |
Operating revenues – related party | | $ | 124,985 |
| | $ | — |
| | $ | 109,093 |
| | (f) | | $ | 234,078 |
| |
Costs and expenses: | | | | | | | | | | | |
Operating expenses | | 32,205 |
| | 36,324 |
| | 23 |
| | (g) | | 68,552 |
| |
General and administrative expenses | | 7,195 |
| | 261 |
| | 839 |
| | (h) | | 8,295 |
| |
Depreciation expense | | 16,256 |
| | 8,906 |
| | — |
| | | | 25,162 |
| |
Total costs and expenses | | 55,656 |
| | 45,491 |
| | 862 |
| | | | 102,009 |
| |
Operating income (loss) | | 69,329 |
| | (45,491 | ) | | 108,231 |
| | | | 132,069 |
| |
Other income, net | | 309 |
| | — |
| | — |
| | | | 309 |
| |
Interest expense | | (198 | ) | | — |
| | (5,159 | ) | | (i) | | (5,357 | ) | |
Income (loss) before income taxes | | 69,440 |
| | (45,491 | ) | | 103,072 |
| | | | 127,021 |
| |
Income tax expense | | 1,434 |
| | — |
| | 71 |
| | (j) | | 1,505 |
| |
Net income (loss) | | 68,006 |
| | (45,491 | ) | | 103,001 |
| | | | 125,516 |
| |
Less: Net income (loss) attributable to Predecessor | | 65,965 |
| | (45,491 | ) | | 100,480 |
| | | | 120,954 |
| |
Net income attributable to partners | | 2,041 |
| | — |
| | 2,521 |
| | | | 4,562 |
| |
Less: General partner’s interest in net income | | 41 |
| | — |
| | 50 |
| | (k) | | 91 |
| |
Limited partners’ interest in net income | | $ | 2,000 |
| | $ | — |
| | $ | 2,471 |
| | | | $ | 4,471 |
| |
| | | | | | | | | | | |
Net income per limited partner unit – basic and diluted: | | | | | | | | | | | |
Common units | | $ | 0.03 |
| | | | | | | | $ | 0.08 |
| (l) |
Subordinated units | | $ | 0.03 |
| | | | | | | | $ | 0.08 |
| (l) |
| | | | | | | | | | | |
Weighted-average limited partner units outstanding – basic and diluted: | | | | | | | | | | | |
Common units | | 28,790 |
| | | | 1,908 |
| | (l) | | 30,698 |
| |
Subordinated units | | 28,790 |
| | | | — |
| | | | 28,790 |
| |
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
VALERO ENERGY PARTNERS LP
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2012
(In Thousands)
|
| | | | | | | | | | | | |
| | Historical | | Acquired Business | | Pro Forma |
| | (Audited) | | (Unaudited) | | |
Operating revenues – related party | | $ | 115,889 |
| | $ | — |
| | $ | 115,889 |
|
Costs and expenses: | | | | | |
|
Operating expenses | | 34,473 |
| | 37,902 |
| | 72,375 |
|
General and administrative expenses | | 6,546 |
| | 235 |
| | 6,781 |
|
Depreciation expense | | 16,550 |
| | 6,522 |
| | 23,072 |
|
Total costs and expenses | | 57,569 |
| | 44,659 |
| | 102,228 |
|
Operating income (loss) | | 58,320 |
| | (44,659 | ) | | 13,661 |
|
Other income, net | | 337 |
| | — |
| | 337 |
|
Interest expense | | (307 | ) | | — |
| | (307 | ) |
Income (loss) before income taxes | | 58,350 |
| | (44,659 | ) | | 13,691 |
|
Income tax expense | | 553 |
| | — |
| | 553 |
|
Net income (loss) | | $ | 57,797 |
|
| $ | (44,659 | ) | | $ | 13,138 |
|
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
VALERO ENERGY PARTNERS LP
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
| |
(a) | This adjustment reflects the following increases and decreases to cash: |
| |
• | Increases to cash: $200.0 million borrowing under our revolving credit agreement and $160.0 million of proceeds from a subordinated loan agreement with Valero. |
| |
• | Decreases to cash: payment of $571.2 million as part of the total consideration for the Acquired Business and estimated transaction costs of $351,000 associated with the Acquisition. |
| |
(b) | This adjustment reflects the $200.0 million of borrowings under our revolving credit agreement and $160.0 million of borrowings under the subordinated loan agreement with Valero. |
| |
(c) | This adjustment reflects the reduction in the deferred tax liability related to a reduction in the apportionment rate of the Texas margin tax and associated adjustment for the tax basis in the Acquired Business. |
| |
(d) | This adjustment reflects the following increases and decreases to partners’ capital (in thousands): |
|
| | | | | | | | | | | | | | | | |
| | Estimated Transaction Costs | | Issuance of Common and General Partner Units | | Excess Consideration | | Pro Forma Adjustments |
Common unitholders – public | | $ | (100 | ) | | $ | — |
| | $ | — |
| | $ | (100 | ) |
Common unitholder – Valero | | (78 | ) | | 98,000 |
| | (116,172 | ) | | (18,250 | ) |
Subordinated unitholder – Valero | | (166 | ) | | — |
| | (248,705 | ) | | (248,871 | ) |
General partner – Valero | | (7 | ) | | 2,000 |
| | (10,488 | ) | | (8,495 | ) |
Total | | $ | (351 | ) | | $ | 100,000 |
| | $ | (375,365 | ) | | $ | (275,716 | ) |
Excess consideration of $375.4 million is calculated as total consideration of $671.2 million for the Acquired Business, net of Valero’s net investment in the Acquired Business of $295.7 million and net of the reduction in the deferred tax liability of $144,000 as described in Note (c).
