-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DLU/5DLhzIn4TO3dZnlWvFiMc+NwOFjSsysbcl2ZNxKNLDdUyXLDOSGB/X6c60ZQ SJHR/eJED93rqcPjHS02zw== 0000856465-95-000009.txt : 19951023 0000856465-95-000009.hdr.sgml : 19951023 ACCESSION NUMBER: 0000856465-95-000009 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951004 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951019 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIANT INDUSTRIES INC CENTRAL INDEX KEY: 0000856465 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 860642718 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10398 FILM NUMBER: 95582494 BUSINESS ADDRESS: STREET 1: 23733 N SCOTTSDALE RD CITY: SCOTTSDALE STATE: AZ ZIP: 85255 BUSINESS PHONE: 6025858888 MAIL ADDRESS: STREET 1: 23733 N SCOTTSDALE RD CITY: SCOTTSDALE STATE: AZ ZIP: 85255 8-K 1 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) October 4, 1995 GIANT INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware (State or jurisdiction of incorporation) 1-10398 86-0642718 (Commission File Number) (IRS Employer Identification No.) 23733 North Scottsdale Road Scottsdale, Arizona 85255 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (602) 585-8888 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On October 4, 1995, Giant Industries Arizona, Inc. and San Juan Refining Company (collectively "the Company"), each a direct or indirect wholly-owned subsidiary of Giant Industries, Inc. ("Giant"), completed the purchase of the 18,000 barrel per day ("bpd") Bloomfield Refinery ("the Refinery") located in Bloomfield, New Mexico, along with related pipeline and transportation assets. The Refinery and related assets were purchased from Gary-Williams Energy Co. and its wholly-owned subsidiary Bloomfield Refining Company ("BRC"), a privately-held company not affiliated with the Company or Giant, for a price of $55 million, determined as a result of arms'-length negotiations, plus approximately $7.5 million for crude oil and refined products inventories associated with the refinery operations. The purchase agreement also provides for potential contingent payments to be made to BRC over approximately the next six years should certain criteria be met. The Refinery includes the following major processing units: - 18,000 bpd Crude Distillation Unit - 6,200 bpd Catalytic Cracking Unit - 4,000 bpd Catalytic Reforming Unit - 4,000 bpd Naphtha Hydrotreating Unit - 3,000 bpd Distillate Hydrotreating Unit - 2,000 bpd Catalytic Polymerization Unit Also included in the purchase is approximately 25 miles of pipeline connecting the Refinery to the Texas-New Mexico and Four Corners common carrier pipeline systems and various automobiles and small trucks. The Refinery has been and will continue to be used to process primarily locally acquired crude oil into refined products which are distributed principally in Southern Utah, Southern Colorado, Northwestern New Mexico and Northeastern Arizona. The purchase was funded with approximately $32.5 million of cash on hand and $30.0 million provided under a three-year unsecured revolving term facility evidenced by a Credit Agreement (the "Agreement") with Bank of America Illinois and Bank of America National Trust and Savings Association, as Agent. In addition, the Agreement contains a three-year unsecured working capital facility to provide working capital and letters of credit in the ordinary course of business. The availability of funds under this working capital facility will be the lesser of (i) $40.0 million, or (ii) the amount under a borrowing base as defined in the Agreement. Both credit facilities have floating interest rates that are tied to various short-term indices. The Agreement contains certain covenants and restrictions which require Giant to, among other things, maintain a minimum consolidated net worth; minimum fixed charge coverage ratio; minimum funded debt to total capitalization percentage; and places limits on investments, prepayment of senior subordinated debt, guarantees, liens and restricted payments. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired BLOOMFIELD REFINING COMPANY CONDENSED BALANCE SHEET JUNE 30, 1995
ASSETS JUNE 30, 1995 ----------- (UNAUDITED) CURRENT ASSETS Cash and temporary investments $ 5,004,313 Accounts receivable - affiliates 8,119,859 Accounts receivable 452,296 Inventories 8,955,818 Prepaid crude oil - affiliate 6,017,091 Prepaid expenses and other 990,457 ----------- Total current assets 29,539,834 ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 23,296,346 Gas plants, property and equipment 5,124,801 Less: Accumulated depreciation (7,410,590) ----------- 21,010,557 Construction in progress 277,979 ----------- Total property, plant and equipment 21,288,536 ----------- Other 281,783 ----------- TOTAL ASSETS $51,110,153 =========== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable - affiliates $12,200,562 Accounts payable 296,331 Accrued liabilities 2,144,797 Income taxes payable - affiliate 863,000 ----------- Total current liabilities 15,504,690 ----------- NON-CURRENT LIABILITIES Deferred income taxes, net 1,216,700 Accrued turnaround costs 2,525,447 Other 115,941 ----------- Total non-current liabilities 3,858,088 ----------- Commitments and contingencies (Note 3) SHAREHOLDER'S EQUITY Common stock, .01 par value: 1,000 voting shares authorized, issued and outstanding 10 Contributed capital 3,200,090 Retained earnings 28,547,275 ----------- Total shareholder's equity 31,747,375 ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $51,110,153 ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY CONDENSED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
1995 1994 ----------- ----------- Operating revenues $69,613,751 $65,637,591 Operating expenses 58,315,363 52,494,058 ----------- ----------- Gross margin 11,298,388 13,143,533 General and administrative expenses 3,552,587 3,465,778 ----------- ----------- Operating income 7,745,801 9,677,755 ----------- ----------- OTHER INCOME (EXPENSE) Interest income 142,617 153,994 Interest expense (134,757) (138,756) Other 96,829 56,947 ----------- ----------- 104,689 72,185 ----------- ----------- Income before income taxes 7,850,490 9,749,940 INCOME TAX EXPENSE Current (3,020,000) (3,722,000) Deferred (32,200) (107,900) ----------- ----------- (3,052,200) (3,829,900) ----------- ----------- NET INCOME $ 4,798,290 $ 5,920,040 =========== =========== NET INCOME PER COMMON SHARE $ 4,798.29 $ 5,920.04 =========== =========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 1,000 1,000 =========== =========== STATEMENTS OF RETAINED EARNINGS Balance at January 1 $27,138,322 $23,854,523 Net income 4,798,290 5,920,040 Dividends ($3,389.34 per share in 1995 and $1,200.00 per share in 1994) (3,389,337) (1,200,000) ----------- ----------- Balance at June 30 $28,547,275 $28,574,563 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
1995 1994 ----------- ----------- Cash flows from operating activities: Reconciliation of net income to net cash provided by operating activities: Net income $ 4,798,290 $ 5,920,040 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 859,671 851,908 Accrued turnaround costs 571,776 571,776 Changes in assets and liabilities (5,795,054) (5,301,705) ----------- ----------- Net cash provided by operating activities $ 434,683 $ 2,042,019 =========== =========== Cash flows used in investing activities: Capital expenditures - refinery (151,487) (946,759) Capital expenditures - gas plants (269,147) (30,929) ----------- ----------- Net cash used in investing activities (420,634) (977,688) ----------- ----------- Cash flows used in financing activities: Principal payments on debt (2,875,000) Dividends distributed (3,389,337) (1,200,000) ----------- ----------- Net cash used in financing activities (3,389,337) (4,075,000) ----------- ----------- Net decrease in cash and temporary investments (3,375,288) (3,010,669) Cash and temporary investments at beginning of period 8,379,601 9,501,500 ----------- ----------- Cash and temporary investments at end of period $ 5,004,313 $ 6,490,831 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION --------------------- The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of the Management of Bloomfield Refining Company, all adjustments and reclassifications considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the six months ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. The enclosed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 annual financial statements. (2) INVENTORIES ----------- Inventories are valued at the lower of first-in, first-out cost or market. Inventories at June 30, 1995 are as follows:
June 30, 1995 ---------- Refined, unrefined and intermediate products $5,314,051 Crude oil 2,792,252 Materials and supplies 849,515 ---------- $8,955,818 ==========
(3) COMMITMENTS AND CONTINGENCIES ----------------------------- The Company is subject to certain environmental and other regulations primarily administered by the United States Environmental Protection Agency (E.P.A.) and various state agencies. Management of the Company believes it has complied with all material aspects associated with these regulations. The Company entered into an administrative order with the E.P.A. to perform a study to assess the nature of any environmental cleanup requirements at the refinery which was substantially completed in 1994. Management is currently evaluating the E.P.A.'s response and is uncertain as to what, if any, additional costs may be required. The Company and its parent are members of a consolidated tax group which files a consolidated income tax return. The Internal Revenue Service concluded a field audit of the consolidated tax group's income tax return for the fiscal year 1990 resulting in a "Notice of Deficiency" for that fiscal year. Proposed adjustments to income and tax credits resulted in a proposed tax deficiency of approximately $4,800,000 plus penalties. The Company's parent filed a petition with the United States Tax Court contesting the notice and believes that it has meritorious legal defenses to the proposed tax deficiency, but the ultimate outcome of the Tax Court case is uncertain. The Company is subject to various claims and business disputes in the ordinary course of business. Management does not anticipate that the ultimate outcome of these issues will have a material impact on the Company's financial position or results of operations. An affiliate of the Company entered into a ten year lease agreement for office space in November 1989. The Company has guaranteed the performance of the affiliate's obligations. Terms of the lease provided for annual rent of $553,000 in 1994 and escalating to $796,000 in years six through ten. In addition to the rent, the Company has guaranteed the annual payment of $328,000 in occupancy costs with provisions for escalation based on actual expenses. Currently, the affiliate of the Company is subleasing certain office space to a third party and a related party. (4) SUBSEQUENT EVENT ---------------- Effective October 4, 1995, the Company sold to a third party substantially all of its refining assets for $55,000,000 and potential contingent payments to be made over approximately the next six years should certain criteria be met. In addition, related refinery inventories were sold for approximately $7,500,000. ARTHUR ANDERSEN LLP BLOOMFIELD REFINING COMPANY FINANCIAL STATEMENTS TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS OF DECEMBER 31, 1994, 1993 AND 1992 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholder of Bloomfield Refining Company: We have audited the accompanying balance sheets of Bloomfield Refining Company (a Delaware corporation) as of December 31, 1994 and 1993, and the related statements of operations, retained earnings and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial statements referred to above present fairly, in all material respects, the financial position of Bloomfield Refining Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Denver, Colorado, October 13, 1995. BLOOMFIELD REFINING COMPANY BALANCE SHEETS DECEMBER 31, 1994 AND 1993
ASSETS 1994 1993 ----------- ----------- CURRENT ASSETS Cash and temporary investments $ 8,379,601 $10,800,111 Accounts receivable - affiliates 6,008,872 5,646,661 Accounts receivable 257,820 35,783 Inventories 7,887,826 6,046,026 Prepaid crude oil - affiliate 2,312,338 819,868 Prepaid expenses and other 584,495 879,839 Deferred tax asset --- 291,500 ----------- ----------- Total current assets 25,430,952 24,519,788 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 23,165,353 22,177,094 Gas plants, property and equipment 4,855,654 4,652,324 Less: Accumulated depreciation (6,550,919) (4,854,519) ----------- ----------- 21,470,088 21,974,899 Construction in progress 147,712 409,970 ----------- ----------- Total property, plant and equipment 21,617,800 22,384,869 ----------- ----------- Other 289,005 240,720 ----------- ----------- TOTAL ASSETS $47,337,757 $47,145,377 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable - affiliates $10,853,802 $ 8,513,020 Accounts payable 649,983 935,698 Current portion of long-term debt --- 2,875,000 Accrued liabilities 2,227,067 2,558,658 Income taxes payable - affiliate --- 2,496,600 ----------- ----------- Total current liabilities 13,730,852 17,378,976 ----------- ----------- NON-CURRENT LIABILITIES Deferred income taxes, net 1,184,500 1,750,300 Accrued turnaround costs 1,953,671 810,119 Other 130,312 151,359 ----------- ----------- Total non-current liabilities 3,268,483 2,711,778 ----------- ----------- Commitments and contingencies (Note 9) SHAREHOLDER'S EQUITY Common stock, .01 par value; 1,000 voting shares authorized, issued and outstanding 10 10 Contributed capital 3,200,090 3,200,090 Retained earnings 27,138,322 23,854,523 ----------- ----------- Total shareholder's equity 30,338,422 27,054,623 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $47,337,757 $47,145,377 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. BLOOMFIELD REFINING COMPANY STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 ------------ ------------ ------------ Operating revenues $141,701,590 $148,822,139 $143,974,427 Operating expenses 114,999,480 118,026,762 124,573,250 ------------ ------------ ------------ Gross margin 26,702,110 30,795,377 19,401,177 General and administrative expenses 7,529,972 8,470,542 8,542,979 ------------ ------------ ------------ Operating income 19,172,138 22,324,835 10,858,198 ------------ ------------ ------------ OTHER INCOME (EXPENSE) Gain (loss) on sale of assets 8,568 (8,503) 1,495,553 Interest income 375,022 259,062 272,471 Interest expense (265,862) (357,446) (753,046) Other 268,858 15,839 89,671 ------------ ------------ ------------ 386,586 (91,048) 1,104,649 ------------ ------------ ------------ Income before income taxes 19,558,724 22,233,787 11,962,847 INCOME TAX EXPENSE (NOTE 4) Current (7,396,500) (7,635,100) (4,993,000) Deferred (248,800) (1,220,800) --- ------------ ------------ ------------ (7,645,300) (8,855,900) (4,993,000) ------------ ------------ ------------ NET INCOME $ 11,913,424 $ 13,377,887 $ 6,969,847 ============ ============ ============ NET INCOME PER COMMON SHARE $ 11,913.42 $ 13,377.88 $ 6,969.85 ============ ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 1,000 1,000 1,000 ============ ============ ============ STATEMENTS OF RETAINED EARNINGS Balance at January 1 $ 23,854,523 $ 16,077,577 $ 11,367,632 Net income 11,913,424 13,377,887 6,969,847 Dividends ($8,629.63, $5,600.94 and $2,230.57 per share in 1994, 1993 and 1992, respectively) (8,629,625) (5,600,941) (2,230,572) Excess of additional pension liability over unrecognized prior service cost --- --- (29,330) ------------ ------------ ------------ Balance at December 31 $ 27,138,322 $ 23,854,523 $ 16,077,577 ============ ============ ============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 ------------- ------------- - ------------- Cash flows from operating activities: Cash received from customers $ 141,129,762 $ 148,745,079 $ 143,704,941 Cash paid to suppliers and employees (120,708,328) (120,947,666) (130,035,607) Cash outlay for turnaround --- (3,202,273) (3,522) Interest received 382,751 263,429 264,519 Interest paid (266,117) (359,739) (806,318) Income taxes (10,416,200) (6,260,500) (5,062,500) Other 266,933 7,703 135,602 ------------- ------------- - ------------- Net cash provided by operating activities 10,388,801 18,246,033 8,197,115 ------------- ------------- - ------------- Cash flows from investing activities: Capital expenditures - refinery (1,276,862) (8,744,591) (743,730) Acquisition of gas plants interests (Note 1) --- --- (2,544,653) Capital expenditures - gas plants (29,574) (528,826) (88,426) Proceeds from sale of assets 1,750 29,657 3,308,618 ------------- ------------- - ------------- Net cash used in investing activities (1,304,686) (9,243,760) (68,191) ------------- ------------- - ------------- Cash flows from financing activities: Borrowings under revolving credit agreement --- 3,000,000 --- Principal payments on debt (2,875,000) (2,892,496) (5,376,267) Dividends distributed (8,629,625) (5,600,941) (2,230,572) ------------- ------------- - ------------- Net cash used in financing activities (11,504,625) (5,493,437) (7,606,839) ------------- ------------- - ------------- Net (decrease) increase in cash and temporary investments (2,420,510) 3,508,836 522,085 Cash and temporary investments at beginning of year 10,800,111 7,291,275 6,769,190 ------------- ------------- - ------------- Cash and temporary investments at end of year $ 8,379,601 $ 10,800,111 $ 7,291,275 ============= ============= =============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 ----------- ----------- - ----------- Reconciliation of net income to net cash provided by operating activities: Net income $11,913,424 $13,377,887 $ 6,969,847 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,739,979 1,370,415 1,288,601 Accrued turnaround costs 1,143,552 1,014,887 883,716 (Gain) loss on sale of assets (8,568) 8,503 (1,495,553) Changes in assets and liabilities: Increase in accounts receivable (584,248) (150,662) (873,550) (Increase) decrease in inventories (1,841,800) 1,815,826 37,323 (Increase) decrease in prepaid expenses and other (1,370,882) 462,695 461,337 Decrease (increase) in deferred tax asset 291,500 (291,500) - --- (Increase) decrease in other assets (48,285) --- 387,561 Increase (decrease) in accounts payable 2,569,167 (787,383) (13,964) (Decrease) increase in accrued liabilities (331,591) 1,356,798 242,090 (Decrease) increase in income taxes payable - affiliate (2,496,600) 1,374,600 (69,500) (Decrease) increase in accrued turnaround costs --- (2,809,000) 301,775 (Decrease) increase in other liabilities (21,047) (9,333) 77,432 (Decrease) increase in deferred income taxes (565,800) 1,512,300 - --- ----------- ----------- - ----------- Net cash provided by operating activities $10,388,801 $18,246,033 $ 8,197,115 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY NOTES TO FINANCIAL STATEMENTS (1) BACKGROUND AND ORGANIZATION --------------------------- Organization - ------------ On August 31, 1994, Bloomfield Refining Company, a Delaware corporation (the Company), was incorporated. The Company's primary activities are the refining of petroleum products and gas plant operations. The Company is a wholly-owned subsidiary of Gary-Williams Energy Corporation (GWEC). The Company operates a refinery in Bloomfield, New Mexico with a throughput capacity of 17,000 barrels per day and has ownership interests in two gas plants located in Utah. During 1992, the Company acquired additional interests in a gas plant located in Utah for approximately $2,500,000. Also during 1992, the Company sold all rights, title and interest in a gas plant gathering system, an extraction plant, and certain related equipment and appurtenances located in Colorado to third parties, resulting in a gain on sale of gas plant assets of $1,495,553. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Cash and Temporary Investments - ------------------------------ For purposes of these statements, the Company considers investments purchased with an original maturity of three months or less to be cash or temporary investments. Temporary investments consist primarily of certificates of deposit and commercial paper. These securities are classified as held to maturity investments as defined by Statement of Financial Accounting Standards No. 115. At December 31, 1994 and 1993, these securities are recorded at a market value of $7,663,000 and $8,520,000, respectively. Realized gains and losses from sales of these securities are included in interest income in the accompanying statements of operations. The net unrealized gain or loss on these securities was not material as of December 31, 1994 and 1993. Inventories - ----------- Inventories are valued at the lower of first-in, first-out cost or market. Inventories at December 31, 1994 and 1993, are as follows:
December 31, December 31, 1994 1993 ----------- ----------- Refined, unrefined and intermediate products $4,181,728 $3,692,757 Crude oil 2,811,004 1,432,350 Materials and supplies 895,094 920,919 ---------- ---------- $7,887,826 $6,046,026 ========== ==========
Property, Plant and Equipment - ----------------------------- The initial purchase and additions to property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method based on estimated useful lives ranging from 2 to 35 years, with an average initial life of approximately 19 years. Ownership interests in gas plants are recorded at cost and proportionately consolidated for financial statement purposes. Depreciation is provided using the straight-line method with estimated useful lives ranging from 5 to 10 years, with an average initial life of approximately 7 years. General and Administrative Expenses - ----------------------------------- The Company reimbursed GWEC $5,146,145, $4,999,212 and $5,395,703 for general and administrative services relating to the supply and marketing of raw materials and refined products and gas plant operations in 1994, 1993 and 1992, respectively. Accrued Turnaround Costs - ------------------------ Major repair and maintenance expenses (turnaround costs) are accrued and charged to current operations in anticipation of the work to be performed in future periods to renew the related refinery assets. Accrued turnaround costs are classified as either current or non-current liabilities based upon the scheduling of major expenditures. Capitalized Interest - -------------------- The Company capitalizes interest on debt associated with the financing of capital construction projects. During 1993 interest of $109,480 was capitalized to property, plant and equipment. No such interest was capitalized during 1994 or 1992. Reclassifications - ----------------- Certain prior year amounts have been reclassified for consistency with the current year presentation. (3) LONG-TERM DEBT -------------- The Company has a revolving credit facility, as amended, with a group of banks under which it may borrow up to $8,000,000 in cash and/or issue letters of credit which in the aggregate cannot exceed the lesser of $35,000,000 or the borrowing base. The borrowing base, which consists principally of accounts receivable, inventory, exchange balances and unused outstanding letters of credit was approximately $21,000,000 and $18,000,000 as of December 31, 1994 and 1993. The Company had no amounts outstanding under the revolving credit facility, however, letters of credit totaling approximately $20,000,000 and $14,000,000 had been issued as of December 31, 1994 and 1993. Borrowings under the revolving credit facility bear interest at a rate based on the bank's prime rate. The credit facility is secured by substantially all of the assets of the Company and, among other things, requires the maintenance of certain financial covenants and ratios. The revolving credit facility matures June 1, 1996; however, the credit agreement provides for extensions of the maturity date. The Company borrowed $3,000,000 in 1993 for capital projects at the Bloomfield refinery pursuant to an amendment to the credit agreement. Interest was based on the bank's prime rate or alternatively, interest rates could be fixed for 30, 60 or 90 day periods on portions of the term loan at a floating Eurocurrency rate. At December 31, 1993, the weighted average interest rate being paid was approximately 6.2%. The entire balance was paid during 1994. (4) INCOME TAXES ------------ The Company and GWEC are members of a consolidated tax group which files a consolidated federal income tax return. An agreement was entered into between the Company and GWEC whereby the Company determines, on a stand alone basis, the tax liability or benefit as if it were not a member of the tax group. The Company then reimburses GWEC for its current income tax liability on a quarterly basis. Deferred income taxes are paid to GWEC periodically. The Company is entitled to be reimbursed by GWEC for its income tax benefit when the Company could otherwise have utilized such benefit on a stand alone basis. Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", (SFAS 109). SFAS 109 requires that deferred income taxes be recognized for the differences between the tax and financial reporting bases of assets and liabilities at each year- end based on enacted tax laws and statutory tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The adoption of SFAS 109 had no material impact on the Company's financial position or results of operations for the year ended December 31, 1993. The net deferred tax liability consists of the following:
December 31, December 31, 1994 1993 ------------ ------------ Gross deferred tax assets: Turnaround expenses $ 760,000 $ 315,100 Inventory costs capitalized for tax and other 182,100 150,700 Other 148,600 140,800 ----------- ----------- 1,090,700 606,600 Gross deferred tax liabilities: Accelerated tax depreciation (2,798,300) (2,065,400) ----------- ----------- (1,707,600) (1,458,800) Payments to affiliate 523,100 Valuation allowance ----------- ----------- Net deferred tax liability $(1,184,500) $(1,458,800) =========== ===========
The difference between the statutory federal income tax rate and the Company's effective income tax rate is summarized as follows:
Year Ended December 31, ------------------------------- 1994 1993 1992 ---- ---- ---- Federal income tax rate 34% 34% 34% State income taxes 5% 6% 6% Other 2% ---- ---- ---- 39% 40% 42% ==== ==== ====
In management's opinion, it is more likely than not that the gross deferred tax assets will be realized based on past earnings history. Tax Deficiency - -------------- The Internal Revenue Service concluded a field audit of the consolidated tax group's income tax return for the fiscal year 1990 resulting in a "Notice of Deficiency" for that fiscal year. Proposed adjustments to income and tax credits resulted in a proposed tax deficiency of approximately $4,800,000 plus penalties. The Company filed a petition with the United States Tax Court contesting the notice and believes that it has meritorious legal defenses to the proposed tax deficiency, but the ultimate outcome of the Tax Court case is uncertain. (5) OPERATING REVENUES AND EXPENSES BY SEGMENTS -------------------------------------------- The following segment information reflects operating revenues, operating expenses and gross margins for the years ended December 31, 1994 and 1993.
