EXHIBIT 2.02
Crack Spread Retained Interest Agreement
This Crack Spread Retained Interest Agreement ("Agreement") is made and
entered into as of the 25th day of November, 2002 between Xxxxxxxx Refining &
Marketing, L.L.C., a Delaware limited liability company ("Xxxxxxxx") and Premcor
Refining Group, Inc., a Delaware corporation ("Premcor") in consideration of the
sale and purchase of the Assets, as described in that certain Asset Purchase and
Sale Agreement (the "Asset PSA") by and among Xxxxxxxx et al. and Premcor and
Premcor Inc., the covenants and agreements set forth in the Asset PSA, the sum
of Ten Dollars, and in further consideration of the covenants and agreements
hereinafter set forth.
1. This Agreement is conditioned and shall become effective upon the
Closing of the transactions contemplated by the Asset PSA. Pursuant to this
Agreement, Xxxxxxxx has retained the income interest described in this Agreement
(the "Retained Interest") deriving from the Assets sold to Premcor under the
Asset PSA. Under this Agreement, Premcor will pay to Xxxxxxxx the Retained
Interest Payment as more fully described in paragraph 2 below.
2. The Retained Interest Payment will be based upon 50% of any excess
of an annual average "actual margin" per barrel calculated as set forth below
("Actual Margin") over a "stipulated margin" per barrel as set forth below
("Stipulated Margin") multiplied by Crude Oil Throughput at the Memphis Refinery
acquired by Premcor from Xxxxxxxx under the Asset PSA. The Retained Interest
Payment is to be calculated annually for each 12-month period beginning on the
first day of the calendar month immediately following the Closing Date under the
Asset PSA (unless the Closing Date is the first day of a calendar month in which
event the beginning date will be the Closing Date), but no earlier than January
1, 2003, and will terminate on the last day of the eighty-fourth calendar month
of the period ("Retained Interest Payment Period").
Xxxxxxxx will have no right to receive any Retained Interest Payment
for any period after the Retained Interest Payment Period terminates. Each
12-month period after the first 12-month period shall commence on the
anniversary of the first day of the preceding 12-month period.
3. The Retained Interest Payment in any applicable 12-month period in
the Retained Interest Payment Period shall be calculated as follows:
[ (Actual Margin - Stipulated Margin) x .50] x number of days in the
Retained Interest Payment Period during each applicable 12-month period
x Crude Oil Throughput.
The Actual Margin will be calculated on a daily basis for each day in
the Retained Interest Payment Period as follows:
(Gas Crack + Heat Crack) / 2
where:
Gas Crack = Gas x 42 - WTI
Heat Crack = Heat x 42 - WTI
where:
Gas = The daily arithmetic average of the high and low prices in
dollars per gallon as published in Xxxxx'x Oilgram Price
Report ("Xxxxx'x") under the heading "Product Price
Assessments - U.S. Gulf Coast Pipeline Unl 87" (lowest
applicable RVP, but not less than 7.8 RVP unless a lower RVP
becomes the new USGC market standard during the VOC control
period), excluding Colonial Pipeline Grade M-0 or 7.0 RVP
during the Retained Interest Payment Period in the applicable
12-month period. The prices used shall represent Spot U.S.
Gulf Coast Pipeline 87 Octane Conventional Unleaded Regular
Gasoline for Colonial Pipeline Grades X-0, X-0, X-0, or M-4 at
a Pasadena, Texas origin.
WTI = The daily settlement of the NYMEX front month West Texas
Intermediate contract in dollars per barrel during the
Retained Interest Payment Period in the applicable 12-month
period. The price used shall represent light sweet crude oil
at Cushing, Oklahoma as the origin point.
Heat = The daily arithmetic average of the high and low prices in
dollars per gallon as published in Xxxxx'x under the heading
"Product Price Assessments - U.S. Gulf Coast Pipeline No. 2"
during the Retained Interest Payment Period in the applicable
12-month period. The prices used shall represent Spot U.S.
Gulf Coast Pipeline Number 2 Heating Oil for Colonial Pipeline
Grade 86 or 0.20 wt.% sulfur diesel fuel at a Pasadena, Texas
origin.
For non-publication days the prices shall be the arithmetic average
of the prices for the last preceding publication day and the next following
publication day.
The Stipulated Margin shall be for each applicable 12-month period in
the Retained Interest Payment Period as follows:
12-Month Period Stipulated Margin
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First $3.25
Second 3.35
Third 3.45
Fourth 3.55
Fifth 3.65
Sixth 3.75
Seventh 3.85
The Crude Oil Throughput shall be a deemed throughput of 167,123 barrels per day
for each applicable 12-month period.
4. Forty-five (45) days after the end of each 12-month period that is
within a Retained Interest Payment Period, Premcor shall calculate the Retained
Interest Payment, if any, for the completed 12-month period. There will be no
payment for any particular payment period if the value of a Retained Interest
Payment is less than zero for such period. Premcor shall deliver its Retained
Interest Payment calculations with supporting documentation to Xxxxxxxx.
Xxxxxxxx shall confirm the amount of Retained Interest Payment, if any, that is
due within thirty (30) days ("Confirmation Period").
Xxxxxxxx and its authorized representatives shall, at reasonable times,
have access to the books and records of the Premcor relating to the calculation
of the Retained Interest. Xxxxxxxx shall have the right to audit those records
at any reasonable time during the Confirmation Period. Premcor will fully
cooperate with Xxxxxxxx to accomplish the audit as expeditiously as possible.