| |
(e) | This adjustment reflects the elimination of Valero’s net investment in the Acquired Business, and its reclassification to partners’ capital (see Note (d)). |
| |
(f) | This adjustment reflects revenues associated with the Partnership’s entry into additional schedules to our commercial agreements with Valero related to the Acquired Business. Revenues were calculated using the throughput rates included in those schedules. Volumes used were historical volumes throughput and handled by the assets of the Acquired Business. |
| |
(g) | This adjustment reflects the following increases to operating expenses: |
| |
• | a net increase of $2.5 million for each of the years ended December 31, 2014 and 2013 for insurance premiums in excess of those allocated by Valero in the combined financial statements of the Acquired Business for business interruption, property, and third-party liability insurance coverage. |
VALERO ENERGY PARTNERS LP
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The insurance premiums that we will incur are based on quotes from Valero’s captive insurance company from which we will obtain insurance coverage.
| |
• | a net decrease of $1.3 million and net increase of $458,000 for the years ended December 31, 2014 and 2013, respectively, for the payment of rent expense on land located at Valero’s Houston Refinery and St. Charles Refinery, net of rent expense and other facility-related expenses, including utilities, allocated to the Acquired Business. |
| |
• | a net increase of $493,000 and net decrease of $3.0 million for the years ended December 31, 2014 and 2013, respectively, for the annual secondment fee of $17.4 million payable by the Partnership to Valero related to the Acquired Business, net of employee-related expenses allocated to the Acquired Business. |
| |
(h) | This adjustment reflects a net increase of $833,000 and $839,000 for the years ended December 31, 2014 and 2013, respectively, to general and administrative expenses for the annual administrative fee payable by the Partnership to Valero in excess of such expenses allocated to the Acquired Business. The annual administrative fee increased from $9.3 million to $10.4 million as of March 1, 2015, for the management of our day-to-day operations after the closing of the Acquisition under the amended and restated schedules to our omnibus agreement. |
| |
(i) | This adjustment reflects variable interest expense at 1.41% and 1.44% for the years ended December 31, 2014 and 2013, respectively, on the $160.0 million of borrowings under the subordinated loan agreement with Valero and $200.0 million of borrowings under our revolving credit agreement, partially offset by a reduction of $355,000 and $15,000 in the years ended December 31, 2014 and 2013, respectively, in the commitment fee for the unutilized portion of the revolving credit agreement. A change of 0.125% in the interest rate associated with the borrowings would result in a $450,000 change in annual interest expense. |
| |
(j) | This adjustment reflects the increase in tax expense attributable to the Texas margin tax. |
| |
(k) | The purpose of this adjustment is to reflect our general partner’s interest in our net income. We compute net income allocated to the general partnership interest by applying the provisions of our partnership agreement as more fully described in Note (l). |
| |
(l) | Basic and diluted net income per limited partner unit is determined pursuant to the two-class method for master limited partnerships. The two-class method is an earnings allocation formula that is used to determine earnings to our general partner, common unitholders, and participating securities according to (i) distributions pertaining to each period’s net income and (ii) participation rights in undistributed earnings. |
We calculate net income available to limited partners based on the distributions pertaining to each period’s net income. After considering the appropriate period’s distributions, the remaining undistributed earnings or excess distributions over earnings, if any, are allocated to the general partner, limited partners, and other participating securities in accordance with the contractual terms of our partnership agreement and as prescribed under the two-class method. Participating securities include incentive distribution rights
VALERO ENERGY PARTNERS LP
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(IDRs) and awards under our 2013 Incentive Compensation Plan that receive distribution equivalent rights (DERs). However, the terms of our partnership agreement limit the general partner’s incentive distribution to the amount of available cash, which, as defined in our partnership agreement, is net of reserves deemed appropriate. As such, IDRs are not allocated undistributed earnings or distributions in excess of earnings in the calculation of net income per limited partner unit. Diluted net income per limited partner unit is computed based on the weighted average number of units plus the effect of dilutive potential units outstanding during the period using the two-class method.