Refining Gas Plants Total ------------ ---------- ------------ December 31, 1994 ------------------------------------------ Operating Revenues $139,073,511 $2,628,079 $141,701,590 Operating Expenses 112,824,818 2,174,662 114,999,480 ------------ ---------- ------------ Gross Margin $ 26,248,693 $ 453,417 $ 26,702,110 ============ ========== ============ December 31, 1993 ------------------------------------------ Operating Revenues $145,878,017 $2,944,122 $148,822,139 Operating Expenses 115,829,494 2,197,268 118,026,762 ------------ ---------- ------------ Gross Margin $ 30,048,523 $ 746,854 $ 30,795,377 ============ ========== ============ December 31, 1992 ------------------------------------------ Operating Revenues $140,088,307 $3,886,120 $143,974,427 Operating Expenses 122,005,814 2,567,436 124,573,250 ------------ ---------- ------------ Gross Margin $ 18,082,493 $1,318,684 $ 19,401,177 ============ ========== ============
(6) RELATED PARTY TRANSACTIONS -------------------------- A supply and marketing service agreement was entered into between the Company and GWEC, whereby GWEC purchases crude oil and other raw materials for resale to the Company, at cost, for processing at the refinery. The intercompany purchases of raw materials include all amounts accrued and owing by GWEC to third parties, including prepayments and offsite inventory and represent substantially all raw material purchases made by the Company. Also, the Company sells substantially all of its refined petroleum products to GWEC, at market, for resale by GWEC. The Company has guaranteed the payment by GWEC of an aggregate maximum at any one time of $2,000,000 of present and/or future indebtedness owed to a third party crude oil supplier. (7) EMPLOYEE BENEFIT PLANS ---------------------- The Company has a profit sharing plan (defined contribution plan) covering certain non-union employees who meet eligibility requirements as to age and length of service. Contributions to the plan are determined annually by the Company. Contributions of $187,357, $173,139 and $169,002 were accrued for the years ended December 31, 1994, 1993 and 1992, respectively. The Company also has a defined benefit pension plan for union employees. The Company's funding policy is to contribute annually an amount to fund normal cost and amortize unfunded actuarial liabilities over 19 years. Plan assets at December 31, 1994 and 1993 consist primarily of private and public debt and equity investments. In 1993 and 1992, benefits were based on a percentage of the employee's earnings, as defined, as of June 1, 1990, and years of credited service up to a maximum of 30 years. In 1994, the plan was amended to base benefits on a percentage of the employee's earnings as of June 1, 1993. The following table sets forth the funded status and amounts recognized in the Company's statements of financial position and operations at December 31, 1994, 1993 and 1992, for the defined benefit pension plan:
1994 1993 1992 --------- --------- --------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $417,559, $406,405 and $364,702 at December 31, 1994, 1993 and 1992, respectively $(433,264) $(424,162) $(377,359) ========= ========= ========= Projected benefit obligation for service rendered to date $(433,264) $(424,162) $(377,359) Plan assets at fair value 302,952 272,803 216,667 --------- --------- --------- Projected benefit obligation in excess of plan assets (130,312) (151,359) (160,692) Unrecognized net obligation existing at January 1, 1989 being recognized over 19 years 8,926 9,590 10,255 Prior service cost not yet recognized 77,483 14,091 14,951 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 70,391 160,797 176,517 Adjustment to recognize minimum liability (156,800) (184,478) (201,723) --------- --------- --------- Accrued pension liability included in other liabilities $(130,312) $(151,359) $(160,692) ========= ========= ========= Net pension cost includes the following components: Service cost $ 55,079 $ 49,580 $ 35,988 Interest cost 29,266 23,202 18,060 Actual return on plan assets 6,557 (31,641) (18,597) Net amortization and deferral of other components (19,922) 20,237 6,712 --------- --------- --------- Net periodic pension cost $ 70,980 $ 61,378 $ 42,163 ========= ========= =========
The discount rate used in determining the actuarial present value of the projected benefit obligation was 7.0% for 1994, 6.0% for 1993, and 5.75% for 1992. The expected long-term rate of return on pension plan assets was 8.0% in 1994 and 1993 and 9% in 1992. (8) MAJOR CUSTOMER --------------- During the years ended December 31, 1994, 1993 and 1992, the Company sold 100% of the refined products to GWEC. Also, during that period, the Company purchased 100% of the crude oil and raw materials from GWEC. (9) COMMITMENTS AND CONTINGENCIES ----------------------------- The Company is subject to certain environmental and other regulations primarily administered by the United States Environmental Protection Agency (E.P.A.) and various state agencies. Management of the Company believes it has complied with all material aspects associated with these regulations. The Company entered into an administrative order with the E.P.A. to perform a study to assess the nature of any environmental cleanup requirements at the refinery which was substantially completed in 1994. Management is currently evaluating the E.P.A.'s response and is uncertain as to what, if any, additional costs may be required. The Company is subject to various claims and business disputes in the ordinary course of business. Management does not anticipate that the ultimate outcome of these issues will have a material impact on the Company's financial position or results of operations. An affiliate of the Company entered into a ten year lease agreement for office space in November 1989. The Company has guaranteed the performance of the affiliate's obligations. Terms of the lease provided for annual rent of $553,000 in 1994 and escalating to $796,000 in years six through ten. In addition to the rent, the Company has guaranteed the annual payment of $318,000 in occupancy costs with provisions for escalation based on actual expenses. Currently, the affiliate of the Company is subleasing certain office space to a third party and a related party. (10) SUBSEQUENT EVENT ---------------- Effective October 4, 1995, the Company sold to a third party substantially all of its refining assets for $55,000,000 and potential contingent payments to be made over approximately the next six years should certain criteria be met. In addition, related refinery inventories were sold for approximately $7,500,000. (b) Pro Forma Financial Information On October 4, 1995, Giant Industries Arizona, Inc. and San Juan Refining Company (collectively "the Company"), each a direct or indirect wholly-owned subsidiary of Giant Industries, Inc. ("Giant"), completed the purchase of the Bloomfield Refinery ("the Refinery") along with related pipeline and transportation assets from Gary-Williams Energy Co. and its wholly-owned subsidiary Bloomfield Refining Company ("BRC"). The historical financial statements of BRC include the assets and results of operations of two gas plants not included in the purchase and exclude the assets of the Refinery pipeline and transportation operations which were acquired. The pre-tax operating results of the pipeline and transportation operations are included in BRC's historical cost of products sold line item in the Unaudited Pro Forma Combined Condensed Statements of Earnings. For purposes of presenting the Unaudited Pro Forma Combined Condensed Balance Sheet, only the historical Balance Sheet of Giant is presented since only property, plant and equipment and inventories of BRC were purchased. The fiscal year for both companies ends on December 31. For purposes of presenting the Unaudited Pro Forma Combined Condensed Statements of Earnings, the results of the full year ended December 31, 1994, and for the six months ended June 30, 1995 for both companies are included in the respective Pro Forma statements. The Unaudited Pro Forma Combined Condensed Balance Sheet assumes the Purchase was consummated on June 30, 1995, and the Unaudited Pro Forma Combined Condensed Statements of Earnings assume the Purchase was consummated January 1, 1994. The unaudited pro forma combined financial information does not purport to represent the results of operations that actually would have resulted had the purchase occurred on January 1, 1994, nor should it be taken as indicative of the future results of operations. The unaudited pro forma combined financial information should be read in conjunction with the Notes to Unaudited Pro Forma Combined Financial Information and the separate financial statements and notes thereto of Giant and BRC. On October 2, 1995, Giant announced the temporary closure of its ethanol processing plant. The plant is expected to be closed until grain prices return to more favorable levels. Included in Giant's historical numbers are ethanol plant third party revenues of $12.7 million and operating losses of $1.4 million for the year ended December 31, 1994, and third party revenues of $5.3 million and operating earnings of $450,000 for the six months ended June 30, 1995. GIANT INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET JUNE 30, 1995 (DOLLARS IN THOUSANDS)
HISTORICAL ---------- PRO FORMA PRO FORMA GIANT ADJUSTMENTS COMBINED ---------- ----------- --------- ASSETS Current Assets: Cash and cash equivalents $ 11,518 $ (7,101) $ 4,417 Marketable securities 26,039 (26,039) Accounts receivable, net 17,804 17,804 Income tax refunds receivable 259 259 Inventories 34,089 7,500 41,589 Prepaid expenses and other 2,344 2,344 Deferred income taxes 2,419 2,419 --------- -------- --------- Total current assets 94,472 (25,640) 68,832 --------- -------- --------- Property, plant and equipment 319,903 55,000 374,903 Less accumulated depreciation, depletion and amortization (151,113) (151,113) --------- -------- --------- 168,790 55,000 223,790 --------- -------- --------- Other assets 13,382 640 14,022 --------- -------- --------- $ 276,644 $ 30,000 $ 306,644 ========= ======== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 4,133 $ $ 4,133 Accounts payable 19,745 19,745 Accrued expenses 16,791 16,791 --------- -------- --------- Total current liabilities 40,669 40,669 --------- -------- --------- Long-term debt, net of current portion 113,523 30,000 143,523 Deferred income taxes 13,851 13,851 Other liabilities 3,462 3,462 Common stockholders' equity 105,139 105,139 --------- -------- --------- $ 276,644 $ 30,000 $ 306,644 ========= ======== =========
See accompanying notes to pro forma combined condensed financial statements. GIANT INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (IN THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
HISTORICAL ----------------------- PRO FORMA PRO FORMA GIANT BRC ADJUSTMENTS COMBINED ---------- ---------- -------------- - ---------- Net revenues $ 151,558 $ 69,614 $ (1,189) $ 220,557 574 Cost of products sold 104,627 58,316 (1,065) 154,798 (69) (7,314) 303 ---------- ---------- -------- - ---------- Gross margin 46,931 11,298 7,530 65,759 ---------- ---------- -------- - ---------- Operating expenses 25,476 6,756 32,232 Depreciation, depletion and amortization 7,694 1,375 9,069 (587) 587 Selling, general and administrative expenses 6,207 3,552 (41) 7,518 (2,437) 250 16 (29) ---------- ---------- -------- - ---------- Operating income 7,554 7,746 1,640 16,940 Interest expense, net and other 4,173 (104) 1,200 6,147 111 663 104 ---------- ---------- -------- - ---------- Earnings before income taxes 3,381 7,850 (438) 10,793 Provision for income taxes 1,082 3,052 (171) 3,963 ---------- ---------- -------- - ---------- Net earnings $ 2,299 $ 4,798 $ (267) $ 6,830 ========== ========== ======== ========== Earnings per common share $ 0.20 $ 4,798.29 $ 0.59 ========== ========== ========== Weighted average number of shares outstanding 11,662,510 1,000 11,662,510 ========== ========== ==========
See accompanying notes to pro forma combined financial statements. GIANT INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1994 (IN THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
HISTORICAL ----------------------- PRO FORMA PRO FORMA GIANT BRC ADJUSTMENTS COMBINED ---------- ---------- -------------- - ---------- Net revenues $ 293,458 $ 141,702 $ (2,628) $ 433,924 1,392 Cost of products sold 193,359 115,000 (2,177) 292,834 (190) (14,042) 884 ---------- ---------- -------- - ---------- Gross margin 100,099 26,702 14,289 141,090 ---------- ---------- -------- - ---------- Operating expenses 53,884 12,932 66,816 Depreciation, depletion and amortization 15,040 2,750 17,790 (1,110) 1,110 Selling, general and administrative expenses 11,930 7,530 (93) 14,495 (5,393) 500 21 Reduction of carrying value of crude oil and natural gas properties 3,395 3,395 ---------- ---------- -------- - ---------- Operating income 15,850 19,172 3,572 38,594 Interest expense, net and other 10,072 (387) 2,400 14,021 223 1,326 387 ---------- ---------- -------- - ---------- Earnings before income taxes 5,778 19,559 (764) 24,573 Provision for income taxes 1,257 7,645 (298) 8,604 ---------- ---------- -------- - ---------- Net earnings $ 4,521 $ 11,914 $ (466) $ 15,969 ========== ========== ======== ========== Earnings per common share $ 0.37 $11,913.42 $ 1.32 ========== ========== ========== Weighted average number of shares outstanding 12,127,481 1,000 12,127,481 ========== ========== ==========
See accompanying notes to pro forma combined financial statements. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND STATEMENTS OF EARNINGS The Unaudited Pro Forma Combined Condensed Balance Sheet was prepared as if the purchase took place on June 30, 1995. The Unaudited Pro Forma Combined Condensed Statements of Earnings were prepared as if the purchase took place on January 1, 1994. The following is a summary of reclassifications and adjustments reflected in the Unaudited Pro Forma Combined Condensed Balance Sheet and Statements of Earnings: Represents the purchase of the Refinery, pipeline and transportation assets along with the associated inventories for cash and the issuance of long-term debt to partially finance the purchase. The Statements of Earnings reflect the increase in interest expense based on the issuance of long-term debt at an assumed interest rate of 8%. Debt issuance costs of approximately $640,000 are amortized to interest expense over three years, the term of the Loan. It is assumed that all debt was issued on January 1, 1994 and was outstanding through June 30, 1995. Represents the reduction in interest income due to a decrease in cash available for investment. Represents Giant's depreciation expense due to the purchase and reverses BRC depreciation expense included in the historical amounts. Represents the elimination of the Gas Plant operations not purchased, but included in the historical amounts. Represents the elimination of certain GWEC general and administrative expenses allocated to BRC and other income (expense), included in the historical amounts, which will not be duplicated subsequent to the purchase. Represents the estimated increase in Giant's general and administrative costs due to the purchase. Represents the reclassification of BRC operating expenses to conform to Giant's presentation. Represents the reclassification of pipeline and transportation pre-tax operating results, after the elimination of intercompany transactions. Represents the tax effect of the Statements of Earnings adjustments based upon the statutory rate in effect for the periods shown. (c) Exhibits 2.1 Purchase and Sale Agreement, dated August 8, 1995, among Bloomfield Refining Company and Gary-Williams Energy Corporation, as Sellers, and Giant Industries Arizona, Inc., as Buyer. 2.2 First Amendment, dated September 29, 1995, to Purchase and Sale Agreement, dated August 8, 1995, among Bloomfield Refining Company and Gary-Williams Energy Corporation, as Sellers, and Giant Industries Arizona, Inc. as Buyer. 2.3 Second Amendment, dated October 2, 1995, to Purchase and Sale Agreement, dated August 8, 1995, among Bloomfield Refining Company and Gary-Williams Energy Corporation, as Sellers, and Giant Industries Arizona, Inc. as Buyer. 4.1 Credit Agreement, dated October 4, 1995, among Giant Industries, Inc., as Borrower, Giant Industries Arizona, Inc., Ciniza Production Company, San Juan Refining Company, Giant Exploration & Production Company and Giant Four Corners, Inc., as Guarantors and Bank of America National Trust and Savings Association, as Agent, Bank of America Illinois, as a Bank and as Letter of Credit Issuing Bank and the Other Financial Institutions Parties hereto. 23.1 Consent of Arthur Andersen LLP to incorporate reports in previously filed Registration Statement. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GIANT INDUSTRIES, INC. /s/ A. WAYNE DAVENPORT ----------------------------- A. Wayne Davenport Vice President and Chief Financial Officer (Principal Accounting Officer) Date: October 18, 1995 EX-2.1 2 PURCHASE AND SALE AGREEMENT Bloomfield Refining Company and Gary-Williams Energy Corporation, as Sellers and Giant Industries Arizona, Inc., as Buyer Dated as of August 8, 1995 TABLE OF CONTENTS Page ARTICLE I Definitions and References . . . . . . . . . . . 1 1.01 General Definitions. . . . . . . . . . . . . . . 1 1.02 Exhibits and Schedules . . . . . . . . . . . . .15 1.03 References and Titles. . . . . . . . . . . . . .15 ARTICLE II Purchase and Sale . . . . . . . . . . . . .16 2.01 Purchase and Sale. . . . . . . . . . . . . . . .16 2.02 Effective. . . . . . . . . . . . . . . . . . . .16 2.03 Purchase Price . . . . . . . . . . . . . . . . .16 2.04 Allocation of Purchase Price . . . . . . . . . .16 2.05 Adjustments to Base Purchase Price . . . . . . .16 ARTICLE III Representations and Warranties. . . . . . .17 3.01 Representations and Warranties of Seller . . . .17 3.02 Representations and Warranties of Buyer. . . . .22 ARTICLE IV Covenants . . . . . . . . . . . . . . . . .24 4.01 Covenants of Sellers . . . . . . . . . . . . . .24 4.02 Covenants of Buyer . . . . . . . . . . . . . . .28 ARTICLE V Certain Procedures . . . . . . . . . . . . . . .29 5.01 Environmental Matters. . . . . . . . . . . . . .29 5.02 Personnel, Employment Arrangements and Employee Benefits . . . . . . . . . . . . . .37 5.03 Casualty Loss. . . . . . . . . . . . . . . . . .40 5.04 Taxes Due with Respect to Transfer of Assets . .41 5.05 Property Tax Proration Amount. . . . . . . . . .41 5.06 Like-Kind Exchange . . . . . . . . . . . . . . .41 5.07 Due Diligence. . . . . . . . . . . . . . . . . .42 ARTICLE VI Conditions to Closing . . . . . . . . . . .42 6.01 Conditions to Obligations of Seller. . . . . . .42 6.02 Conditions to Obligations of Buyer . . . . . . .43 6.03 Conditions to Obligations of Both Parties. . . .52 ARTICLE VII Closing . . . . . . . . . . . . . . . . . .54 7.01 Date of Closing. . . . . . . . . . . . . . . . .54 7.02 Place of Closing . . . . . . . . . . . . . . . .54 7.03 Closing Obligations. . . . . . . . . . . . . . .54 ARTICLE VIII Obligations After Closing . . . . . . . . .58 8.01 Post-Closing Settlement. . . . . . . . . . . . .58 8.02 Recording Fees . . . . . . . . . . . . . . . . .60 8.03 Indemnification. . . . . . . . . . . . . . . . .60 8.04 Assumption of Obligations. . . . . . . . . . . .62 8.05 Identifications, Signs, Trademarks and Tradenames . . . . . . . . . . . . . . . . . . .63 8.06 Access to Records - Books and Records. . . . . .63 8.07 Waiver of Compliance with Bulk Sales Laws. . . .64 8.08 Covenant Against Competition . . . . . . . . . .64 8.09 Independent Evaluation . . . . . . . . . . . . .64 8.10 Further Assurances . . . . . . . . . . . . . . .65 ARTICLE IX Termination of Agreement. . . . . . . . . .66 9.01 Termination. . . . . . . . . . . . . . . . . . .66 9.02 Return of Information. . . . . . . . . . . . . .67 9 .03 Effect of Termination. . . . . . . . . . . . . .67 ARTICLE X Miscellaneous. . . . . . . . . . . . . . . . . .68 10.01 Expenses . . . . . . . . . . . . . . . . . . . .68 10.02 Notices. . . . . . . . . . . . . . . . . . . . .68 10.03 Amendment. . . . . . . . . . . . . . . . . . . .70 10.04 Assignment . . . . . . . . . . . . . . . . . . .70 10.05 Announcements. . . . . . . . . . . . . . . . . .70 10.06 Counterparts . . . . . . . . . . . . . . . . . .71 10.07 Governing Law. . . . . . . . . . . . . . . . . .71 10.08 Entire Agreement . . . . . . . . . . . . . . . .71 10.09 Parties in Interest. . . . . . . . . . . . . . .72 SCHEDULE OF EXHIBITS AND SCHEDULES EXHIBITS: A -- Form of COMMON UNDERTAKING LETTER. B -- Form of GENERAL DEED, ASSIGNMENT, BILL OF SALE AND ASSUMPTION, covering all of the Assets. C -- Form of BILL OF SALE, covering the Refinery Equipment, the Refinery Facilities and the Refinery Inventory. D -- Form of ASSIGNMENT AND CONVEYANCE, covering the Refinery Real Property (other than the Refinery Site). E -- Form of GENERAL WARRANTY DEED, covering the Refinery Site. F -- Form of BILL OF SALE, covering the Pipeline Equipment, the Pipeline Facilities and the Pipeline Inventory. G -- Form of ASSIGNMENT AND CONVEYANCE, covering the Pipeline Real Property. H -- Form of GUARANTEE AND AGREEMENT. I -- Form of SELLERS' CERTIFICATE. J -- Form of BUYER'S CERTIFICATE. K -- Form of NON-FOREIGN STATUS CERTIFICATE. L -- Form of CRUDE OIL CONTRACT. SCHEDULES: 1.01.1 -- Earnout 1.01.2 -- Excluded Contracts 1.01.3 -- Processing Units, Shipping Facilities and Terminals 1.01.4 -- Refinery Site 1.01.5 -- Refinery Site Encumbrances 2.04 -- Allocation of Purchase Price 3.01(e) -- Contested Taxes 3.01(g) -- Litigation 3.01(j) -- Capital Projects 3.01(k) -- Collective Bargaining Agreements 3.01(l) -- Water and Water Rights 3.01(m) -- Financial Statements 3.01(n) -- Summary of Operations 3.02(g) -- Certain Permits, Licenses and Contracts 5.02(a) -- Retained Employees 6.02(i) -- BOR Draft Permit PURCHASE AND SALE AGREEMENT This Purchase and Sale Agreement (this "Agreement"), dated as of August 8, 1995, is among BLOOMFIELD REFINING COMPANY, a Delaware corporation ("BRC"), with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation ("GWEC"), with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, and GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("Buyer"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. BRC and GWEC shall be referred to collectively as "Sellers," and individually as a "Seller." In consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Sellers agree as follows: ARTICLE I DEFINITIONS AND REFERENCES 1.01 GENERAL DEFINITIONS. As used herein, the terms "Agreement," "BRC," "GWEC," "Buyer," "Sellers" and "Seller" shall have the meaning ascribed thereto above, and the following terms shall have the following meanings: "ACCOUNTS PAYABLE" shall mean all accounts and other obligations of the Businesses for the payment of money which are reflected in accordance with generally acceptable accounting principles as accounts payable on the books and records of Sellers. "ACCOUNTS RECEIVABLE" shall mean accounts and other rights of the Businesses to receive the payment of money which are reflected in accordance with generally accepted accounting principles as accounts receivable on the books and records of Sellers. "ADMINISTRATION" shall have the meaning ascribed to such term in Subsection 6.02(t). "AFFILIATE" shall mean with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. The term "control" as used in the preceding sentence means, with respect to any specified Person the power to direct the management and policies of such Person directly or indirectly, whether through the ownership of voting stock or interests, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "ANTI-DUMPING REQUIREMENTS" shall have the meaning ascribed to such term in Subsection 6.02(u). "ASSETS" shall mean the Refinery Assets and the Pipeline Assets, but excluding the Excluded Assets. "BASE PURCHASE PRICE" shall mean $55,000,000 in U.S. currency. "BEST EFFORTS" shall mean the taking by a party of such action as would be in accordance with reasonable commercial practices as applied to the particular matter in question; provided, however, that such action shall not include the incurrence of unreasonable expenses. "BUSINESSES" shall mean the Refinery Business and the Pipeline Business. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a United States federal or New Mexico state banking holiday. "BUYER'S EMPLOYEES" shall have the meaning ascribed to such term in Subsection 5.02(a). "CAPITAL PROJECTS" shall have the meaning ascribed to such term in Subsection 3.01(j). "CAPITAL PROJECTS COSTS" shall mean those costs and expenses relating to the Capital Projects and paid in the ordinary course by Sellers after the date of this Agreement. "CLEANUP" shall have the meaning ascribed to such term in Subsection 5.01(e). "CLOSING" shall have the meaning ascribed to such term in Section 7.01. "CLOSING DATE" shall have the meaning ascribed to such term in Section 7.01. "CODE" shall mean the Internal Revenue Code of 1986, as amended, together with all Treasury Regulations promulgated thereunder. "COMMON UNDERTAKING LETTER" shall have the meaning ascribed to such term in Subsection 5.01(c). "CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality Agreement, dated as of June 22, 1995, between Buyer and GII, as Recipient, and Sellers, as Provider. "CONTRACTS" shall mean all transferable agreements, contracts, leases of personal property, preferential rights of purchase, calls on production, agreements for the purchase of non-Four Corners area crude oil which is delivered or sold to an exchange partner in consideration for receipts or purchases of Four Corners area crude oil and other legally binding contractual commitments to which a Seller or any Affiliate of a Seller is a party (including without limitation, those which name a Seller as a party) and which are materially associated with, relate to, or are used in connection with the Assets or the Businesses, excluding the Excluded Contracts. "EARNOUT" shall mean the contingent payment by Buyer to BRC of up to a net present value of $25,000,000 in accordance with the terms and provisions of Schedule 1.01.1. "EFFECTIVE TIME" shall mean 7:00 A.M. on the Closing Date, as such time is customarily observed in Bloomfield, New Mexico. "ENVIRONMENTAL INVESTIGATION" shall have the meaning ascribed to such term in Subsection 5.01(b). "ENVIRONMENTAL LAWS" shall mean: (i) the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendment and Reauthorization Act and otherwise, the Resource Conservation and Recovery Act, the Clean Air Act, the Toxic Substances Control Act, the Safe Drinking Water Act, the Federal Water Pollution Control Act, the Oil Pollution Act and other federal laws relating to the use, storage, emission, discharge, cleanup, removal, remediation, release or threatened release of Hazardous Substances in any work place or on or into the air, land, surface waters, ground water or other medium, or otherwise relating to the manufacture, processing, distribution, use, treatment, disposal, transportation or handling of Hazardous Substances; (ii) regulations relating to such federal laws; or (iii) similar state, local and tribal laws, ordinances and regulations. Environmental Laws do not include laws concerning man made material fibers (which term shall not be deemed to include asbestos or other mineral fibers) or employee health and safety. "ENVIRONMENTAL LIABILITIES" shall mean any liabilities, claims, expenses, penalties, fines or other obligations, including reasonable fees of attorneys, consultants, engineers, accountants and other advisers, for environmental conditions, situations, circumstances, events or incidents on, at or concerning, originating at or relating to the Assets arising under common law actions or Environmental Laws as in effect on the Effective Time directly or indirectly from: (i) the use, storage, emission, discharge, release or threatened release of Hazardous Substances in any work place or on or into the air, land, surface waters, groundwater or other medium (on or off site); (ii) the manufacture, processing, distribution, use, treatment, disposal, transportation or handling of Hazardous Substances; or (iii) the investigation, study, correction, cleanup, removal, remediation, or monitoring of Hazardous Substances. The foregoing notwithstanding, in the case of: (i) any remediation or other Cleanup of Hazardous Substances for which Sellers are responsible and liable pursuant to Section 5.01(g) (including, but not limited to, the investigation, study, correction, cleanup, removal and monitoring of such Hazardous Substances), such remediation or Cleanup shall be conducted and performed in accordance with remediation standards in effect up to the time the remediation or Cleanup is completed; and (ii) any claims or demands that are within the scope of Section 5.01(g)(iv), Sellers shall be responsible and liable for such claims and demands in accordance with, and as required by, all applicable Environmental Laws without limitation to those Environmental Laws in effect on the Effective Time. "ENVIRONMENTAL NOTICE" shall have the meaning ascribed to such term in Subsection 5.01(d). "EPA" shall mean the United States Environmental Protection Agency. "EQUIPMENT" shall mean all equipment, tools, instruments, machines, parts, materials, substances, systems, supplies, rolling stock, furniture, catalysts and chemicals, communications systems and licenses, vehicles, electronic systems and computers. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "EXCLUDED ASSETS" shall mean the Accounts Receivable, the Excluded Contracts and all assets of Sellers or Affiliates of Sellers not associated with, related to or used in connection with the Businesses, including without limitation (i) the Bluebell and Altonah gas plants and related gathering systems located in Uintah and Duchesne Counties, Utah, (ii) Sellers' airplane and hanger, and (iii) the stock of Gary-Williams Acquisition Company, Gary-Williams Retail Company and Gary-Williams Production Company. The term "EXCLUDED ASSETS" shall also include (i) the computers, software (other than the Refinery linear program in connection with which Buyer agrees to pay the $5,000 assumption fee), trademarks, office equipment and supplies and other fixed assets located in the ordinary course of business in Sellers' office in Denver, Colorado, (ii) all fixed assets located in the ordinary course of business in Denver or Arapahoe Counties, Colorado, (iii) all sulfur credits earned prior to the Effective Time, and (iv) the stock of BRC. "EXCLUDED CONTRACTS" shall mean those contracts and agreements listed in Schedule 1.01.2 which are excluded from the terms of this Agreement and are being retained by Sellers. "EXISTING ENVIRONMENTAL LIABILITIES" shall mean those Environmental Liabilities disclosed in a writing of even date herewith and executed by Buyer and Sellers. "FACILITIES" shall mean all facilities, units, buildings, structures, fixtures, terminals, pipelines, tanks and other storage facilities and similar property used in the refining, processing, treating, transporting or storage of crude oil and refined products. "FEEDSTOCK" shall mean crude oil, natural gas liquids and other hydrocarbons processed by the Refinery. "FINAL SETTLEMENT STATEMENT" shall have the meaning ascribed to such term in Subsection 8.01(a). "GII" shall mean Giant Industries, Inc., a Delaware corporation, the direct parent of Buyer. "HAZARDOUS SUBSTANCES" shall mean any hazardous substance, extremely hazardous substance, hazardous material, hazardous waste, toxic substance, pollutant, contaminant, hazardous waste constituent, radioactive material, petroleum (including without limitation crude oil or any fraction thereof), any variation of the foregoing, or any other environmental contaminant. "H-S-R ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations of the Federal Trade Commission under such act. "INDEMNIFIED PARTY" shall have the meaning ascribed to such term in Subsection 8.03(c). "INDEMNIFYING PARTY" shall have the meaning ascribed to such term in Subsection 8.03(c). "INDEMNITY OBLIGATION" shall have the meaning ascribed to such term in Subsection 8.03(c). "INTANGIBLE PROPERTY" means patents, copyrights, proprietary know-how and proprietary technology (but not Licenses thereof), associated with, related to, or used in connection with the Assets or the Businesses. "INTERMEDIATE PRODUCTS" shall mean products that have been purchased, partially processed or refined and placed in storage pending blending or further processing in amounts and qualities that have been historically stored and used in connection with the Businesses. "INVENTORY" shall mean readily marketable and saleable or useable Feedstock, Refined Products and Intermediate Products, including line fills, salable tank bottoms and work in process. "LAWS" shall mean all laws, rules, regulations, ordinances and orders of all federal, state, local and tribal governmental bodies, authorities and agencies having jurisdiction over the Assets or the Businesses, other than Environmental Laws. "LICENSES" shall mean all licenses and other rights to use proprietary materials, technology, processes and rights in connection with the Assets and the Businesses. "LOSS" shall mean any loss, cost, claim, damage, deficiency and all expenses, including without limitation, attorneys' and accountants' fees and disbursements. "MATERIAL EFFECT" shall mean an adverse effect which, in the reasonable judgment of a comparable industry third party purchasing assets and businesses comparable to the Assets and Businesses, would, alone or in the aggregate, cause such a third party not to purchase the Assets for reasons other than changes or conditions in the industry and in markets. "NONTRANSFERABLE PERMITS AND LICENSES" shall mean those Permits and Licenses which by their terms are not transferable, or, if by their terms require consent or approval for transfer, such consents or approvals are not obtained prior to Closing. "OSHA REQUIREMENTS" shall have the meaning ascribed to such term in Subsection 6.02(t). "PERMITS" shall mean any and all permits, authorizations, certificates, approvals, registrations, premanufacture notifications or other approvals and licenses granted or required by any federal, state, local or tribal governmental bodies, authorities and agencies in connection with the Businesses or the Assets. "PERMITTED EXCEPTIONS" shall mean: (a) liens for taxes or assessments not yet delinquent or, if delinquent, that are being contested in good faith in the normal course of business; (b) mechanic's, materialmen's, repairmen's, employees, contractor's, operator's and similar liens or charges arising in the ordinary course of business securing amounts not yet due and payable; (c) easements, rights-of-way, servitudes, permits, surface leases and other rights with respect to surface operations; pipelines, grazing, canals, ditches, reservoirs or the like; conditions, restrictive and protective covenants, common area maintenance assessments or other similar restrictions and charges; mineral and royalty reservations and conveyances; and easements for streets, alleys, highways, pipelines, telephone lines, power lines, railways and other easements and rights-of-way, on, over or in respect of any of the Assets; provided in each case that such matters do not and will not interfere materially with the ownership, operation or use of the Assets or the Businesses as they are now operated or used and as they have been operated or used on an historical basis, nor result in a Material Effect; (d) other minor defects and irregularities of title affecting the Assets that do not and will not interfere materially with the ownership, operation or use of the Assets or the Businesses as they are now owned, operated or used or as they have been owned, operated or used on an historical basis, nor result in a Material Effect; and (e) ordinary and customary rights reserved to or vested in any federal, state, local or tribal governmental authority to control or regulate the Businesses or any of the Assets. "PERSON" shall mean an individual, partnership, corporation, governmental body, limited liability company, joint venture, trust or an unincorporated organization or association or other legal entity. "PIPELINE" shall mean the crude oil pipeline commonly referred to as the San Juan Pipeline and located in San Juan County, New Mexico, and currently owned in part by Buyer and in part by GWEC; the LPG pipeline connecting the Refinery to the MAPCO pipeline; and any other pipelines in which Sellers or any Affiliate have an interest and which are associated with, related to or used in connection with the San Juan Pipeline, the LPG pipeline and the Refinery. "PIPELINE ASSETS" shall mean all of Sellers' and any Affiliate's property, interests and rights in and to the real property, personal property and other assets associated with, related to, or used in connection with the Pipeline and the Pipeline Business, including without limitation, all of Sellers' and any Affiliate's property, interests and rights in and to the Pipeline Real Property, the Pipeline Personal Property, the Pipeline Inventory and the Pipeline Contracts. "PIPELINE BUSINESS" shall mean Sellers' and any Affiliate's business relating to the transportation of crude oil and LPGs through the Pipeline. "PIPELINE CONTRACTS" shall mean all Contracts associated with, related to or used in connection with the Pipeline or the Pipeline Business. "PIPELINE EQUIPMENT" shall mean all Equipment associated with, related to or used in connection with the Pipeline and the Pipeline Business. "PIPELINE FACILITIES" shall mean all Facilities associated with, related to or used in connection with the Pipeline and the Pipeline Business, including without limitation, all pipes, pipelines, tanks and storage facilities, terminals, pumps and pumping stations. "PIPELINE INVENTORY" shall mean all Inventory owned by Sellers or any Affiliate located at or stored on or in the Pipeline Facilities as of the Effective Time. "PIPELINE PERSONAL PROPERTY" shall mean the Pipeline Equipment and all other tangible personal property (including any Pipeline Facilities and fixtures that are personal property under state law, but excluding Pipeline Inventory) associated with, related to or used in connection with the Pipeline or the Pipeline Business. "PIPELINE REAL PROPERTY" shall mean the real property (including any Pipeline Facilities and fixtures that are real property under state law) associated with, related to or used in connection with the Pipeline, or the Pipeline Business, including without limitation, all leases, easements, servitudes, rights-of-way, mineral rights, water rights, appurtenant rights, permits, licenses, franchises, grants, certificates and rights to use the surface. "PRELIMINARY AMOUNT" shall have the meaning ascribed to such term in Subsection 6.03(d). "PRELIMINARY SETTLEMENT STATEMENT" shall have the meaning ascribed to such term in Subsection 6.03(d). "PREPAID ITEMS" shall mean necessary goods and services to be delivered to the Refinery in the ordinary course of business on or after the Closing Date for which Seller has prepaid as reflected in accordance with generally accepted accounting principles on the books and records of Sellers and for which Buyer will receive the proportionate benefit which at the date of this Agreement are estimated by Sellers to be approximately $25,000. "PROPERTY TAX PRORATION AMOUNT" shall have the meaning ascribed to such term in Section 5.05. "RCRA" shall mean the federal Resource Conservation and Recovery Act. "RECORDS" shall mean and include all originals and copies, in whatever form, of agreements, documents, tapes, maps, manuals, books, financial information, reports, engineering designs, surveys, plans and specifications, title reports, test results, files and other records in the possession or control of Sellers and reasonably necessary or desirable for analyzing, owning, operating and maintaining the Assets and the Businesses, excluding personnel and other records that are subject to an obligation of confidentiality or are not transferable under applicable agreements with third parties or any applicable laws, rules, regulations or orders. "REFINED PRODUCTS" shall mean gasoline, diesel fuel, aviation fuel, fuel oil and other refined products produced by the Refinery. "REFINERY" shall mean the refinery known as the Bloomfield Refinery. "REFINERY ASSETS" shall mean all of Sellers' and any Affiliate's property, interests and rights in and to the real property, personal property, and other assets associated with, related to or used in connection with the Refinery or the Refinery Business, including without limitation, all of Sellers' and any Affiliate's property, interests and rights in and to the Refinery Real Property, the Refinery Personal Property, the Intangible Property, the Refinery Inventory and the Refinery Contracts. "REFINERY BUSINESS" shall mean Sellers' and any Affiliate's business relating to the purchase, transportation, refinement, processing and sale of Feedstock and Refined Products in the Refinery's historical area of operation. "REFINERY CONTRACTS" shall mean all Contracts associated with, related to or used in connection with the Refinery or the Refinery Business. "REFINERY EQUIPMENT" shall mean all Equipment associated with, related to or used in connection with the Refinery or the Refinery Business. "REFINERY FACILITIES" shall mean all Facilities associated with, related to or used in connection with the Refinery or the Refinery Business, including without limitation, the processing units, shipping facilities and terminals described on Schedule 1.01.3. "REFINERY INVENTORY" shall mean all Inventory owned by Sellers or any Affiliate located at or stored on or in the Refinery Facilities as of the Effective Time. "REFINERY PERSONAL PROPERTY" shall mean the Refinery Equipment and all other tangible personal property (including any Refinery Facilities and fixtures that are personal property under state law, but excluding Refinery Inventory) associated with, related to, or used in connection with the Refinery or the Refinery Business. "REFINERY REAL PROPERTY" shall mean the Refinery Site and the other real property (including any Refinery Facilities and fixtures that are real property under state law) associated with, related to, or used in connection with the Refinery or the Refinery Business, including without limitation, all leases, easements, servitudes, rights-of-way, mineral rights, water rights, appurtenant rights, permits, licenses, franchises, grants, certificates and other rights to use the surface. "REFINERY SITE" shall mean the real property on which the Refinery is located as more specifically described on Schedule 1.01.4. "REFINERY SITE ENCUMBRANCES" shall mean the liens, charges, encumbrances, contracts, agreements, instruments, obligations, defects and irregularities affecting the Refinery Site as listed on Schedule 1.01.5. "TRANSFERABLE PERMITS AND LICENSES" shall mean those Permits and Licenses which by their terms are transferable, or, if by their terms require consent or approval for transfer, such consent or approval is obtained prior to Closing. "TRANSFER DOCUMENTS" shall have the meaning ascribed to such term in Subsection 7.03(a). "TRANSFER TAXES" shall have the meaning ascribed to such term in Section 5.04. 1.02 EXHIBITS AND SCHEDULES. All Exhibits and Schedules referred to in this Agreement have been separately bound and initialed by the duly authorized officers of Buyer and Sellers. All of such Exhibits and Schedules are hereby incorporated in this Agreement by reference and constitute a part of this Agreement. Each party to this Agreement and its counsel has received a complete set of the Exhibits and Schedules prior to and as of the execution of this Agreement. 1.03 REFERENCES AND TITLES. All references in this Agreement to Exhibits, Schedules, Articles, Sections, Subsections, and other subdivisions refer to the Exhibits, Schedules, Articles, Sections, Subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles and headings appearing at the beginning of any subdivision are for convenience only and do not constitute a part of any such subdivision and shall be disregarded in construing the language contained in this Agreement. The words "this Agreement," "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Article," "this Section" and "this Subsection" and similar phrases refer only to the Articles, Sections or Subsections hereof in which the phrase occurs. The word "or" is not exclusive. Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender. Words in the singular form shall be construed to include the plural and words in the plural form shall be construed to include the singular, unless the context otherwise requires. The words "operated as they have been operated on an historical basis" and words of similar import shall include physical operation, financial results of operation and all other aspects of operation, but shall not include changes or conditions affecting the industry or markets. ARTICLE II PURCHASE AND SALE 2.01 PURCHASE AND SALE. Sellers agree to sell and transfer to Buyer, and Buyer agrees to purchase and accept delivery of, the Assets, subject to the terms and conditions of this Agreement. 2.02 EFFECTIVE. The purchase and sale of the Assets shall be effective for all purposes as of the Effective Time. 2.03 PURCHASE PRICE. The consideration to be paid by Buyer to Sellers for the Assets shall be: (i) the Base Purchase Price as adjusted pursuant to Section 2.05; plus (ii) the Earnout if and when earned. 2.04 ALLOCATION OF PURCHASE PRICE. The purchase price shall be allocated among the Assets and among Sellers as set forth in Schedule 2.04. Buyer and Sellers shall not take any position on their respective income tax returns or financial statements that is inconsistent with the allocation of the purchase price as set forth in Schedule 2.04, and Buyer and Sellers shall duly prepare and timely file such reports and information returns as may be required under Section 1060 of the Code to report the allocation of the purchase price among the Assets in a manner consistent with Schedule 2.04. 2.05 ADJUSTMENTS TO BASE PURCHASE PRICE. The Base Purchase Price shall be adjusted upward by the value of the Refinery Inventory and the Pipeline Inventory as of the Effective Time, and the cost of any Prepaid Items (apportioned as of the Effective Time). The value of Inventory shall be determined: (a) for Feedstock, using weighted average laid-in prices as of the Effective Time; (b) for Refined Products, using Bloomfield O.P.I.S. average product prices as of the Effective Time less a discount equal to the difference between the prior calendar month O.P.I.S. average product prices and the realized netbacks for those products for the prior calendar month (Refined Products prices not reported in O.P.I.S. shall be the fair market value thereof); (c) for Intermediate Products (other than blend stocks) using the prices for Refined Products for the refined components to be produced from the Intermediate Products less $.03 per gallon; and (d) for blend stocks, using the weighted average laid-in price as of the Effective Time. Work in process (estimated to be no more than 1,000 barrels) shall be transferred without additional consideration as part of the Base Purchase Price. The cost of Prepaid Items shall be the amount Sellers actually paid in good faith in arm's length transactions for such Prepaid Items. The Base Purchase Price shall also be adjusted upward by the Capital Projects Costs, and downward by the Property Tax Proration Amount. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.01 REPRESENTATIONS AND WARRANTIES OF SELLER. Sellers represent and warrant to Buyer as follows: (a) ORGANIZATION. Sellers are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and Sellers are duly qualified to carry on their business in the State of New Mexico. (b) POWER AND AUTHORITY. Sellers have all requisite power and authority to carry on their business as presently conducted, to enter into this Agreement, to sell the Assets on the terms described in this Agreement, and to perform their obligations under this Agreement. The consummation of the transactions provided for in this Agreement will not violate, nor be in conflict with, any provision of either Seller's charter, bylaws or governing documents, or any agreement or instrument to which either Seller is a party or is bound, or any judgment, decree, order, statute, rule or regulation applicable to either Seller. (c) AUTHORIZATION. The execution, delivery and performance of this Agreement and the transactions provided for herein have been duly and validly authorized by all requisite action on the part of Sellers and, if necessary, Sellers' shareholders. (d) BINDING OBLIGATIONS. This Agreement has been duly executed and delivered on behalf of Sellers, and at the Closing all documents and instruments required hereunder to be executed and delivered by Sellers shall have been duly executed and delivered. This Agreement does, and such documents and instruments shall, constitute legal, valid and binding obligations of Sellers, enforceable against Sellers in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws relating to or affecting the enforcement of creditors' rights generally and to general principles of equity. (e) TAXES. All taxes, including without limitation all ad valorem, property, excise, sales, use, assessments, special assessments, pipeline, windfall profit, severance, payroll, employment, unemployment compensation and other governmental charges and assessments (together with any and all interest and penalties) that would result in a lien on the Assets or otherwise affect title thereto or that Buyer (as the owner of the Assets and Businesses after the Effective Time) would be responsible for after the Effective Time that have become due and payable have been properly and timely withheld, collected, deposited, and paid prior to becoming delinquent, or are being contested in good faith in the normal course of business. All such taxes which are being so contested are described on Schedule 3.01(e), and Sellers shall continue to be responsible therefor. (f) BROKER'S AND FINDER'S FEES. Sellers have incurred no liability, contingent or otherwise, for brokers' or finders' fees relating to the transactions provided for in this Agreement for which Buyer shall have any responsibility whatsoever. (g) LITIGATION. Except for pending or threatened litigation expressly described as Existing Environmental Liabilities and those matters listed on Schedule 3.01(g), no suit, action, investigation, material dispute or other proceeding is pending or, to the best of Sellers' knowledge, threatened before any court, arbitrator, or governmental agency that, if determined adversely would result in any of the following: (i) a Material Effect, (ii) impairment or loss of title to any portion of the Assets or the value thereof or of the Businesses in any material respect, or (iii) any prohibition, restriction, limitation, or other matter that would affect the use, operation or enjoyment of the Assets and the Businesses in any material respect. (h) COMPLIANCE WITH LAWS. Except as disclosed in a writing of even date herewith and executed by Buyer and Sellers, all Laws relating to the Assets, the Businesses or the ownership and operation thereof as they are now operated and as they have been operated on an historical basis have been complied with in all material respects. (i) NON-FOREIGN PERSON. Neither Seller is a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code). (j) CAPITAL PROJECTS. Schedule 3.01(j) contains a listing of all material capital projects (the "CAPITAL PROJECTS") being conducted or proposed (i.e., budgeted or approved) to be conducted in relation to the Assets or the Businesses (other than scheduled turnarounds), together with the estimated costs thereof and the estimated cost remaining to be paid for completion. (k) COLLECTIVE BARGAINING AGREEMENTS. Schedule 3.01(k) sets forth all collective bargaining agreements to which Sellers are parties or are bound and relating to the Businesses, and all long term employment contracts relating to employees who may become Buyer's Employees. During the past year Sellers have not been advised of any threatened strikes, slow downs, work stoppages, representation questions, material grievances or similar labor activities relating to the Businesses. The consummation of the transactions provided for in this Agreement does not violate any collective bargaining agreement with or for the benefit of any employee of Sellers, and shall not result in a material violation of any Laws relating to employment obligations of Sellers. (l) WATER RIGHTS. Schedule 3.01(l) sets forth a description of the water and water rights used by Sellers in connection with the Assets and the Businesses. (m) FINANCIAL STATEMENTS. Schedule 3.01(m) sets forth (i) audited financial statements as of the close of BRC's fiscal years ended December 31, 1990, 1991, 1992, 1993 and 1994, (ii) unaudited financial statements for 1995 as of March 31, and (iii) profit and loss statements for April and May of 1995. These financial statements, together with the notes thereto, and the profit and loss statements are complete and correct in all material respects and present fairly the financial position and the results of operations of BRC as of the dates and for the periods indicated. The financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis. Since March 31, 1995, there has not been any change in operations, assets or business which would have a Material Effect. (n) SUMMARY OF OPERATIONS. Schedule 3.01(n) sets forth a financial summary of operations of the Businesses for the periods indicated prepared from the books and records of the Sellers. Such financial summary (taking into consideration all notes and explanations contained therein and exclusions for transportation and marketing personnel that overlap with Buyer's transportation and marketing personnel) fairly represents the results of operations for the periods indicated in all material respects. Since the last period indicated in such financial summary, there has not been any change in the Assets or the Businesses or the operations thereof which would have a Material Effect. (o) CLAIMS AGAINST TITLE. To the best knowledge of Sellers, subject to Permitted Exceptions and the Refinery Site Encumbrances, no claim or demand has been made or asserted challenging Sellers' title, ownership use or operation of the Refinery Assets or the Pipeline Assets. (p) NECESSARY ASSETS. Except for the Excluded Assets and water rights, the Refinery Assets and the Pipeline Assets include all tangible property necessary for owning and operating the Refinery, Sellers' interest in the Pipeline, and the Businesses as they are currently being operated and as they have been operated on an historical basis. 3.02 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Sellers as follows: (a) ORGANIZATION. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Arizona, and Buyer is duly qualified to carry on its business in the State of New Mexico. (b) POWER AND AUTHORITY. Buyer has all requisite power and authority to carry on its business as presently conducted, to enter into this Agreement, to purchase the Assets on the terms described in this Agreement and to perform its other obligations under this Agreement. The consummation of the transactions provided for in this Agreement will not violate, nor be in conflict with, any provision of Buyer's charter, bylaws or governing documents, or any agreement or instrument to which Buyer is a party or is bound, or any judgment, decree, order, statute, rule or regulation applicable to Buyer. (c) DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and the transactions provided for herein have been duly and validly authorized by all requisite action on the part of Buyer. (d) BINDING OBLIGATIONS. This Agreement has been duly executed and delivered on behalf of Buyer, and at the Closing all documents and instruments required hereunder to be executed and delivered by Buyer shall have been duly executed and delivered. This Agreement does, and such documents and instruments shall, constitute legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws relating to or affecting the enforcement of creditors' rights generally and to general principles of equity. (e) QUALIFIED. Buyer is duly qualified to own, hold and operate assets customary in the industry for the Businesses, including without limitation all industry typical leases, easements, rights-of-way and other agreements covering, affecting or otherwise relating to federal, state and tribal lands. (f) BROKER'S AND FINDER'S FEES. Buyer has incurred no liability, contingent or otherwise, for brokers' or finders' fees relating to the transactions provided for in this Agreement for which Sellers shall have any responsibility whatsoever. (g) ACCEPTANCE OF CERTAIN PERMITS, LICENSES AND CONTRACTS. Notwithstanding anything contained herein to the contrary, Buyer has received copies of the Permits, Licenses, Contracts and other documents listed on Schedule 3.02(g), and copies of the Refinery Site Encumbrances; and Buyer acknowledges that such items do not result in a Material Effect and are otherwise acceptable to Buyer, and Buyer shall not assert a failure of a condition to Closing as a result of the terms and provisions of such items. Provided the foregoing shall not prohibit Buyer from raising the condition in Subsection 6.02(p), except for fees, costs and expenses specifically enumerated in such items. ARTICLE IV COVENANTS 4.01 COVENANTS OF SELLERS. From the date hereof through the Closing Date, Sellers covenant and agree with Buyer as follows: (a) ACCESS TO INFORMATION. In order to assist Buyer in Buyer's due diligence review as provided in Section 5.07 and Buyer's review of the accuracy of Sellers' representations and warranties, Sellers shall permit Buyer and its authorized employees, agents, consultants, accountants, and legal counsel access, at Buyer's sole expense, risk and cost, during normal business hours, to the Records and the Assets and will furnish Buyer with such additional financial and operating data and other information pertaining to the Businesses as Buyer may reasonably request to the extent that such access and disclosure would not violate the terms of any agreement to which Sellers are bound or any applicable law, rule, regulation or order; provided, however, that the confidentiality of any data or information to which Buyer is given access shall be maintained by Buyer and its representatives (including employees, agents, consultants, accountants and legal counsel) in accordance with the Confidentiality Agreement, and Buyer shall be liable for any disclosure or use in violation thereof. Sellers shall promptly provide Buyer with a listing of any such matters withheld pursuant to the provisions of this Section. (b) CERTAIN CHANGES. Except as contemplated in this Agreement, Sellers will not, without first obtaining the consent of Buyer (which consent will not be unreasonably withheld): (i) make any change in the nature of the Businesses or carry on the Businesses other than in the ordinary course; (ii) enter into or amend in any material respect any Contract other than in the ordinary course of business; (iii) refrain from using its Best Efforts to maintain all qualifications of Sellers which are required for them to carry on the Businesses; (iv) sell or otherwise transfer or encumber (other than liens and security interests to be released at Closing) title to any of the Assets, other than Inventory in the ordinary course of business and personal property that is replaced by equivalent property or consumed in the normal operation of the Refinery or the Pipeline; (v) except to the extent otherwise required by applicable legal requirements, fail to maintain their books and records in the usual, regular and ordinary manner and consistent with past practices; or (vi) commit itself to do any of the foregoing. (c) MAINTENANCE OF ASSETS. Sellers shall cause the Assets to be maintained and operated in a good and workmanlike manner consistent with past practices and industry standards, shall maintain insurance now in force with respect to the Assets and shall pay or cause to be paid all costs and expenses incurred in connection therewith. (d) OPERATION OF BUSINESSES AND MAINTENANCE OF INVENTORY. Sellers shall carry on the Businesses in substantially the same manner as Sellers have heretofore and shall not introduce any new method of management, operation or accounting with respect to the Businesses. Sellers shall use reasonable efforts to maintain the customers, good will and reputation of the Businesses, and shall maintain Inventory, supplies and spare parts in the ordinary course of business consistent with past practice in amounts reasonably sufficient to allow Buyer to continue operations of the Assets in the ordinary course immediately after the Closing. (e) COMPLIANCE WITH LAWS. All Laws relating to the Assets and the Businesses shall be complied with in all material respects. (f) BEST EFFORTS. Subject to Sellers' rights hereunder, Sellers shall use their Best Efforts to take or cause to be taken all such actions as may be necessary or advisable to consummate and make effective the sale of the Assets and the transactions provided for in this Agreement and to assure that as of the Closing Date they will not be under any material corporate, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions; and Sellers will use their Best Efforts to obtain the satisfaction of the conditions to Closing set forth in Section 6.02 hereof. (g) H-S-R ACT FILING. As soon as practicable after the date hereof, but in no event later than five Business Days after the date hereof, Sellers shall submit all necessary filings for Sellers in connection with the transactions provided for in this Agreement under the H-S-R Act. (h) TRANSFER OF PERMITS AND LICENSES AND CONTRACTS. Sellers shall use their Best Efforts to have all Transferable Permits and Licenses transferred to Buyer at the Closing, and shall assist Buyer in obtaining replacement or substitute Permits and Licenses for the Nontransferable Permits and Licenses. Sellers shall use their Best Efforts to have the Contracts transferred to Buyer at the Closing; and shall assist Buyer in obtaining replacement or substitute contracts and agreements for the contracts and agreements (other than those included within the Excluded Contracts) which would be Contracts except that such contracts and agreements are not transferrable. (i) CONTRACTS. On or before ten days after the date of this Agreement, Sellers shall provide Buyer with a list (and copies of) of all material Contracts, all Contracts with Affiliates, and any Contracts that do not expire within 180-days of the date hereof or cannot be terminated or canceled on 180-days or less notice. Such list shall also separately list all material contracts which would be Contracts except that Sellers believe such contracts to be not transferable. (j) PERMITS AND LICENSES; INTANGIBLE PROPERTY. On or before ten days after the date of this Agreement, Sellers shall provide Buyer with a list (and copies of) all material Permits and Licenses and all Intangible Property. (k) NON-TRANSFERABLE RECORDS. As soon as practical after the date of this Agreement, Sellers shall provide Buyer with a list of the Records, if any, that are not transferrable under applicable agreements with third parties or any applicable law, rule, regulation or order. (l) INFORMATION FOR SEC FILINGS. Sellers shall provide all information in their possession or control reasonably required for Buyer to make any securities filings in connection with the transaction provided for in this Agreement, including but not limited to audited financial statements and unaudited summarized data as may be required by the rules and regulations of the Securities and Exchange Commission; provided, however, all reasonable costs and expenses incurred by Sellers in connection therewith shall be borne and paid by Buyer. Notwithstanding the foregoing, Sellers shall not be required to provide any such information if in doing so it would require Sellers to incur unreasonable costs and expenses unless Buyer agrees to reimburse Sellers for such added costs and expenses. (m) NOTICES. Sellers shall promptly notify Buyer in writing of: (a) all events, circumstances, facts and occurrences known to Sellers which would result in a breach of a representation or warranty or covenant of the Sellers; (b) all other material developments known to Sellers affecting the Assets and the Businesses which would have a Material Effect; and (c) receipt of a notice from a third party that would cause one of the conditions in Section 6.02 not to be met. 4.02 COVENANTS OF BUYER. From the date hereof through the Closing, Buyer covenants and agrees with Sellers as follows: (a) BEST EFFORTS. Subject to Buyer's rights hereunder, Buyer shall use its Best Efforts to take or cause to be taken all such actions as may be necessary or advisable to consummate and make effective the purchase of the Assets and the transactions provided for in this Agreement and to assure that as of the Closing Date it will not be under any material corporate, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions; and Buyer will use its Best Efforts to obtain the satisfaction of the conditions to Closing set forth in Section 6.01. (b) H-S-R ACT. As soon as practicable after the date hereof, but in no event later than five Business Days after the date hereof, Buyer shall submit all necessary filings for Buyer in connection with the transactions provided for in this Agreement under the H-S-R Act. (c) FINANCIAL COMMITMENTS. Subject to Buyer's rights hereunder, Buyer shall obtain all necessary bonds, insurance, guaranties, letters of credit and similar financial commitments in connection with (i) the transfer of the Transferrable Permits and Licenses, (ii) obtaining replacement or substitute Permits and Licenses for the Nontransferable Permits and Licenses, (iii) the transfer of the Contracts, and (iv) obtaining replacement or substitute contracts and agreements (other than those within the Excluded Contracts) which would be Contracts except that such contracts and agreements are not transferable. (d) TRANSFER OF PERMITS AND LICENSES AND CONTRACTS. Buyer shall use its Best Efforts to obtain replacement or substitute Permits and Licenses for the Nontransferable Permits and Licenses; and shall assist Sellers in having the Transferable Permits and Licenses transferred to Buyer at the Closing. Buyer shall use its best efforts to obtain replacement or substitute contracts and agreements for the contracts and agreements (other than those included within the Excluded Contracts) which would be Contracts except that such contracts and agreements are not transferrable; and shall assist Sellers in having the Contracts transferred to Buyer at the Closing. ARTICLE V CERTAIN PROCEDURES 5.01 ENVIRONMENTAL MATTERS. (a) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except for the Existing Environmental Liabilities, to the best knowledge of Sellers the Assets, the Businesses and the ownership and operation thereof as they are currently being owned and operated and as they have been owned and operated on an historical basis and all Refined Products produced thereby are in compliance with all Environmental Laws, the failure of which compliance could have a Material Effect. (b) ACCESS FOR INSPECTION. From the date hereof until the Effective Time, Buyer shall have the right to make an environmental assessment of the Assets at Buyer's sole risk and expense in compliance with the terms and conditions described in this Section ("ENVIRONMENTAL INVESTIGATION"). Sellers agree to cooperate with reasonable requests by Buyer and its agents in connection with the Environmental Investigation. (c) ENVIRONMENTAL INVESTIGATION. If Buyer exercises its right pursuant to Subsection 5.01(b) to make an Environmental Investigation of the Assets, Buyer and its agents shall have the right, subject to compliance with the provisions of this Section, to enter upon the Assets and all structures and improvements thereon, inspect the same, conduct soil and water tests and borings, and conduct such other tests, examinations, investigations and studies as may be necessary or appropriate in Buyer's reasonable judgment for the preparation of appropriate engineering and other reports relating to the Assets, their condition, and the presence thereon of any Hazardous Substances. Buyer shall give Sellers at least two Business Days' notice prior to conducting any such test, which notice shall set forth with specificity the procedures to be used; and Sellers shall be entitled to be present during any such tests and shall be entitled to conduct their own tests, including tests using split samples. Buyer shall exercise all due diligence in safeguarding and maintaining as confidential all data or information acquired during its Environmental Investigation, and all such data and information shall be subject to the terms of the Confidentiality Agreement. If Buyer or its agents prepares any report documenting any Environmental Investigation, Buyer shall furnish copies thereof to Sellers, and Sellers shall exercise all due diligence in safeguarding and maintaining any such report as confidential. Buyer waives and releases all claims and demands against Sellers, their respective directors, officers, shareholders, employees and agents for injury to or death of persons or damage to property arising in any way from any Environmental Investigation, except to the extent such claims are caused by the negligence or willful misconduct of Sellers, or their directors, officers, shareholders, employees and agents in connection with such Environmental Investigation. Buyer and Sellers have executed a letter relating to any Environmental Investigation in the form of Exhibit A (the "COMMON UNDERTAKING LETTER"), the provisions of which shall survive the execution of this Agreement. (d) ENVIRONMENTAL NOTICE; LOSSES. If Buyer determines reasonably and in good faith that any portion of the Assets or the Businesses is adversely affected by Environmental Liabilities other than (i) Existing Environmental Liabilities, (ii) Environmental Liabilities attributable to the actions or omissions of Buyer in conducting the Environmental Investigation and (iii) Environmental Liabilities related to the Pipeline Assets of which Buyer had knowledge prior to the date of this Agreement as a result of its prior ownership interest in the Pipeline Assets, Buyer shall give Sellers one or more notices (an "ENVIRONMENTAL NOTICE") thereof on or before the Effective Time, if the Environmental Liabilities are discovered prior to the Effective Time, or on or before one year after the Effective Time if the Environmental Liabilities are discovered after the Effective Time. Buyer shall provide Sellers with a copy of any report or reports of the results of the Environmental Investigation and shall disclose to Sellers the discovery of any Hazardous Substance or other matter that could result in Environmental Liabilities. Sellers shall exercise all due diligence in safeguarding and maintaining as confidential any such reports, the Environmental Notice, and any information relating to the discovery of any Hazardous Substance or any other matter that could result in Environmental Liabilities. The Environmental Notice shall describe such matters and include copies of reports, tests, photographs and other documentary evidence supporting the position that an Environmental Liability exists. With respect to Environmental Notices received on or before the Closing, Sellers shall either: (i) terminate this Agreement if allowed by Section 5.01(f); or (ii) give written notice to Buyer that it will remain responsible and liable for the Environmental Liabilities identified in the Environmental Notice. (e) CLEANUP. From and after the Closing, Sellers and their agents shall have the right, subject to compliance with the provisions of this Section, to enter upon the Assets for the purpose of conducting any remediation or restoration ("CLEANUP") required to remedy any Environmental Liabilities for which Sellers remain responsible and liable after the Closing pursuant to Section 5.01(g). Sellers shall give Buyer at least two Business Days' notice prior to visits or for activities that will not affect the normal operation of the Assets. Sellers shall give Buyer at least ten Business Days' notice of activities that will affect normal operation. Sellers shall not, to the extent reasonably possible, interfere with Buyer's use or operation of the Assets, or the conduct of the Businesses, in conducting any Cleanup. Sellers agree to use their best efforts to complete any Cleanup in a timely manner. For purposes of all applicable Laws, Sellers shall be considered the "generator" of any Hazardous Substances generated during any Cleanup conducted by Sellers, and Sellers shall own any Hazardous Substances, including any water, soil and other media contaminated with Hazardous Substances, that is treated, stored or disposed of in connection with Sellers' Cleanup activities. If Sellers or their agents prepare any reports in connection with a Cleanup, Sellers shall furnish copies thereof to Buyer, and Buyer shall exercise all due diligence in safeguarding and maintaining any such report as confidential in accordance with the Confidentiality Agreement. Sellers waive and release all claims and demands against Buyer, its directors, officers, shareholders, employees and agents for injury to or death of persons or damage to property arising in any way from a Cleanup, except to the extent such claims are caused by the negligence or willful misconduct of Buyer, its directors, officers, employees and agents. (f) TERMINATION OF AGREEMENT. If the Loss reasonably expected to be incurred in connection with one or more of the Environmental Liabilities identified in one or more Environmental Notices received prior to Closing in the aggregate is greater than five percent of the Base Purchase Price, Sellers or Buyer may terminate this Agreement without liability to either party. (g) ENVIRONMENTAL LIABILITIES RETAINED BY SELLER. Sellers expressly retain responsibility and liability for and agree to pay, perform, fulfill and discharge the following Environmental Liabilities: (i) all Environmental Liabilities existing with regard to the Assets or the Businesses that are known to Sellers on the date of this Agreement and that are not disclosed in a writing of even date herewith executed by Buyer and Sellers; (ii) all Environmental Liabilities that are identified in one or more Environmental Notices delivered to Sellers on or before Closing (if the Environmental Liabilities are discovered prior to that date) or on or before one year after the Closing (if the Environmental Liabilities are discovered after the Closing but before one year after Closing); (iii) all Environmental Liabilities arising from or in connection with claims made by third parties (other than claims made by governmental entities requiring or requesting that Sellers or Buyer clean up, remove or otherwise remediate any Hazardous Substance) at any time, whether before or after the Effective Time, arising out of or in connection with operations or other activities conducted by such third parties on or associated with the Assets, or the presence of such third parties on the Assets, prior to the Effective Time and during the period of Sellers' or an Affiliate's ownership or operation of the Assets; (iv) all Environmental Liabilities arising from or in connection with any claims or demands made at any time, whether before or after the Effective Time, arising out of or in connection