Xxxxxxxx may retain outside auditors whose costs and fees shall be borne by
Xxxxxxxx.
Premcor's calculation of the Retained Interest Payment shall be deemed
to be final at the expiration the Confirmation Period unless Premcor receives a
written objection to such calculation. If Xxxxxxxx makes such objection, it
shall at the same time, provide, in writing, an alternative calculation of the
Retained Interest Payment with supporting documentation. If the Parties are
unable to reach agreement on the calculation of the Retained Interest Payment
within thirty (30) days of the expiration of the Confirmation Period the dispute
shall be resolved in accordance with Article X of the Asset PSA.
The payment of the Retained Interest Payment, if any, shall be due and
payable forty-five (45) days after the expiration of the Confirmation Period. If
there is a dispute, Premcor shall pay, if any amount, based upon its calculation
of the Retained Interest Payment, subject to the dispute resolution provisions
of Article X of the Asset PSA. If a published price, publication, or the
composition or method that is used to determine (in whole or part) a particular
published price, which is used in the calculation of the Retained Interest
Payment, is discontinued or changed during the term of Retained Interest Payment
Period, the Parties shall use a substitute method for determining such price
used in the calculation of the Retained Interest Payment based upon an
arms-length, third-party price for a like product which should duly take into
account quality and transportation differentials.
5. The cumulative Retained Interest Payments during the Retained
Interest Payment Period shall not exceed $75,000,000.
6. The amounts payable to Xxxxxxxx under this Agreement shall be due
and payable without condition and without any right of set-off, counterclaim or
other
reaction, for any reason, including, without limitation, for any Claim that
Premcor may have against Xxxxxxxx or Xxxxxxxx' Guarantor or Affiliate under the
indemnity provisions of the Asset PSA or otherwise.
7. With respect to the Retained Interest, Xxxxxxxx and Premcor agree
and covenant that (a) Xxxxxxxx, notwithstanding its ownership of the Retained
Interest, will not be entitled to receive any cash other than the Retained
Interest Payments, (b) Xxxxxxxx and its Affiliates will have no right to manage,
control, convey, operate or encumber the Assets or the Business and will have no
obligation solely as a consequence of ownership of the Retained Interest for
liabilities, costs or other obligations resulting from the Assets or the
Business after Closing, and (c) such interest is an interest in income only with
respect to the Assets as set forth herein.
8. This Agreement may be executed in multiple counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
9. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by Premcor (whether by operation of law
or otherwise) without the prior written consent of Xxxxxxxx. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the Parties and their respective successors and assigns.
Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon any person other than the parties hereto, their
successors and assigns, any right, remedy or claim under or by reason of this
Agreement.
10. This Agreement constitutes the entire agreement between the parties
relating to the subject matter hereof, and supersedes any prior understandings,
agreements, arrangements and representations between the parties, written or
oral, to the extent they related to the subject matter hereof.
11. All notices, requests, demands, claims and other communications
required or permitted to be given hereunder shall be in writing and shall be
given by (a) personal delivery (effective upon delivery), (b) facsimile
transmission (effective on the next day after transmission), or (c) recognized
overnight delivery service (effective on the next day after delivery to the
delivery service), in each case addressed to the intended recipient as set forth
below:
If to Premcor:
The Premcor Refining Group Inc.
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: General Counsel
If to Xxxxxxxx:
c/o The Xxxxxxxx Companies
Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
With copies (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx, P.C.
0000 Xxxxx Xxxxx Tower
00 Xxxx 0xx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: Lynnwood X. Xxxxx, Xx.
Facsimile: (000) 000-0000
General Counsel
Xxxxxxxx Energy Services
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Any party may change its address(es) for receiving notices by giving written
notice of such change to the other party in accordance with this Section 11.
12. This Agreement may be amended by the parties at any time only by a
written instrument signed on behalf of each of the parties.
13. Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, such provision shall be interpreted to be only
so broad as is enforceable.
14. The parties may, to the extent legally allowed: (a) extend the time
for the performance of any of the obligations or other acts of the other party,
(b) waive any inaccuracies in the representations and warranties of the other
Party contained herein or in any document delivered pursuant hereto, or (c)
waive performance of any of the covenants or agreements, or satisfaction of any
of the conditions, contained herein. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. Except as provided in this Agreement,
no action taken pursuant to this Agreement, including any investigation by or
on behalf of either party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by either party of a
breach of any provision hereof shall not operate or be construed as a waiver of
any prior or subsequent breach of the same or any other provisions hereof.
15. The performance of Premcor's obligations under this Agreement shall
be guaranteed under the guaranty (referred to as "Purchaser's Guaranty")
deliverable by Premcor, Inc. at Closing under the terms of the Asset PSA.
16. This Agreement is governed by and shall be construed in accordance
with the law of the State of New York.
17. This Agreement may be executed in one or more counterparts, and by
each party in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all of which shall together
constitute but one and the same agreement. This Agreement may be duly delivered
by one party by its transmission of a facsimile signature page of this
Agreement.
The Premcor Refining Group, Inc. Xxxxxxxx Refining & Marketing, L.L.C.
By: /s/ Xxxx Xxxxxx By: /s/ Xxxxx Xxxxxxxx
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Name: Xxxx Xxxxxx Name: Xxxxx Xxxxxxxx
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Title: Title:
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Premcor, Inc. ("Purchaser's Guarantor")
By: /s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
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Title:
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