Pro forma net income per limited partner unit is calculated only for the periods subsequent to the Offering as no units were outstanding prior to the Offering. Because all newly issued common units and general partner units associated with the Acquisition were assumed to have been outstanding for the entire period subsequent to the Offering, the pro forma basic and diluted weighted average number of common and subordinated units outstanding equals the number of common and subordinated units outstanding as of December 31, 2014 and 2013, plus the number of newly issued common units, or 1,908,100 units, at the closing of the Acquisition.
For purposes of the pro forma calculation, we have assumed that distributions were declared for each common and subordinated unit equal to actual distributions declared during 2013 and 2014, including cash distributions declared on IDRs during 2014.
VALERO ENERGY PARTNERS LP
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following reflects the calculation of pro forma net income per limited partner unit for the years ended December 31, 2014 and 2013 in the manner described above (in thousands, except per unit amounts). All amounts, including distributions, are on a pro forma basis.
|
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2014 |
| | | | Limited Partners | | | | |
| | General Partner | | Common Units | | Subordinated Units | | Restricted Units | | Total |
Allocation of pro forma net income to determine pro forma net income available to limited partners: | | | | | | | | | | |
Distributions, excluding general partner’s IDRs | | $ | 1,147 |
| | $ | 28,887 |
| | $ | 27,091 |
| | $ | — |
| | $ | 57,125 |
|
General partner’s IDRs | | 200 |
| | — |
| | — |
| | — |
| | 200 |
|
DERs | | — |
| | — |
| | — |
| | 6 |
| | 6 |
|
Distributions and DERs declared | | 1,347 |
| | 28,887 |
| | 27,091 |
| | 6 |
| | 57,331 |
|
Undistributed earnings | | 1,073 |
| | 27,124 |
| | 25,438 |
| | 4 |
| | 53,639 |
|
Pro forma net income available to limited partners – basic | | $ | 2,420 |
| | 56,011 |
| | 52,529 |
| | $ | 10 |
| | $ | 110,970 |
|
Add: DERs | | | | 10 |
| | — |
| | | | |
Pro forma net income available to limited partners – diluted | | | | $ | 56,021 |
| | $ | 52,529 |
| | | | |
| | | | | | | | | | |
Pro forma net income per limited partner unit – basic: | | | | | | | | | | |
Weighted-average units outstanding | | | | 30,698 |
| | 28,790 |
| | | | |
| | | | | | | | | | |
Pro forma net income per limited partner unit – basic | | | | $ | 1.83 |
| | $ | 1.83 |
| |
| | |
| | | | | | | | | | |
Pro forma net income per limited partner unit – diluted: | | | | | | | | | | |
Weighted-average units outstanding | | | | 30,698 |
| | 28,790 |
| | | | |
Common equivalent units for restricted units | | | | 1 |
| | — |
| | | | |
Weighted-average units outstanding – diluted | | | | 30,699 |
| | 28,790 |
| | | | |
| | | | | | | | | | |
Pro forma net income per limited partner unit – diluted | | | | $ | 1.83 |
| | $ | 1.83 |
| | | | |
VALERO ENERGY PARTNERS LP
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2013 |
| | | | Limited Partners | | |
| | General Partner | | Common Units | | Subordinated Units | | Total |
Allocation of pro forma net income to determine pro forma net income available to limited partners: | | | | | | | | |
Distributions | | $ | 45 |
| | $ | 1,136 |
| | $ | 1,065 |
| | $ | 2,246 |
|
Undistributed earnings | | 46 |
| | 1,171 |
| | 1,099 |
| | 2,316 |
|
Pro forma net income available to limited partners – basic and diluted | | $ | 91 |
| | $ | 2,307 |
| | $ | 2,164 |
| | $ | 4,562 |
|
| | | | | | | | |
Pro forma net income per limited partner unit – basic and diluted: | | | | | | | | |
Weighted-average units outstanding | | | | 30,698 |
| | 28,790 |
| | |
| | | | | | | | |
Pro forma net income per limited partner unit – basic and diluted | | | | $ | 0.08 |
| | $ | 0.08 |
| | |
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