with any Hazardous Substances that were transported off of the Assets prior to the Effective Time by Sellers, an Affiliate or their agents for purposes of treatment, storage or disposal; (v) all Environmental Liabilities arising from or in connection with claims made by third parties ( including governmental entities) within two years after the Effective Time arising out of or in connection with any discharge or other release of Hazardous Substances off of the Assets prior to the Effective Time, or the migration off of the Assets of Hazardous Substances that were discharged or otherwise released on the Assets prior to the Effective Time; (vi) all Environmental Liabilities arising from or in connection with tort claims for injury to human health made by third parties (other than claims made by governmental entities requiring or requesting that Sellers or Buyer clean up, remove or otherwise remediate any Hazardous Substance) at any time, whether before or after the Effective Time, arising out of or in connection with the presence in the air, in groundwater used for drinking purposes, or in the San Juan River of Hazardous Substances discharged or otherwise released off of the Assets prior to the Effective Time, or Hazardous Substances that were discharged or otherwise released on the Assets prior to the Effective Time and have migrated off of the Assets; and (vii) all fines, penalties and related assessments for Environmental Liabilities assessed or imposed by governmental entities relating to, arising out of or pertaining to the Assets, the Businesses or the ownership or operation thereof, but only to the extent such fines, penalties and assessments pertain to the period of Sellers' or Affiliate's ownership or operation of the Assets. Environmental Liabilities retained by Sellers in this Section 5.01(g) shall not include (w) any Environmental Liabilities known to Buyer prior to the Effective Time that are not disclosed to Sellers by an Environmental Notice given prior to Closing and (x) any Environmental Liabilities for which Buyer has liability prior to the Effective Time by virtue of its existing ownership interest in the Pipeline Assets, but only to the extent of such ownership interest. Environmental Liabilities retained by Sellers in this Section 5.01(g) also shall not include Environmental Liabilities that result either from (y) cleanup or other remedial actions taken by Buyer voluntarily prior to demand therefor by a third party including any governmental entity, or (z) notices given by Buyer to any third party of facts or circumstances concerning the Assets that could provide the basis for Environmental Liabilities, except notices requested or required by a governmental entity or required by any Law or Environmental Law. (h) ENVIRONMENTAL LIABILITIES ASSUMED BY BUYER. Except for the Environmental Liabilities retained by Sellers pursuant to Section 5.01(g), upon Closing Buyer shall assume and agree to pay, perform, fulfill and discharge all Environmental Liabilities arising before, as of or after the Effective Time for which Sellers would otherwise have responsibility (including those Environmental Liabilities relating to the Assets and contractually assumed by Sellers from predecessors in interest to the Assets, but not including those Environmental Liabilities, if any, contractually assumed from other third parties, unless such Environmental Liabilities contractually assumed from other third parties are described in the Existing Environmental Liabilities or the documents incorporated by reference therein), including without limitation the Existing Environmental Liabilities, Environmental Liabilities for remediation or cleanup on the Assets required by any governmental entity to remove sources of Hazardous Substances giving rise to tort claims described in Section 5.01(g)(v) and (vi), and all Environmental Liabilities not expressly retained by Seller pursuant to Section 5.01(g) or referred to in the parenthetical in this Subsection 5.01(h). 5.02 PERSONNEL, EMPLOYMENT ARRANGEMENTS AND EMPLOYEE BENEFITS. (a) OFFERS OF EMPLOYMENT. Except for those employees of BRC listed on Schedule 5.02(a), Buyer shall offer employment to all hourly or salaried active, full time employees of BRC employed in connection with the Businesses. The employees who accept offers of employment by Buyer shall be referred to as "BUYER'S EMPLOYEES." As soon as practicable after the date hereof, Sellers shall provide Buyer with information as to the titles and current salaries with respect to such employees, and Buyer and Sellers shall cooperate in all aspects in effecting their change of employment as of the Closing Date in an orderly fashion. (b) BENEFITS. (i) SELLERS' UNION DEFINED BENEFITS AND 401(K) SAVINGS PLANS. Buyer shall have no liability whatsoever to the Buyer's Employees or to Sellers with respect to accrued pension benefits or any other benefits payable to such Buyer's Employees under the Bloomfield Refining Company Union Employee's Defined Benefits and 401(k) Savings Plans, and Sellers warrant there are no and have not been any multiemployer plans within the meaning of Section 4001(a)(3) of ERISA. (ii) SELLERS' NON-UNION RETIREMENT PLAN. Buyer shall have no liability whatsoever to the Buyer's Employees or to Sellers with respect to any benefits payable to such Buyer's Employees under the non-union Gary Tax Advantaged Savings Program and Profit Sharing Plan. (iii) UNUSED VACATION. Sellers will pay out directly to each Buyer's Employee any accrued unused vacation time as of the Closing Date. (iv) ONGOING BENEFITS. Except as provided in any contract between Buyer and any labor organization in connection with any Buyer's Employees, all Buyer's Employees shall receive from Buyer substantially the same employee benefits as Buyer's current employees are receiving, including health, disability and other insurance, retirement accounts and vacation and sick leave, with no waiting period for comparable benefits, and with credit for years of service to Sellers for vesting purposes, in each case to the extent permitted by Buyer's existing plans and programs. (v) SELLERS' RESPONSIBILITY FOR EXISTING BENEFITS. Buyer shall not be liable for any salaries, wages, commissions, vacation and/or sick leave pay or other compensation or benefits due Sellers' employees prior to the Effective Time, including, but not limited to, any withdrawal liability imposed under ERISA as the result of the cessation of any of Sellers' obligations to contribute to any plan subject to ERISA. Sellers shall remain liable for and pay all amounts due their employees under any pension, vacation, 401(k) savings, profit sharing, retirement, severance, bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, medical, dental, life insurance, supplemental retirement or other benefit plans, programs, or arrangements (including any such plans, programs or arrangements contained in any employment or collective bargaining contract or agreement). Sellers agree to remain solely responsible and liable for any claims or demands made by their employees arising or resulting from facts or circumstances occurring during their employment by Sellers. Sellers hereby agree to indemnify, save and hold harmless Buyer for, from and against any and all Loss associated in any way with the matters set forth in this Section 5.02(b). (c) COOPERATION OF THE PARTIES. Sellers and Buyer agree to fully cooperate with respect to each of the calculations necessary to effect the transactions contemplated by this Section. (d) EMPLOYEE RIGHTS. Nothing herein expressed or implied shall confer upon any employee of Sellers, any Buyer's Employee or any other employee or legal representatives thereof any rights or remedies, including any right to employment, or continued employment for any specified period, of any nature or kind whatsoever under or by reason of this Agreement. (e) COBRA AND HEALTH CLAIM DATA. Sellers shall provide all notices and fulfill all of their obligations, if any, under Section 4980B(f)(6) of the Code with respect to the Buyer's Employees. Prior to Closing, Sellers shall provide Buyer information with respect to all accident, workers' compensation and disability claims filed by each of Sellers' employees (including information respecting the total number of claims filed, the total amount of benefits claimed and the total amount of benefits paid) during the eighteen-month period immediately preceding the delivery of such information to Buyer. (f) WAGE REPORTING. Wages paid by Sellers to Buyer's Employees during 1995 shall be considered attributable to Buyer for purposes of Section 3121(a)(1) of the Code and Section 31.3121(a)(1)-1(b) of the Treasury Regulations. Buyer shall furnish each Buyer's Employee one statement of Income Tax Withheld on Wages (IRS Form W-2) for wages paid by Sellers and Buyer. Buyer shall file IRS Forms W-2 and W-3 covering Buyer's Employees with the Social Security Administration for wages paid and withheld by Sellers and Buyer during 1995. Both parties shall comply with the provisions of Section 5 of Rev. Proc. 84-77. Sellers shall provide Buyer computer information as soon as practicable relative to wages paid to Buyer's Employees prior to the Closing Date to permit Buyer to comply with this Subsection. Sellers and Buyer do not intend by this Subsection 5.02(f) to relieve Sellers of the obligation to pay and/or withhold any wages for any of Buyer's Employees up to the Effective Time. (g) UNEMPLOYMENT COMPENSATION. Prior to the Closing Date, if requested by Buyer, Buyer and Sellers shall jointly make application to the New Mexico Department of Labor to transfer Sellers' New Mexico unemployment compensation experience rating as of the Closing Date. 5.03 CASUALTY LOSS. If, prior to the Closing, all or any portion of the Assets shall be destroyed by fire or other casualty, or if any portion of the Assets shall be taken in condemnation or under the right of eminent domain, or if proceedings for such purposes shall be pending or threatened, the effect of which would have a Material Effect, Buyer or Sellers may elect to terminate this Agreement. If Buyer or Sellers shall so elect, neither party shall have any further obligation to the other hereunder. If not so terminated or if there is no Material Effect, this Agreement shall remain in full force and effect notwithstanding any such destruction or taking, and Sellers shall repair or replace that portion of the Assets damaged or destroyed by fire or other casualty prior to the Closing and, in the event of a taking under condemnation or under the right of eminent domain, Sellers shall at the Closing pay to Buyer all sums paid to Sellers by reason of such taking, and Sellers shall assign, transfer and set over unto Buyer all of the right, title and interest of Sellers in and to any unpaid awards or other payments arising out of such taking. 5.04 TAXES DUE WITH RESPECT TO TRANSFER OF ASSETS. Buyer and Sellers believe that there are no sales or other transfer taxes ("TRANSFER TAXES") applicable as a result of the transfer of the Assets to Buyer pursuant to this Agreement. If there are any such Transfer Taxes, Buyer shall be obligated to pay such taxes or reimburse Sellers for Sellers' payment of such taxes. 5.05 PROPERTY TAX PRORATION AMOUNT. Unpaid state and local ad valorem, property and similar taxes and assessments, common area charges and assessments, utility charges, and rent under leases or subleases applicable to the Assets shall be apportioned as of the Effective Time. The "PROPERTY TAX PRORATION AMOUNT" shall be the amount of the foregoing which have accrued for periods preceding the Effective Time, but which have not been paid. The calculation of the Property Tax Proration Amount shall be based on the best information relating to the items covered thereby available immediately prior to the Closing Date. The Property Tax Proration Amount as so determined shall be final between the parties and the Base Purchase Price shall be adjusted therefor as provided in Section 2.05. 5.06 LIKE-KIND EXCHANGE. If requested by Sellers, Buyer will cooperate with Sellers to accommodate a like-kind exchange under Section 1031 of the Code with respect to the Assets or any portion thereof. Such cooperation shall include, without limitation, the execution of certain documents in connection with such like-kind exchange, but Buyer shall not have to assume any additional liabilities or obligations in connection therewith. Sellers shall have the right, without the consent of Buyer, to assign all or any portion of their interests in the Assets and their rights and obligations under this Agreement to a third party designated by Sellers for purposes of facilitating such like-kind exchange. Sellers shall indemnify, save and hold harmless Buyer for, from and against any and all costs, expenses, liabilities, fines, penalties, and demands for damages associated in any way with the like-kind exchange or the third-party's property to be exchanged and the breach of all warranties, obligations and duties of "Sellers" under this Agreement and the Transfer Documents. 5.07 DUE DILIGENCE. Immediately upon execution of this Agreement, and subject to Section 5.01(b) and (c), Sellers shall give to Buyer full access during normal business hours to all information as provided in Section 4.01(a) in order to allow Buyer to inspect, test, and examine the Assets and the Businesses prior to the Closing and in order to assist Buyer in determining if any matter or event may constitute a Material Effect. ARTICLE VI CONDITIONS TO CLOSING 6.01 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Sellers to consummate the transactions provided for in this Agreement are subject, at the option of Sellers, to the satisfaction or waiver of the following condition: All representations and warranties of Buyer contained in this Agreement shall be true in all respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Buyer shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed and satisfied by Buyer at or prior to the Closing. 6.02 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to consummate the transactions provided for in this Agreement are subject, at the option of Buyer, to the satisfaction or waiver of the following conditions: (a) REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and warranties of Sellers contained in this Agreement shall be true in all respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Sellers shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed and satisfied by Sellers at or prior to the Closing. (b) NO STATUTE OR REGULATION. No state or federal statute or regulation shall have been proposed or adopted that would result in a Material Effect or that would adversely affect the Assets, the Businesses or Buyer's ability to own and operate the Assets in substantially the same way as they are now operated and as they have been operated on an historical basis. (c) TITLE. Subject to Permitted Exceptions, and the Refinery Site Encumbrances, Sellers' title to the Refinery Assets shall be good and marketable. Subject to Permitted Exceptions, Sellers' title to the Pipeline Assets shall be such as to allow Buyer to enjoy the use and operation thereof as they are now operated by Sellers and as they have been operated on an historical basis, free of any claims of third parties. (d) PERMITS AND LICENSES. All material Permits and Licenses necessary for Buyer to own and operate the Assets and the Businesses in accordance with Laws and Environmental Laws and as they are now owned and operated by Sellers and as they have been owned and operated on a historical basis, shall have been transferred to Buyer without modifications, amendments, or additional costs, financial obligations or other requirements that would have a Material Effect, or Buyer shall have received replacement or substitute Permits and Licenses or other arrangements have been made to give Buyer substantially the same benefits, without modifications, amendments or additional costs, financial obligations or other requirements that would have a Material Effect. (e) CONTRACTS. Except for the Excluded Contracts, all material contracts, agreements, leases of personal property and leases of real property, and any consents required from any Person in connection with the assignment thereof, necessary for Buyer to own and operate the Assets and the Businesses as they are now owned and operated by Sellers and as they have been owned and operated on an historical basis, shall have been transferred to Buyer without modifications, amendments, or additional costs, financial obligations or other requirements that would have a Material Effect, or Buyer shall have received replacement or substitute contracts, agreements, leases of personal property and leases of real property for such material contracts, agreements, leases of personal property and leases of real property, respectively, or other arrangements have been made to give Buyer substantially the same benefits, without modifications, amendments or additional costs, financial obligations or other requirements that would have a Material Effect. (f) CONDITION AND REPAIR OF REFINERY FACILITIES AND REFINERY PERSONAL PROPERTY. The Refinery shall be operating in the ordinary course and shall be capable of operating at its rated capacity. The Refinery Facilities and Refinery Personal Property shall be in good condition and repair and shall have been maintained in as good and effective operating condition as they would be kept and maintained by a prudent operator; and the Refinery Facilities and Refinery Personal Property shall be in compliance with all Laws, the failure of which compliance would have a Material Effect. (g) CONDITION AND REPAIR OF PIPELINE FACILITIES AND PIPELINE PERSONAL PROPERTY. Subject to those matters known to Buyer as a result of Buyer's ownership interest in the Pipeline and taking into consideration the age and use of the Pipeline, the Pipeline Facilities and Pipeline Personal Property shall be in good condition and repair and shall have been maintained in as good and effective operating condition as they would be kept and maintained by a prudent operator; and the Pipeline Facilities and Pipeline Personal Property shall be in compliance with all Laws, the failure of which compliance would have a Material Effect. (h) RESULTS OF DUE DILIGENCE. Buyer's inspection, testing and examination of the Assets and the Businesses conducted pursuant to Section 5.07 shall not have revealed any matter which, in the reasonable judgment of a comparable industry third party purchasing assets and businesses comparable to the Assets and Businesses, would, alone or in the aggregate, cause such a third party not to purchase the Assets for reasons other than changes or conditions in the industry and in markets. (i) WATER RIGHTS. Buyer shall have received an assignment, and all required consents thereto, of a fully executed, valid and effective contract between Sellers and the United States Bureau of Reclamation in the form set forth in Schedule 6.02(i), and, in addition, a comparable industry third party purchasing assets and businesses comparable to the Assets and Businesses would in its reasonable judgment determine, following due diligence review as provided in Section 5.07, that an assured water supply, at a cost not materially exceeding historical costs, will be available in the immediate future through a valid and enforceable contract with a term of not less than 10 years with a local municipality for delivery of water through the Refinery's existing delivery point(s) in an amount sufficient to operate the Refinery as it is now operated by Sellers and has been operated by Sellers on an historical basis. If such an assured water supply is not immediately available, Sellers and Buyer shall together in good faith attempt to determine if other mutually satisfactory assurances of adequate long-term supply are available. The water rights described on Schedule 3.01(l) shall have, in the past, provided the Refinery with an adequate water supply to operate in the ordinary course of business without interruption or shut down and without objections, litigation, threatened litigation or similar claims, except as set forth on such Schedule. The water rights granted by the contract with the United States Bureau of Reclamation described above, together with the "Owned Rights" described on Schedule 3.01(l), shall be sufficient to allow Buyer to operate the Refinery as it is currently being operated and as it has been operated on a historical basis; and except as set forth in such Schedule, there shall be no objections, threatened objections, complaints, litigation, threatened litigation or other matters with respect to, limiting or affecting the continued use of such water by Buyer. (j) COLLECTIVE BARGAINING AGREEMENT. Buyer shall have entered into an agreement(s) with those labor organizations, or successors thereto, that are parties to the collective bargaining agreements set forth in Exhibit 3.01(k) containing terms and conditions no more onerous than those contained in said collective bargaining agreements in any material respect. (k) APPROVAL OF WATER USAGE. The New Mexico State Engineer Office shall have approved the continued removal of groundwater in connection with environmental remediation activities at the Refinery and said approval shall not unreasonably restrict the amount of groundwater that may be removed for such purpose after the Effective Time, or Buyer shall have received from Montgomery & Andrews, New Mexico legal counsel to Buyer, reasonable assurances to the effect that lack of such approval will not have a material adverse effect on such remediation activities. (l) INTANGIBLE PROPERTY. Buyer shall have obtained all material Intangible Property necessary to own and operate the Assets and the Businesses as they are now operated and as they have been operated on an historical basis. The continued operation of the Refinery Business and the Pipeline Business and the use of such Intangible Property and the Licenses shall not infringe any valid patent, copyright, tradename or other right held by any third party in any material respect. No claim by any third party contesting the validity, enforceability, use or ownership of the Intangible Property or Licenses shall have been threatened or outstanding. (m) NO VIOLATION. No oral or written notice, citation, order or judgment shall have been issued, no penalty shall have been assessed, and no investigation or review shall be pending or threatened by any Person with respect to any alleged material violation of any Laws or Environmental Laws (other than as disclosed as an Existing Environmental Liability), or with respect to any alleged failure to have any material Licenses or Permits in connection with the Assets or the Businesses. (n) VALIDITY OF CONTRACTS. All material Contracts and leases of real property (i) shall be in full force and effect, (ii) shall be legal, valid, binding and enforceable in accordance with their terms, and (iii) shall not be in default and no events have occurred thereunder, which with the giving of notice or the passage of time or both could cause any such Contract or leases of real property to be in default. All monies due and performance required under the terms of all material Contracts and leases of real property through the Effective Date shall have been paid and performed or Sellers will give adequate assurance that such will be so paid and performed. (o) CONDEMNATION. There shall be no material condemnation, expropriation, eminent domain, or similar proceeding pending or threatened affecting any of the Assets. (p) COSTS RELATING TO ENVIRONMENTAL LIABILITIES. The costs and expenses of Buyer to comply with Environmental Laws and to pay, perform, fulfill and discharge Environmental Liabilities would not, in the reasonable judgment of a comparable industry third party purchasing assets and businesses comparable to the Assets and Businesses, be materially increased over the historical costs incurred by Sellers in connection therewith. (q) REASSESSMENTS AND REEVALUATIONS. There shall have been no proposed reassessments or reevaluations of any of the Assets, any imposition of additional assessments or special assessments, or any other proposals that would increase the amount of any taxes relating to the Assets or the Businesses, that would have a Material Effect. (r) PROFIT AND LOSS STATEMENTS. Prior to Closing Sellers shall have provided to Buyer profit and loss statements for BRC for each month subsequent to May, 1995 as is normally available. (s) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except for the Existing Environmental Liabilities, the Assets, the Businesses and the ownership and operation thereof as they are currently being owned and operated and as they have been owned and operated on an historical basis and all Refined Products produced thereby shall be in compliance with all Environmental Laws, the failure of which compliance could have a Material Effect. (t) CRUDE OIL CONTRACTS. All contracts for the purchase or supply of crude oil identified by Sellers in Schedule 3.02(g) shall have been transferred to Buyer without any material modifications, amendments, or additional costs, financial obligations or other requirements or Buyer shall have received replacement or substitute contracts or other arrangements have been made to give Buyer substantially the same benefits, without material modifications, amendments, or additional costs, financial obligations or other requirements. (u) OSHA MATTERS. Except as referred to in Section 3.01(h), all requirements of the Occupational Safety and Health Act and the regulations promulgated thereunder, and all requirements of any similar laws or regulations of any state, tribal or local jurisdiction (the "OSHA REQUIREMENTS") relating to the Assets, the Businesses or the ownership or operation thereof as they are now owned and operated, and as they have been owned and operated on an historical basis, shall have been complied with in all material respects. Sellers shall have not received any citation or other notice of alleged violation of OSHA Requirements from the Occupational Safety and Health Administration or any comparable administration of any state, tribal or local jurisdiction (an "ADMINISTRATION") or any Administration inspector setting forth any respect in which the Assets, the Businesses, or the ownership or operation thereof is not in compliance with OSHA Requirements, which noncompliance shall not have been corrected or remediated to the satisfaction of such Administration or inspector. (v) CONVENTIONAL GASOLINE/ANTI-DUMPING. Subject to averaging in accordance with 40 C.F.R. Part 80, Subpart E, all gasoline produced at the Refinery shall be in compliance with the anti-dumping provisions, including conventional gasoline standards and blendstock controls, of the Clean Air Act and the regulations promulgated thereunder, including 40 C.F.R. Part 80, Subpart E (the "ANTI-DUMPING REQUIREMENTS"), and the Refinery is capable of producing gasoline which complies with the Anti-Dumping Requirements, without any limitation on existing gasoline production capacity, utilizing the Refinery's existing configuration and existing Feedstock quality. (v) MATERIAL STATEMENTS. No information provided by Sellers shall have contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained therein not misleading. There shall have been no material adverse fact known to Sellers and unknown to Buyer relating to the Assets or the Businesses which has not been disclosed to Buyer. (w) PERMITS AND LICENSES. The Permits and Licenses shall have been entered into by Sellers in the ordinary course of business and shall contain terms and conditions customary in the industry for similar types of instruments. (x) CONTRACTS. The Contracts shall have been entered into by Sellers or Affiliates in the ordinary course of business in arm's length transactions and shall contain terms and conditions customary in the industry for similar types of instruments. (y) CONSENTS. All material final consents, approvals, orders and authorizations of any Person required in connection with the consummation of the transactions herein contemplated, the transfer of the Assets to Buyer or the ownership, operation or use of the Assets and the Businesses as they are now operated or used and as they have been operated or used on an historical basis (including but not limited to any preferential rights to purchase or consents to assignments), shall have been obtained without conditions which would result in a Material Effect, or, if such consents are customarily obtained subsequent to such transfer, such consents will be forthcoming in the ordinary course without resulting in a Material Effect. (z) BENEFIT PLANS. Each employee benefit plan maintained by Sellers which is intended to meet the requirements for tax-favored treatment under the Code or which is intended to be qualified within the meaning of Section 401(a) of the Code, shall have been administered in accordance with such requirements and shall have received a favorable determination letter from the Internal Revenue Service with respect thereto; and nothing shall have occurred which would cause the loss of any such tax-favored treatment or qualification. Each such plan shall have been amended prior to the end of the Code's remedial amendment period to incorporate all provisions required by the Tax Reform Act of 1986 and subsequent legislation. (aa) UTILITIES. Buyer shall have access and the right to use all gas, electricity and other utilities necessary or historically used for the operation of the Assets and the Businesses as they are currently being operated and as they have been operated on a historical basis. 6.03 CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The obligations of Sellers and Buyer to consummate the transactions provided for in this Agreement are subject, at the option of each party, to the satisfaction or waiver by both parties of the following conditions: (a) NO ACTION OR PROCEEDINGS. There shall not be pending or instituted, threatened or proposed, any suit, action, investigation, material dispute or other proceeding by or before any court, arbitrator or governmental agency or any other Person affecting, relating to, challenging or complaining of, or seeking to collect damages or other relief in connection with, the transactions provided for in this Agreement, the Assets or the Businesses. (b) H-S-R ACT. The waiting period applicable under the H-S-R Act shall have been terminated or shall have expired, no litigation shall be pending or threatened with respect to any antitrust issue, and the Closing shall then be permitted to occur without violation of the H-S-R Act. (c) NO STATUTE, RULE, REGULATION OR ACTION. No state or federal statute, rule, regulation or action shall exist or be proposed, pending, or threatened, or shall have been adopted or taken and no judicial or administrative decision shall have been entered (whether on a preliminary or final basis), that would prohibit, restrict or delay the consummation of the transactions provided for in this Agreement or make illegal the payments due hereunder. (d) PRELIMINARY SETTLEMENT STATEMENT. Sellers and Buyer shall have agreed upon a settlement statement (the "PRELIMINARY SETTLEMENT STATEMENT") that shall set forth the Preliminary Amount (as hereinafter defined) and each adjustment and the calculation of such adjustments used to determine such amount. The term "PRELIMINARY AMOUNT" shall mean the Base Purchase Price adjusted as provided in Section 2.05 using for such adjustment the best information then available. ARTICLE VII CLOSING 7.01 DATE OF CLOSING. Subject to the conditions stated in this Agreement, the consummation of the transactions contemplated by this Agreement (the "CLOSING") shall be held on August 31, 1995, provided, however, if all conditions to Closing set forth in Article VI have not been satisfied or waived by such date, the Closing shall occur within three business days after such conditions shall have been met or waived. The date Closing actually occurs shall be referred to as the "CLOSING DATE." 7.02 PLACE OF CLOSING. The Closing shall be held at the offices of Holme Roberts & Owen LLC, Suite 4100, 1700 Lincoln, Denver, Colorado, or at such other place as Buyer and Sellers may agree upon in writing. 7.03 CLOSING OBLIGATIONS. At the Closing the following events shall occur, each being a condition precedent to the others and each being deemed to have occurred simultaneously with the others: (a) TRANSFER DOCUMENTS. Sellers (and, if necessary, Affiliates of Sellers) shall execute, acknowledge and deliver, and Buyer shall execute, acknowledge and accept delivery of, the following transfer documents (the "TRANSFER DOCUMENTS"): (i) General Deed, Assignment, Bill of Sale and Assumption, covering all of the Assets; guarantees and warranties on equipment and fixtures; claims against UST funds for Environmental Liabilities assumed by Buyer; and as to any matters for which Buyer has assumed any liability or obligation, any claims, defenses, warranties of title and rights to indemnity which Sellers have or to which they are entitled from the parties from whom Sellers acquired the Assets or Sellers' predecessors in interest; substantially in the form of Exhibit B; (ii) Bill of Sale, covering the Refinery Equipment, Refinery Facilities, Refinery Inventory, and Pipeline Inventory warranting to Buyer good title free and clear of all liens, claims, liabilities, encumbrances or rights or interests of any third party whatsoever, subject to Permitted Exceptions, substantially in the form of Exhibit C; (iii) Assignment and Conveyance covering the Refinery Real Property (other than the Refinery Site and the fixtures that are real property under applicable state law located thereon), if any, containing a special warranty of title against liens and security interests created by, through or under Seller, subject to Permitted Exceptions, substantially in the form of Exhibit D; (iv) General Warranty Deed, covering the Refinery Site and the fixtures that are real property under applicable state law located thereon, containing a general warranty of title, subject to Permitted Exceptions and the Refinery Site Encumbrances, substantially in the form of Exhibit E (if deemed necessary by Buyer, this Transfer Document will be recorded in the real property records of San Juan County, New Mexico, concurrently with the Closing); (v) Bill of Sale, covering all of Sellers' right, title and interest in the Pipeline Equipment and Pipeline Facilities, containing a special warranty of title against liens and security interests created by, through or under Sellers, subject to Permitted Exceptions, substantially in the form of Exhibit F; and (vi) Assignment and Conveyance covering all of Sellers' right, title and interest in the Pipeline Real Property, containing a special warranty of title against liens and security interests created by, through or under Seller, subject to Permitted Exceptions, substantially in the form of Exhibit G. As appropriate, Sellers and Buyer shall also execute, acknowledge and deliver (i) separate transfer documents for individual Assets as may be required given the nature of an individual Asset, and (ii) separate transfer documents of the Assets on officially approved forms in sufficient counterparts to satisfy applicable statutory and regulatory requirements. All such separate transfer documents shall be deemed to contain all of the exceptions, reservations, warranties, right, titles, powers and privileges as are contained in the Transfer Documents. (b) POSSESSION. Buyer shall be given exclusive possession of the Refinery Assets, possession of the Pipeline Assets and possession of the Records maintained at the Refinery (and Buyer shall be entitled to retain copies of all Records maintained by Sellers in Denver). (c) LIEN RELEASES. Sellers shall deliver to Buyer releases of liens and security interests (including termination of financing statements relating thereto) necessary to transfer title as provided herein. (d) INDIVIDUALS' NONCOMPETE. Sellers shall cause to be delivered to Buyer a covenant against competition executed by Sam Gary and Ron Williams in form and substance as Section 8.08. (e) GUARANTEE AND AGREEMENT. Buyer shall cause to be delivered to Sellers a Guarantee and Agreement executed by GII in form and substance as set forth in Exhibit H. (f) PRELIMINARY SETTLEMENT STATEMENT. Sellers and Buyer shall execute and deliver the Preliminary Settlement Statement. (g) PRELIMINARY AMOUNT. Buyer shall deliver the Preliminary Amount to Sellers or to Sellers' account (such account to be designated by Sellers at least two Business Days prior to the Closing Date) by direct bank or wire transfer. (h) SELLERS' CERTIFICATE. Sellers shall execute, acknowledge and deliver to Buyer a Sellers' Certificate dated as of the Closing Date in form and substance as set forth in Exhibit I. (i) BUYER'S CERTIFICATE. Buyer shall execute, acknowledge and deliver to Seller a Buyer's Certificate dated as of the Closing Date in form and substance as set forth in Exhibit J. (j) NON-FOREIGN STATUS CERTIFICATE. Each Seller shall execute, acknowledge and deliver to Buyer a Non-Foreign Status Certificate dated as of the Closing Date in form and substance as set forth in Exhibit K. (k) CRUDE OIL CONTRACT. Sellers and Buyer shall execute and deliver a crude oil contract in form and substance as set forth in Exhibit L. ARTICLE VIII OBLIGATIONS AFTER CLOSING 8.01 POST-CLOSING SETTLEMENT. (a) FINAL SETTLEMENT STATEMENT. Within 60 days following the Closing Date Sellers and Buyer SHALL PREPARE A STATEMENT (THE "Final Settlement Statement") setting forth the Base Purchase Price and each adjustment thereto as provided in Section 2.05 which was not finally determined as of the Closing. Sellers and Buyer shall make available to the other party all books, records and other information in their possession or control, and the assistance of personnel who are familiar with same, as may be reasonably requested in connection with the preparation of the Final Settlement Statement. (b) INABILITY TO AGREE TO FINAL SETTLEMENT STATEMENT. The parties shall undertake in good faith to agree on the Final Settlement Statement no later than 90 days after the Closing Date; provided, if Buyer and Sellers shall be unable to agree on the Final Settlement Statement within such 90-day period, then Ernst & Young LLP, or such other nationally recognized public accounting firm mutually acceptable to Buyer and Sellers, shall be engaged to make its determination of the amount in dispute (and only such amount). Each party shall bear and pay one-half of the fees and other costs charged by such accounting firm. (c) ACCOUNTING FIRM PROCEDURES. If any accounting firm is engaged as provided in Subsection 8.01 (b) above, Sellers and Buyer agree to provide such accounting firm with all books, records and other information relevant to the determination of the amount in dispute. In determining the amount in dispute, such accounting firm shall be instructed to use a materiality standard as such firm may determine to be reasonable under the circumstances, in light of the cost to be incurred and the amount in issue. Such accounting firm shall be instructed to make such calculations as soon as practicable. The final determination of any adjustment of the Base Purchase Price, pursuant to this Subsection 8.01(c) shall be binding on the parties hereto. (d) PAYMENT OF DIFFERENCE. The amount of the difference between the Preliminary Amount paid by Buyer to Sellers at the Closing and the amount as determined in accordance with this Section, shall be paid by the appropriate party to the party to whom it is owed within five Business Days after its final determination in immediately available funds. 8.02 RECORDING FEES. Buyer shall pay all documentary, filing and recording fees required in connection with the filing and recording of the Transfer Documents and any separate transfer documents executed pursuant to Subsection 7.03(a). 8.03 INDEMNIFICATION. (a) BUYER'S INDEMNIFICATION OF SELLERS. From and after the Closing Date, Buyer shall defend, indemnify and save and hold harmless Sellers and Sellers' respective directors, officers, shareholders, employees and agents against all Losses which arise from or in connection with (i) any of the matters assumed by Buyer pursuant to Subsection 5.01(h) or set forth in Section 8.04(b); (ii) any breach of any covenant, agreement, representation or warranty of Buyer contained herein; and (iii) claims or demands asserted against any Seller, its directors, officers, shareholders, employees and agents for injury to or death of persons or damage to property arising in any way from Buyer's due diligence or Buyer's Environmental Investigation, and any common law or statutory liens or other encumbrances for labor or materials furnished in connection with an Environmental Investigation. (b) SELLERS' INDEMNITY OF BUYER. From and after the Closing Date, Sellers shall defend, indemnify and save and hold harmless Buyer and Buyer's directors, officers, shareholders, employees and agents against all Losses which arise from or in connection with (i) any of the matters retained or assumed by Sellers pursuant to Subsection 5.01 (g) or set forth in Section 8.04(a); (ii) any breach of any covenant, agreement, representation or warranty of Sellers contained herein ; and (iii) any breach of any covenant, agreement, representation of warranty of Sellers in any Transfer Document. (c) CLAIMS FOR INDEMNIFICATION. Sellers and Buyer shall with reasonable promptness notify the other party of the making of any demand, the assertion of any claim, or the commencement of any suit, action or proceeding by any third party for which indemnity may be sought under this Agreement (an "INDEMNITY OBLIGATION"). The party from whom indemnification is sought (the "INDEMNIFYING PARTY") shall have the right, but not the obligation, to assume the defense or settlement of any Indemnity Obligation of which the party seeking indemnification (the "INDEMNIFIED PARTY") gives notice; provided, however, that if the Indemnifying Party does not elect to assume such defense or settlement, the Indemnified Party shall have the right, but not the obligation, to assume such defense or settlement, and the Indemnifying Party shall at all times have the right, at its option and expense, to participate fully therein. Each party shall have reasonable access to the books, records and personnel in the possession or control of the other party which are pertinent to the defense or settlement of any Indemnity Obligation. The parties shall cooperate in the defense or settlement of any Indemnity Obligation, but the party electing to assume such defense or settlement shall have full authority to determine all action to be taken with respect thereto. The Indemnified Party may join the Indemnifying Party in any suit, action or proceeding to which any such right of indemnity created by this Agreement would or might apply, for the purpose of enforcing any such right. (d) INDEMNIFICATION THRESHOLD. Notwithstanding anything contained herein to the contrary, neither Sellers nor Buyer shall be liable for Losses pursuant to the indemnification obligations set forth in Section 8.03(a) and (b) unless the amount of Losses for which Sellers or Buyer, as the case may be, would be liable, but for the provisions of this Subsection 8.03(d), exceeds $25,000 for any individual Loss or $125,000.00 on an aggregate basis for all such Losses, but they shall retain full liability for all other covenants and obligations. The limitation in the foregoing sentence shall apply to Environmental Liabilities. 8.04 ASSUMPTION OF OBLIGATIONS. (a) SELLERS' OBLIGATION. In addition to the obligations retained or assumed by Sellers elsewhere in this Agreement, and except as otherwise provided in Section 5.01, Sellers shall remain liable and responsible for all claims, costs, expenses, liabilities and obligations of any kind or nature, whether known or unknown, arising from or in any manner relating to the existence, ownership, operation or maintenance of the Assets, the conduct of the Businesses, or any activity of the Sellers (including without limitation obligations arising under the Transferable Permits and Licenses, and the Contracts) attributable to periods prior to the Effective Time. (b) BUYER'S OBLIGATIONS. In addition to the obligations assumed by Buyer elsewhere in this Agreement, and except as otherwise provided in Section 5.01, Buyer shall be liable and responsible for all claims, costs, expenses, liabilities and obligations of any kind or nature, whether known or unknown, arising from or in any manner relating to the ownership or the operation of the Assets, the conduct of Buyer's business, or any activity of Buyer (including without limitation obligations arising under the Transferable Permits and Licenses, and the Contracts) attributable to periods after the Effective Time. 8.05 IDENTIFICATIONS, SIGNS, TRADEMARKS AND TRADENAMES. Within a reasonable time after Closing, but in no event later than 90 days after the Closing Date, Buyer at its sole cost, risk and expense shall remove from the Assets any and all signs or other items that display or exhibit the name of Sellers or their Affiliates, or the trademarks or tradenames of Sellers or their Affiliates. In the conduct of its business and otherwise, Buyer shall not use any of the foregoing and shall not represent, state or otherwise infer in any manner, directly or indirectly, to any party that Buyer is acting on behalf of or as a representative or agent of, or in any way associated with Sellers. Furthermore, Purchaser shall not use the names "Bloomfield Refining Company," "Gary-Williams Energy Corporation," "Bloomfield" or "Gary-Williams" or, with the exception of "Bloomfield Refinery," any combination thereof or any abbreviation thereof in connection with the use and operation of the Assets. 8.06 ACCESS TO RECORDS - BOOKS AND RECORDS. Sellers shall have the right to make copies of any of the Records located at the Refinery which they desire to retain prior to delivering such Records to Buyer at the Closing, and Buyer shall be entitled to make copies of any Records maintained by Sellers in Denver prior to Closing. For a period of seven years after the Closing Date, Buyer shall permit Sellers and their authorized representatives to have reasonable access to any Records received from Sellers remaining from time to time in Buyer's possession; and Sellers shall permit Buyer and its authorized representatives to have reasonable access to any Records retained by Sellers remaining from time to time in Sellers' possession. 8.07 WAIVER OF COMPLIANCE WITH BULK SALES LAWS. Buyer hereby waives compliance by Sellers with the provisions of any applicable bulk sales act, and Sellers hereby agree to indemnify Buyer from any Losses resulting therefrom. 8.08 COVENANT AGAINST COMPETITION. Sellers covenant and agree that they shall not at any time within the five year period immediately following the Closing Date engage in, finance, assist, or have any ownership or interest of any kind, directly or indirectly in any Person that engages in, anywhere within a 175 mile radius of Bloomfield, New Mexico, all or any part of the Businesses or any business related thereto (other than retail marketing of Refined Products, and exchanges and buying and selling of Refined Products relating to the retail marketing of Refined Products) including without limitation the purchasing or gathering of crude oil, the refining of crude oil or the marketing of Refined Products (other than retail marketing of Refined Products, and exchanges and buying and selling of Refined Products relating to the retail marketing of Refined Products); provided, however, that Sellers may own, directly or indirectly, as an investment, securities of any Person which are publicly traded if Sellers do not, directly or indirectly, own five percent or more of any class of securities of such Person. Except as provided in this Section, neither Sellers nor Buyer agree to otherwise refrain from any other competitive activities. 8.09 INDEPENDENT EVALUATION. Buyer is experienced and knowledgeable in the refinery and pipeline businesses and is aware of their risks. To the extent Buyer deems appropriate, Buyer will examine all materials made available by Sellers with respect to the Assets (the "BACKGROUND MATERIALS"). The Background Materials are files, or copies thereof, that Sellers have used in its normal course of business and other information about the Assets that Sellers have compiled or generated; however, Buyer acknowledges and agrees that, except as otherwise set forth herein, Sellers have made no representations or warranties, express or implied, written or oral, as to the accuracy or completeness of the Background Materials or any other information relating to the Assets furnished or to be furnished to Buyer or its representatives by or on behalf of Sellers. Buyer expressly assumes the risk of (i) future changes in the world price for crude oil, (ii) future changes in prices that may be received for refined and other products, (iii) future changes in the volumes of products refined at the Refinery, (iv) future changes in the volumes of products being transported through the Pipeline, and the rates received therefor, and (v) future changes in levels of production from the oil and gas leases and wells supplying the Refinery and the Pipeline (whether expected or unexpected declines or complete cessation of production). 8.10 FURTHER ASSURANCES. Sellers and Buyer shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such instruments and take such other action as may be reasonably necessary or advisable to carry out their obligations under this Agreement and under any Exhibit, Schedule, document, certificate or other instrument delivered pursuant hereto. 8.11 TITLE REPRESENTATIONS. Upon delivery of the Assignment and Conveyance delivered pursuant to 7.03(a)(iii) and the General Warranty Deed delivered pursuant to Section 7.03(a)(iv), GWEC agrees to guarantee to Buyer the title warranties of BRC contained therein. ARTICLE IX TERMINATION OF AGREEMENT 9.01 TERMINATION. This Agreement and the transactions provided for herein may be terminated in the following instances: (a) By either Buyer or Sellers if any condition set forth in Section 6.03 above shall not be satisfied at the Closing. (b) By Buyer if any condition set forth in Section 6.02 above shall not be satisfied on or before October 1, 1995. (c) By Sellers if any condition set forth in Section 6.01 above shall not be satisfied on or before October 1, 1995, or, if the Closing has not occurred, upon the later of 40 days after the date of this Agreement or 10 days after the waiting period applicable under the H-S-R Act has terminated or expired, but in no event earlier than August 31, 1995. (d) By either Buyer or Sellers if, in response to such party's filing under the H-S-R Act, the Federal Trade Commission or the Department of Justice makes a written request of such party for additional information and the compliance with such request would in such party's reasonable judgment cause an out-of-pocket expenditure to such party in excess of $200,000 or would, in the reasonable judgment of a comparable industry third party selling or purchasing assets and businesses comparable to the Assets and Businesses be otherwise unduly burdensome. (e) By either Buyer or Sellers if as of 60 days following the date of this Agreement, all federal and state regulatory clearances or approvals in connection with the H-S-R Act which are required to be granted prior to Closing have not been received. (f) By the mutual written agreement of Buyer and Sellers. This Agreement shall terminate without any further action by Sellers or Buyer if the Closing has not occurred on or before October 1, 1995. 9.02 RETURN OF INFORMATION. If this Agreement is terminated pursuant to Section 9.01 above or terminated under any other provision of this Agreement, Buyer shall return to Sellers all written information and material delivered to Buyer by Sellers pursuant to the terms of this Agreement, and such information shall remain subject to the terms of the Confidentiality Agreement. 9.03 EFFECT OF TERMINATION. The following provisions shall apply in the event of a termination of this Agreement: (a) NON-WILLFUL FAILURE. If this Agreement is terminated by Buyer or Sellers as permitted under Section 9.01 hereof and not as a result of the willful failure of any party to perform any of its obligations hereunder, such termination shall be without liability to any party to this Agreement or on the part of any shareholder, director, officer, employee, agent or representative of such party; (b) WILLFUL FAILURE. If this Agreement is terminated as a result of the willful failure of a party to perform any of its obligations hereunder, such non-performing party shall be fully liable for any and all damages, costs and expenses (including, without limitation, reasonable attorney's fees) sustained or incurred by such other party; (c) REMEDY FOR THE NON-SATISFACTION OF BUYER'S CONDITIONS. Notwithstanding anything contained herein to the contrary, if the conditions to Buyer's obligations to purchase the Assets as set forth in Section 6.02 are not satisfied other than as a result of Sellers' willful failure to perform any of their obligations hereunder, Buyers sole and only remedy is to terminate this Agreement without liability to Sellers; and (d) SURVIVAL. Sellers and Buyer hereby agree that the provisions of this Section 9.03 shall survive any termination of this Agreement. ARTICLE X MISCELLANEOUS 10.01 EXPENSES. Except as otherwise specifically provided in this Agreement, all fees, costs and expenses incurred by Buyer or Sellers in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the party incurring the same, including without limitation, legal and accounting fees, costs and expenses. 10.02 NOTICES. All notices and communications required or permitted under this Agreement shall be in writing and shall be delivered by established overnight delivery service, fax, by hand or by registered or certified mail, postage prepaid, addressed as follows: If to Sellers: Bloomfield Refining Company Gary-Williams Energy Corporation 370 Seventeenth Street, Suite 5300 Denver, Colorado 80202 Attention: David J. Younggren, Senior Vice President Fax No.: 303/628-3834 With copies to: Bloomfield Refining Company Gary-Williams Energy Corporation 370 Seventeenth Street, Suite 5300 Denver, Colorado 80202 Attention: James W. Greene, Esq. Fax No.: 303/628-3833 and Holme Roberts & Owen LLC Suite 4100 1700 Lincoln Denver, Colorado 80203 Attention: Lynn P. Hendrix, Esq. Fax No.: 303/866-0200 If to Buyer: Giant Industries Arizona, Inc. 23733 North Scottsdale Road Scottsdale, Arizona 85255 Attention: Fredric L. Holliger Fax No.: 602/585-8894 With copies to: Giant Industries Arizona, Inc. 23733 North Scottsdale Road Scottsdale, Arizona 85255 Attention: A. Wayne Davenport Fax No.: 602/585-8894 Giant Industries Arizona, Inc. 23733 North Scottsdale Road Scottsdale, Arizona 85255 Attention: Morgan Gust, Esq. Fax No.: 602/585-8985 All notices and communications shall be effective upon the earlier of actual receipt or, if delivered by mail, seven days after being deposited in the mail, postage prepaid and addressed as required by this Section. Either party may, by written notice so delivered to the other, change the address to which delivery shall thereafter be made. 10.03 AMENDMENT. This Agreement may not be altered or amended, nor any rights hereunder be waived, except by an instrument in writing executed by the party or parties to be charged with such amendment or waiver. No waiver of any term, provision or condition of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement. 10.04 ASSIGNMENT. Except as provided in Section 5.06, neither Seller nor Buyer may assign any portion of its rights or delegate any portion of its duties or obligations under this Agreement without the prior written consent of the other party; provided, however, that Buyer may, without the consent of Sellers, assign all or any portion of its right to receive the Assets and its rights and obligations under this Agreement to a wholly-owned subsidiary but, in such event, Buyer shall remain liable for all obligations and duties to Sellers under this Agreement. 10.05 ANNOUNCEMENTS. Sellers and Buyer shall consult with each other with regard to all press releases and other announcements concerning this Agreement or the transactions provided for herein and, except as may be required by applicable laws or the applicable rules and regulations of any governmental agency or stock exchange, neither Buyer nor Sellers shall issue any such press release or make any other announcement without the prior written consent of the other party, which consent will not be unreasonably withheld. 10.06 COUNTERPARTS. This Agreement may be executed by Buyer and Sellers in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. This Agreement shall become operative when each party has executed at least one counterpart of this Agreement This Agreement may be delivered by facsimile or similar transmission evidencing execution, and this Agreement so delivered shall be effective as a valid and binding agreement between the parties for all purposes. 10.07 GOVERNING LAW. This Agreement and the transactions contemplated hereby shall be construed in accordance with, and governed by, the laws of the State of New Mexico. 10.08 ENTIRE AGREEMENT. Except for the Confidentiality Agreement (which shall remain in effect until the Closing occurs) and the Common Undertaking Letter, this Agreement (including the Exhibits and Schedules hereto) constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all negotiations, prior discussions and prior agreements and understandings relating to such subject matter. No representation, warranty, covenant, agreement, promise, inducement or statement, whether oral or written, has been made by Sellers or Buyer that is not set forth in this Agreement or in the instruments referred to herein, and neither Sellers nor Buyer shall be bound by or liable for any alleged representation, warranty, covenant, agreement, promise, inducement or statement not so set forth. 10.09 PARTIES IN INTEREST. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and, except as otherwise prohibited, their respective successors and assigns. Nothing contained in this Agreement, express or implied, is intended to confer upon any other Person or entity any benefits, rights or remedies. Executed as of the date first above mentioned. SELLERS: BLOOMFIELD REFINING COMPANY, a Delaware corporation By: /S/ DAVID J. YOUNGGREN ----------------------------------- David J. Younggren, Senior Vice President GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation By: /S/ DAVID J. YOUNGGREN ----------------------------------- David J. Younggren, Senior Vice President BUYER: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By: /S/ FREDRIC L. HOLLIGER ----------------------------------- Fredric L. Holliger, Executive Vice President EXHIBITS AND SCHEDULES TO PURCHASE AND SALE AGREEMENT Bloomfield Refining Company and Gary-Williams Energy Corporation, as Sellers and Giant Industries Arizona, Inc., as Buyer Dated as of August 8, 1995 These Exhibits and Schedules, when initialed in the spaces provided below, constitute a part of the Purchase and Sale Agreement, dated as of August 8, 1995 (the "Agreement"), among Bloomfield Refining Company, a Delaware corporation and Gary-Williams Energy Corporation, a Delaware corporation, as Sellers, and Giant Industries Arizona, Inc. an Arizona corporation, as Buyer. Certain capitalized terms used in these Exhibits and Schedules without definition have the meanings specified in the Agreement. SELLERS: BUYER: BLOOMFIELD REFINING COMPANY GIANT INDUSTRIES ARIZONA, INC. and GARY-WILLIAMS ENERGY CORPORATION By: /S/ DAVID J. YOUNGGREN By: /S/ FREDRIC L. HOLLIGER ----------------------- --------------------------- SCHEDULE OF EXHIBITS AND SCHEDULES EXHIBITS: A -- Form of COMMON UNDERTAKING LETTER. B -- Form of GENERAL DEED, ASSIGNMENT, BILL OF SALE AND ASSUMPTION, covering all of the Assets. C -- Form of BILL OF SALE, covering the Refinery Equipment, the Refinery Facilities and the Refinery Inventory. D -- Form of ASSIGNMENT AND CONVEYANCE, covering the Refinery Real Property (other than the Refinery Site). E -- Form of GENERAL WARRANTY DEED, covering the Refinery Site. F -- Form of BILL OF SALE, covering the Pipeline Equipment, the Pipeline Facilities and the Pipeline Inventory. G -- Form of ASSIGNMENT AND CONVEYANCE, covering the Pipeline Real Property. H -- Form of GUARANTEE AND AGREEMENT. I -- Form of SELLERS' CERTIFICATE. J -- Form of BUYER'S CERTIFICATE. K -- Form of NON-FOREIGN STATUS CERTIFICATE. L -- Form of CRUDE OIL CONTRACT. SCHEDULES: 1.01.1 -- Earnout 1.01.2 -- Excluded Contracts 1.01.3 -- Processing Units, Shipping Facilities and Terminals 1.01.4 -- Refinery Site 1.01.5 -- Refinery Site Encumbrances 2.04 -- Allocation of Purchase Price 3.01(e) -- Contested Taxes 3.01(g) -- Litigation 3.01(j) -- Capital Projects 3.01(k) -- Collective Bargaining Agreements 3.01(l) -- Water and Water Rights 3.01(m) -- Financial Statements 3.01(n) -- Summary of Operations 3.02(g) -- Certain Permits, Licenses and Contracts 5.02(a) -- Retained Employees 6.02(i) -- BOR Draft Permit EXHIBIT A COMMON UNDERTAKING LETTER Buyer's Counsel Letterhead August 8, 1995 Bloomfield Refining Company Gary-Williams Energy Corporation 370 Seventeenth Street Suite 5300 Denver, Colorado 80202 Re: Common Undertaking Between Giant Industries Arizona, Inc., Bloomfield Refining Company and Gary-Williams Energy Corporation Regarding Due Diligence Assessment of Bloomfield Refinery Gentlemen: On behalf of Giant Industries Arizona, Inc. ("Giant"), Giant's legal department is in the process of conducting an environmental due diligence assessment of the Bloomfield, New Mexico refinery (the "Refinery") of Bloomfield Refining Company and Gary-Williams Energy Corporation (collectively, "Sellers") in connection with the sale of the Refinery to Giant. As part of that due diligence, Giant and its consultants ("Consultants"), have obtained certain documents from Sellers or their counsel regarding environmental issues that may be privileged under the attorney-client or work-product privilege. Consultants are also conducting on-site inspections of the Refinery and related properties. Certain information and documents obtained or prepared as a result of the environmental due diligence assessment will be provided to Sellers and their counsel in accordance with the Purchase and Sale Agreement between Giant and Sellers. Giant, Sellers and their respective counsels have a common interest in evaluating the environmental status of the Refinery and related properties to complete the transaction. Therefore, the transmission of information or documents to Sellers shall not be deemed as a waiver of any attorney-client or work product privilege that may otherwise attach to the information or documents. To maintain the privilege, Sellers and their counsel and any consultants retained by Sellers for this matter agree not to divulge or release the documents or information contained in the documents to any third parties or persons who do not have a need to know the information for purposes of the due diligence. Bloomfield Refining Company August 8, 1995 Page 2 If the foregoing accurately reflects the common understanding concerning the matters described in this letter, please so indicate by signing in the space provided below. This common undertaking may be executed in counterparts which together shall be deemed to be the same instrument. Very truly yours, Giant Industries Arizona, Inc. Legal Department By:______________________________ Morgan Gust, Vice President and General Counsel AGREED AND ACCEPTED this ____ day of August, 1995: BLOOMFIELD REFINING COMPANY and GARY-WILLIAMS ENERGY CORPORATION By:______________________________ Name:_________________________ Title:__________________________ Holme Roberts & Owen LLC, Counsel for Bloomfield Refining Company and Gary-Williams Energy Corporation By:_______________________________ EXHIBIT B FORM OF GENERAL DEED, ASSIGNMENT, BILL OF SALE AND ASSUMPTION AGREEMENT DO NOT RECORD GENERAL DEED, ASSIGNMENT, BILL OF SALE AND ASSUMPTION AGREEMENT This General Deed, Assignment, Bill of Sale and Assumption Agreement (this "INSTRUMENT"), dated as of ___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"), is from BLOOMFIELD REFINING COMPANY, a Delaware corporation ("BRC"), and GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation ("GWEC"), both with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("ASSIGNEE"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. BRC and GWEC shall collectively be referred to as "ASSIGNORS". Assignors and Assignee are parties to that certain Purchase and Sale Agreement (the "PURCHASE AGREEMENT"), dated as of August 8, 1995, wherein Assignors agreed to sell and transfer to Assignee and Assignee agreed to purchase and accept delivery of, certain property, interests and rights as more specifically described therein. Capitalized terms used herein without definition shall have the meaning ascribed thereto in the Purchase Agreement. This Instrument is being delivered pursuant to the Purchase Agreement and shall be construed and interpreted consistently therewith. 1. DEED, ASSIGNMENT AND BILL OF SALE. (a) For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of Assignee accepting delivery as described below, Assignors hereby grant, assign, transfer, convey and deliver unto the Assignee, its successors and assigns forever, the Refinery Assets and the Pipeline Assets, excluding the Excluding Assets, including all of Assignors' property, assets and rights, real, personal and mixed, tangible and intangible, choate and inchoate, of whatever kind and wherever located relating thereto. The property, assets and rights transferred by this Agreement include, without limitation, to the extent transferable (a) the nonexclusive right to enforce and assert the following: (i) all guaranties, indemnities, warranties and covenants received by the Assignors' or their predecessors with respect to any of the Assets transferred hereby and all rights and claims thereunder; (ii) all of Assignors' rights, claims, defenses and causes of action against others, known and unknown, including any such rights, claims, defenses and causes of action to which Assignors are entitled from the parties from whom Assignors acquired the Assets or Assignors' predecessors in interest; and (iii) all of Assignors' rights under warranties of title and indemnities relating to any matters for which Assignee has assumed any liability or obligation under the Purchase Agreement; and (b) any claims against state underground storage tank funds for Environmental Liabilities relating to underground storage tanks to the extent Assignor has assumed liability or responsibility for such underground storage tanks. (b) There is specifically excepted and reserved from the terms of this Instrument, the Excluded Assets. (c) Assignors make in this Instrument no representation, warranty or covenant, express or implied, with respect to any of the property, assets or rights transferred hereby; but nothing herein shall in any way diminish or impair any representation, warranty or covenant made by or on behalf of the Assignors or Assignee in the Purchase Agreement or in any assignment, certificate or other document or instrument executed by the parties. 2. ACCEPTANCE OF DELIVERY. Assignee hereby accepts delivery of the property, assets and rights transferred by this Instrument. 3. ASSUMPTION. (a) Except as otherwise provided in the Purchase Agreement, including without limitation Section 5.01 thereof, Assignors shall remain liable and responsible for all claims, costs, expenses, liabilities and obligations of any kind or nature, whether known or unknown, arising from or in any manner relating to the existence, ownership, operation or maintenance of the Assets, the conduct of the Businesses, or any activity of Assignors (including without limitation obligations arising under the Transferable Permits and Licenses, and the Contracts) attributable to periods prior to the Effective Time. (b) Except as otherwise provided in the Purchase Agreement, including without limitation Section 5.01 thereof, Assignee shall be liable and responsible for all claims, costs, expenses, liabilities and obligations of any kind or nature, whether known or unknown, arising from or in any manner relating to the ownership or the operation of the Assets, the conduct of Assignee's business, or any activity of Assignee (including without limitation obligations arising under the Transferable Permits and Licenses, and the Contracts) attributable to periods after the Effective Time. 4. FURTHER ASSURANCES. Assignees and Assignor shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such instruments and take such other action as may be reasonably necessary or advisable to carry out their obligations under this Instrument. The foregoing shall include the execution, acknowledgment and delivery of (i) separate transfer instruments for individual assets as may be required given the nature of an individual asset, and (ii) separate transfer instruments of the assets on officially approved forms in sufficient counterparts to satisfy applicable statutory and regulatory requirements. Executed as of ___________, 1995, to be effective for all purposes as of the Effective Time. ASSIGNORS: BLOOMFIELD REFINING COMPANY, a Delaware corporation By:__________________________ __________________________ ________________ President GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation By:__________________________ __________________________ ________________ President ASSIGNEE: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By:__________________________ __________________________ Executive Vice President EXHIBIT C FORM OF BILL OF SALE (REFINERY) BILL OF SALE (Refinery) This Bill of Sale (this "INSTRUMENT"), dated as of ___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"), is from BLOOMFIELD REFINING COMPANY, a Delaware corporation ("BRC"), and GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation ("GWEC"), both with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("GRANTEE"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. BRC and GWEC shall collectively be referred to as ("GRANTORS"). Grantors and Grantee are parties to that certain Purchase and Sale Agreement (the "PURCHASE AGREEMENT"), dated as of August __, 1995, wherein Grantors agreed to sell and transfer to Grantee, and Grantee agreed to purchase and accept delivery of, certain property, interests and rights as more specifically described therein. Capitalized terms used herein without definition shall have the meaning ascribed thereto in the Purchase Agreement. This Instrument is being delivered pursuant to the Purchase Agreement and shall be construed and interpreted consistently therewith. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Grantors, Grantors have sold and transferred, and do hereby sell and transfer, to Grantee all of Grantors' right, title and interest in and to the following (collectively, the "PROPERTY"): 1. All of Grantors' right, title and interest in and to all equipment, tools, instruments, machines, parts, materials, substances, systems, supplies, rolling stock, furniture, catalysts and chemicals, communication systems and licenses, vehicles, electronic systems and computers associated with, related to or used in connection with the Refinery or the Refinery Business, including without limitation, all equipment, tools, instruments, machines, parts, materials, substances, systems, supplies, rolling stock, furniture, catalysts and chemicals, communications systems and licenses, vehicles, electronic systems and computers located on the Refinery Site as of the Effective Time. 2. All of Grantors' right, title and interest in and to all facilities, units, buildings, structures, fixtures, terminals, pipelines, tanks and other storage facilities and similar property used in the refining, processing, treating, transporting or storage of crude oil and refined products that are associated with, related to or used in connection with the Refinery or the Refinery Business, including without limitation, the processing units, shipping facilities and terminals described in Exhibit A attached hereto. 3. All of the following owned by Grantors or any of Grantors' Affiliates and located at or stored on or in the Refinery Facilities as of the Effective Time, including, in each case, linefills, tank bottoms and work in progress: (a) crude oil, natural gas liquids and other hydrocarbons processed by the Refinery; (b) gasoline, diesel fuel, aviation fuel, fuel oil and other refined products produced by the Refinery; and (c) products that have been purchased, partially processed or refined and placed in storage pending blending or further processing. 4. All crude oil, natural gas liquids and other hydrocarbons owned by Grantors or any of Grantors' Affiliates and located at or stored on or in the Pipeline Facilities as of the Effective Time, including linefills. There is specifically excepted and reserved from the terms of this Instrument, and the term "Property" shall not include (a) the Accounts Receivable, the Excluded Contracts and all assets of Grantors or Affiliates of Grantors not associated with, related to or used in connection with the Businesses, including without limitation, (i) the Bluebell and Altonah gas plants and related gathering systems located in Uintah and Duchesne Counties, Utah, (ii) Grantors' airplane and hangar, and (iii) the stock of Gary-Williams Acquisition Company, Gary-Williams Retail Company and Gary-Williams Production Company; and (b) (i) the computers, software (excluding the Refinery linear program), trademarks, office equipment and supplies and other fixed assets located in the ordinary course of business in Grantors' offices in Denver, Colorado, (ii) all fixed assets located in the ordinary course of business in Denver or Arapahoe Counties, Colorado, (iii) all sulphur credits earned prior to the Effective Time, and (iv) the stock of BRC. Subject to Permitted Exceptions (as defined in Schedule I attached hereto), Grantors warrant to Grantee, and to Grantee's successors and assigns, that Grantors have good title to the Property free and clear of all liens, claims, liabilities, encumbrances or rights or interests of any third party whatsoever. Except as otherwise provided in the Purchase Agreement, Grantee hereby accepts the transfer set forth in this Instrument and assumes and agrees to pay, perform and discharge all duties, liabilities and obligations appurtenant to the Property and arising after the Effective Time, including the Permitted Exceptions. Grantors also hereby transfer to Grantee, its successors and assigns, to the extent so transferable, the benefit of and the right to enforce the claims, defenses, indemnities, covenants and warranties, if any, that Grantors are entitled to enforce with respect to the Property against Grantors' predecessors. The parties agree that to the extent required to be operative, the disclaimers of certain warranties contained herein are "conspicuous" disclaimers for the purposes of any applicable law, rule or order. The Property is transferred without any implied warranties or covenants; and fixtures and personal property, if any, transferred by this Instrument are transferred "AS IS," "WHERE IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTORS EXPRESSLY DISCLAIM AND NEGATE: (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. The references herein to Permitted Exceptions and to liens, encumbrances, burdens, defects and other matters are for the purpose of defining the nature and extent of Grantors' warranty of title and shall not be deemed to ratify or create any rights in third parties. Executed as of ___________, 1995, to be effective for all purposes as of the Effective Time. GRANTORS: BLOOMFIELD REFINING COMPANY, a Delaware corporation By:_____________________________ _____________________________ ________________ President GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation By:_____________________________ _____________________________ ________________ President GRANTEE: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By:_____________________________ _____________________________ Executive Vice President EXHIBIT D FORM OF ASSIGNMENT AND CONVEYANCE (REFINERY) ASSIGNMENT AND CONVEYANCE (Refinery) This Assignment and Conveyance (this "INSTRUMENT"), dated as of ___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"), is from BLOOMFIELD REFINING COMPANY, a Delaware corporation ("GRANTOR"), with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("GRANTEE"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Grantor, Grantor has granted and assigned, and does hereby grant and assign to Grantee all of Grantor's right, title and interest in and to the following: 1. The leases, easements, servitudes, rights-of-way, mineral rights, water rights, appurtenant rights, permits, licenses, franchises, grants, certificates and rights to use the surface described on Exhibit A hereto; together with all other real property, leases, easements, servitudes, rights-of-way, mineral rights, water rights, appurtenant rights, permits, licenses, franchises, grants, certificates and rights to use the surface associated with, related to or used in connection with the Bloomfield Refinery located on the land described on Exhibit A attached hereto located in San Juan County, New Mexico or Grantor's business relating to the purchase, transportation, refinement, processing and sale of hydrocarbons and hydrocarbon products in connection with such Bloomfield Refinery; and 2. The water rights described on Exhibit B hereto; together with all other water rights associated with, related to or used in connection with such Bloomfield Refinery or Grantor's business relating to the purchase, transportation, refinement, processing and sale of hydrocarbons and hydrocarbon products in connection with such Bloomfield Refinery; together with all of the fixtures located thereon that are real property under applicable law and all hereditaments and appurtenances thereunto belonging (collectively, the "Property"). To have and to hold the Property unto Grantee, and its successors and assigns. This Instrument is executed without warranty of any kind, either express or implied, except that, subject to Permitted Exceptions (as defined in Schedule I attached hereto) and the Refinery Site Encumbrances (as defined in Schedule II), Grantor specially warrants and agrees to defend the title of Grantee, and its successors and assigns, against liens and security interests created by, through or under Grantor, but not otherwise. Grantor also hereby transfers to Grantee, and its successors and assigns, to the extent so transferable, the benefit of and the right to enforce the claims, defenses, indemnities covenants and warranties, if any, that Grantor is entitled to enforce with respect to the Property against Grantor's predecessors. The parties agree that to the extent required to be operative, the disclaimers of certain warranties contained herein are "conspicuous" disclaimers for the purposes of any applicable law, rule or order. The Property is transferred without any implied warranties or covenants; and fixtures and personal property, if any, transferred by this Instrument are transferred "AS IS," "WHERE IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTOR EXPRESSLY DISCLAIMS AND NEGATES: (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. Separate assignments of the Property may be executed on officially approved forms by Grantor to Grantee, in sufficient counterparts to satisfy applicable statutory and regulatory requirements. Those assignments shall be deemed to contain all of the exceptions, reservations, limitations, warranties, rights, titles, powers and privileges set forth herein as fully as though they were set forth in each such assignment. The interests conveyed by such separate assignments are the same, and not in addition to, the Property conveyed herein. The references herein to Permitted Exceptions, Refinery Site Encumbrances and to liens and security interests are for the purpose of defining the nature and extent of Grantor's special warranty of title and shall not be deemed to ratify or create any rights in third parties. Executed as of ___________, 1995, to be effective for all purposes as of the Effective Time. GRANTOR: BLOOMFIELD REFINING COMPANY, a Delaware corporation By:_______________________________ _______________________________ ____________President GRANTEE: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By:_______________________________ _______________________________ Executive Vice President ACKNOWLEDGMENT CERTIFICATES GRANTOR STATE OF _____________ ) ) ss. _______ COUNTY OF ____________) This instrument was acknowledged before me on _____________, 1995, by __________________ as ____ President of BLOOMFIELD REFINING COMPANY, a Delaware corporation. _______________________________ [NOTARIAL SEAL] Notary Public My commission expires: _______________________ GRANTEE STATE OF _____________ ) ) ss. _______ COUNTY OF ____________) This instrument was acknowledged before me on _____________, 1995, by __________________ as Executive Vice President of GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation. _______________________________ [NOTARIAL SEAL] Notary Public My commission expires: _______________________ EXHIBIT E FORM OF GENERAL WARRANTY DEED (REFINERY SITE) GENERAL WARRANTY DEED (Refinery Site) This General Warranty Deed (this "INSTRUMENT"), dated as of _____________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"), is from BLOOMFIELD REFINING COMPANY, a Delaware corporation ("GRANTOR"), with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("GRANTEE"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Grantor, Grantor has granted and does hereby grant to Grantee the following described land: The South One-Half of the Northwest Quarter (S1/2 NW1/4); The Northeast Quarter of the Southwest Quarter (NE1/4SW1/4); The North One-Half of the Northwest Quarter of the Southwest Quarter (N1/2NW1/4SW1/4) and the Southeast Quarter of the Northwest Quarter of the Southwest Quarter (SE1/4NW1/4SW1/4) of Section 26; AND The Southeast Quarter of the Northeast Quarter (SE1/4NE1/4) and the North One-Half of the Northeast Quarter of the Southeast Quarter (N1/2NE1/4SE1/4) of Section 27; AND The West One-Half of the Northeast Quarter (W1/2NE1/4) of Section 27; EXCEPT the following part of said tract, to wit: BEGINNING at the Northwest corner of said tract; THENCE South 30 feet; THENCE east parallel to the north line of said tract, 676.6 feet; THENCE North 30 feet; THENCE West along the North line of said tract 676.6 feet to the place of beginning. AND; BEGINNING at a point which is 826.08 feet North 31 degrees 16' East from the West Quarter Corner of said Section 27; THENCE North 7 degrees 55' East 135.0 feet along the East Right of Way of State Highway #44; THENCE South 82 degrees 05' East 161.3 feet; THENCE South 7 degrees 55' West 135.0 feet; THENCE North 82 degrees 05' West 161.3 feet to the point of beginning. AND; A tract of land situated in the Southeast Quarter of the Northwest Quarter (SE1/4NW1/4) of said Section 27, more particularly described as follow: BEGINNING at a point which is the center of said SECTION 27; THENCE N 00 degrees 23' 49" E along the North-South Centerline of Section 27, a Distance of 554.30 feet, more or less, to a point on the Easterly Right of Way of the Hammond Canal as described in the San Juan County records in Book 633, Page 243B (Parcel No. HMC); THENCE Southwesterly along a non-tangent curve to the left as described in said description 90 feet, more or less; THENCE South 04 degrees 21' 30" West along a line tangent to said curve 487.17 feet, more or less, along the Easterly Right of Way line of the Hammond Canal to a point on the East-West Centerline of Section 27; THENCE North 89 degrees 24' 29" East 79.81 feet along said East-West Centerline to the point of beginning. All in Township 29 North of Range 11 West, N.M.P.M., San Juan County, New Mexico; together with all of the fixtures that are real property under applicable law located thereon and all hereditaments and appurtenances thereunto belonging. Said land, fixtures, hereditaments and appurtenances are collectively referred to as the "PROPERTY." To have and to hold the Property unto Grantee, and its successors and assigns. Subject to Permitted Exceptions (as described in Schedule I attached hereto), and the Refinery Site Encumbrances (as described in Schedule II attached hereto), the Property has been granted, and is granted by Grantor to Grantee with warranty covenants. Grantor also hereby transfers to Grantee, and its successors and assigns, to the extent so transferable, the benefit of and the right to enforce the claims, defenses, indemnities, covenants and warranties, if any, that Grantor is entitled to enforce with respect to the Property against Grantor's predecessors in title to the Property. The parties agree that to the extent required to be operative, the disclaimers of certain warranties contained herein are "conspicuous" disclaimers for the purposes of any applicable law, rule or order. The Property is transferred without any implied warranties or covenants; and fixtures and personal property, if any, transferred by this Instrument are transferred "AS IS," "WHERE IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTOR EXPRESSLY DISCLAIMS AND NEGATES: (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. The references herein to Permitted Exceptions and to Refinery Site Encumbrances and other matters are for the purpose of defining the nature and extent of Grantor's warranty and shall not be deemed to ratify or create any right in third parties. This Instrument shall bind and inure to the benefit of Grantor and Grantee, and their respective successors and assigns. Executed as of ___________, 1995, to be effective for all purposes as of the Effective Time. GRANTOR: BLOOMFIELD REFINING COMPANY, a Delaware corporation By:________________________________ ________________________________ _____ President GRANTEE: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By:_________________________________ _________________________________ Executive Vice President ACKNOWLEDGMENT CERTIFICATES GRANTOR STATE OF _____________ ) ) ss. _______ COUNTY OF ____________) This instrument was acknowledged before me on _____________, 1995, by __________________ as ____ President of BLOOMFIELD REFINING COMPANY, a Delaware corporation. _______________________________ [NOTARIAL SEAL] Notary Public My commission expires: _______________________ GRANTEE STATE OF _____________ ) ) ss. _______ COUNTY OF ____________) This instrument was acknowledged before me on _____________, 1995, by __________________ as Executive Vice President of GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation. _______________________________ [NOTARIAL SEAL] Notary Public My commission expires: _______________________ EXHIBIT F FORM OF BILL OF SALE (PIPELINE) BILL OF SALE (Pipeline) This Bill of Sale (this "INSTRUMENT"), dated as of ___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"), is from BLOOMFIELD REFINING COMPANY, a Delaware corporation ("BRC"), and GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation ("GWEC"), both with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("GRANTEE"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. BRC and GWEC shall collectively be referred to as ("GRANTORS"). Grantors and Grantee are parties to that certain Purchase and Sale Agreement (the "PURCHASE AGREEMENT"), dated as of August 8, 1995, wherein Grantors agreed to sell and transfer to Grantee and Grantee agreed to purchase and accept delivery of, certain property, interests and rights as more specifically described therein. Capitalized terms used herein without definition shall have the meaning ascribed thereto in the Purchase Agreement. This Instrument is being delivered pursuant to the Purchase Agreement and shall be construed and interpreted consistently therewith. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Grantors, Grantors have sold and transferred, and do hereby sell and transfer, to Grantee all of Grantors' right, title and interest in and to the following (collectively, the "Property"): 1. All equipment, tools, instruments, machines, parts, materials, substances, systems, supplies, rolling stock, furniture, catalysts and chemicals, communications systems and licenses, vehicles, electronic systems and computers associated with, related to or used in connection with the Pipeline and the Pipeline Business; and 2. All facilities, units, buildings, structures, fixtures, terminals, pipelines, tanks and other storage facilities and similar property used in the refining, processing, treating, transporting or storage of crude oil and refined products associated with, related to or used in connection with the Pipeline or the Pipeline Business, including, without limitation, all pipes, pumps and pumping stations. There is specifically excepted and reserved from the terms of this Instrument, and the term "Property" shall not include (a) the Accounts Receivable, the Excluded Contracts and all assets of Grantors and their Affiliates not associated with, related to or used in connection with the Businesses, including without limitation (i) the Bluebell and Altonah gas plants and related gathering systems located in Uintah and Duchesne Counties, Utah, (ii) Grantors' airplane and hangar, and (iii) the stock of Gary-Williams Acquisition Company, Gary-Williams Retail Company and Gary-Williams Production Company; and (b) (i) the computers, software (excluding the Refinery linear program), trademarks, office equipment and supplies and other fixed assets located in the ordinary course of business in Grantors' offices in Denver, Colorado, (ii) all fixed assets located in the ordinary course of business in Denver or Arapahoe Counties, Colorado, (iii) all sulphur credits earned prior to the Effective Time, and (iv) the stock of BRC. This Instrument is executed without warranty of any kind, either express or implied, except that, subject to Permitted Exceptions (as defined in Schedule I attached hereto), Grantors specially warrant and agree to defend the title of Grantee, and its successors or assigns, against liens and security interests created by, through or under Grantors, but not otherwise. Except as otherwise provided in the Purchase Agreement, Grantee hereby accepts the transfer set forth in this Instrument and assumes and agrees to pay, perform and discharge all duties, liabilities and obligations appurtenant to the Property arising after the Effective Time, including the Permitted Exceptions. Grantors also hereby transfer to Grantee, and its successors and assigns, to the extent so transferable, the benefit of and the right to enforce the claims, defenses, indemnities covenants and warranties, if any, that Grantors are entitled to enforce with respect to the Property against Grantors' predecessors. The parties agree that to the extent required to be operative, the disclaimers of certain warranties contained herein are "conspicuous" disclaimers for the purposes of any applicable law, rule or order. The Property is transferred without any implied warranties or covenants; and fixtures and personal property, if any, transferred by this Instrument are transferred "AS IS," "WHERE IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTORS EXPRESSLY DISCLAIM AND NEGATE: (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. The references herein to Permitted Exceptions and liens and security interest are for the purpose of defining the nature and extent of Grantors' special warranty of title and shall not be deemed to ratify or create any rights in third parties. Executed as of ___________, 1995, to be effective for all purposes as of the Effective Time. GRANTORS: BLOOMFIELD REFINING COMPANY, a Delaware corporation By:_____________________________ _____________________________ ________________ President GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation By:_____________________________ _____________________________ ________________ President GRANTEE: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By:_____________________________ _____________________________ Executive Vice President EXHIBIT G FORM OF ASSIGNMENT AND CONVEYANCE (PIPELINE) ASSIGNMENT AND CONVEYANCE (Pipeline) This Assignment and Conveyance (this "INSTRUMENT"), dated as of ___________, 1995 at 7:00 A.M. local time (the "EFFECTIVE TIME"), is from BLOOMFIELD REFINING COMPANY, a Delaware corporation ("BRC"), and GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation ("GWEC"), both with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, to GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("GRANTEE"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255. BRC and GWEC shall collectively be referred to as ("Grantors"). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Grantors, Grantors have granted and assigned, and do hereby grant and assign, to Grantee all of Grantors' right, title and interest in and to the leases, easements, servitudes, rights-of-way, mineral rights, water rights, appurtenant rights, permits, licenses, franchises, grants, certificates and rights to use the surface described on Exhibit A hereto; together with all other real property, leases, easements, servitudes, rights-of-way, mineral rights, water rights, appurtenant rights, permits, licenses, franchises, grants, certificates and rights to use the surface associated with, related to or used in connection with the Pipeline as described on Exhibit A attached hereto or Grantors' business relating to the transportation of hydrocarbons and hydrocarbon products through the Pipeline; together with all of the fixtures that are real property under applicable law located thereon and all hereditaments and appurtenances thereunto belonging (collectively, the "PROPERTY"). To have and to hold the Property unto Grantee, and its successors and assigns. This Instrument is executed without warranty of any kind, either express or implied, except that, subject to Permitted Exceptions (as defined in Schedule I attached hereto), Grantors specially warrant and agree to defend the title of Grantee, and its successors and assigns, against liens and security interests created by, through or under Grantors, but not otherwise. Grantors also hereby assign and convey to Grantee, and its successors and assigns, to the extent so transferable, the benefit of and the right to enforce the claims, defenses, indemnities covenants and warranties, if any, that Grantors are entitled to enforce with respect to the Property against Grantors' predecessors. The parties agree that to the extent required to be operative, the disclaimers of certain warranties contained herein are "conspicuous" disclaimers for the purposes of any applicable law, rule or order. The Property is transferred without any implied warranties or covenants; and fixtures and personal property, if any, transferred by this Instrument are transferred "AS IS," "WHERE IS" and "WITH ALL FAULTS." WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE, WITH RESPECT TO ANY FIXTURES OR PERSONAL PROPERTY TRANSFERRED BY THIS INSTRUMENT GRANTORS EXPRESSLY DISCLAIM AND NEGATE: (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. Separate assignments of the Property may be executed on officially approved forms by Grantors to Grantee, in sufficient counterparts to satisfy applicable statutory and regulatory requirements. Those assignments shall be deemed to contain all of the exceptions, reservations, limitations, warranties, rights, titles, powers and privileges set forth herein as fully as though they were set forth in each such assignment. The interests conveyed by such separate assignments are the same, and not in addition to, the Property conveyed herein. The references herein to Permitted Exceptions and to liens and security interests are for the purpose of defining the nature and extent of Grantors' special warranty of title and shall not be deemed to ratify or create any rights in third parties. Executed as of ___________, 1995, to be effective for all purposes as of the Effective Time. GRANTORS: BLOOMFIELD REFINING COMPANY, a Delaware corporation By:_____________________________ _____________________________ ________________ President GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation By:_____________________________ _____________________________ ________________ President GRANTEE: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By:_____________________________ _____________________________ Executive Vice President ACKNOWLEDGMENT CERTIFICATES GRANTORS STATE OF _____________ ) ) ss. _______ COUNTY OF ____________) This instrument was acknowledged before me on _____________, 1995, by __________________ as ____ President of BLOOMFIELD REFINING COMPANY, a Delaware corporation. ___________________________ [NOTARIAL SEAL] Notary Public My commission expires: _______________________ STATE OF _____________ ) ) ss. _______ COUNTY OF ____________) This instrument was acknowledged before me on _____________, 1995, by __________________ as ____ President of GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation. ___________________________ [NOTARIAL SEAL] Notary Public My commission expires: _______________________ GRANTEE STATE OF _____________ ) ) ss. _______ COUNTY OF ____________) This instrument was acknowledged before me on _____________, 1995, by __________________ as Executive Vice President of GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation. ___________________________ [NOTARIAL SEAL] Notary Public My commission expires: _______________________ EXHIBIT H FORM OF GUARANTEE AND AGREEMENT GUARANTEE AND AGREEMENT This Guarantee and Agreement (this "AGREEMENT"), dated as of ___________, 1995, is from GIANT INDUSTRIES, INC., a Delaware corporation, with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255 ("GUARANTOR"), and to and for the benefit of BLOOMFIELD REFINING COMPANY, a Delaware corporation ("BRC"), with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80203, and its successors and assigns. RECITALS Gary-Williams Energy Corporation, a Delaware corporation ("GWEC"), BRC and Giant Industries Arizona, Inc., an Arizona corporation ("GIANT ARIZONA") entered into that certain Purchase and Sale Agreement (the "PURCHASE AGREEMENT"), dated as of August 8, 1995, wherein Sellers agreed to sell and transfer to Giant Arizona, and Giant Arizona agreed to purchase and accept delivery of, certain property, interests and rights as more specifically described in the Purchase Agreement. As set forth in Section 2.02 of the Purchase Agreement the consideration to be paid by Giant Arizona under the Purchase Agreement, included an "Earnout," if and when earned, as more specifically described in Schedule 1.01.1 to the Purchase Agreement (the "EARNOUT"). Capitalized terms used herein without definition shall have the meaning ascribed thereto in the Earnout. Guarantor owns all of the outstanding shares of stock of Giant Arizona, and Guarantor, and the other direct and indirect subsidiaries of Guarantor are mutually dependent on each other in the conduct of their respective businesses as an integrated operation. It is a condition to the consummation of the transactions provided for in the Purchase Agreement that Guarantor shall have executed and delivered this Agreement. AGREEMENT In consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Guarantor, and in order to induce Sellers to proceed with the consummation of the transactions provided for in the Purchase Agreement, Guarantor hereby agrees as follows: 1. RATIFICATION. Guarantor hereby ratifies and agrees to be bound by the provisions contained in Subsection 3.01(c) and Section 3.02 of the Earnout. 2. GUARANTEE. Guarantor hereby guarantees the duties and obligations of Giant Arizona under the Earnout (the "Obligations") as follows: (a) If and whenever Giant Arizona fails for any reason whatsoever punctually to pay or perform any of the Obligations, Guarantor shall cause each and every such Obligation to be paid or performed on demand as if Guarantor instead of Giant Arizona were expressed to be the primary obligor of such Obligations to the intent that BRC shall receive the same amounts and benefits as would have been receivable had such payments or performances had been made by Giant Arizona. (b) If any payment received by BRC shall, on the subsequent bankruptcy, insolvency, corporate reorganization or other similar event applying to Giant Arizona, be avoided or set aside under any laws relating to bankruptcy, insolvency, corporate reorganization or other such similar event, such payments shall not be considered as discharging or diminishing the liability of Guarantor, and the guarantee contained herein shall continue to apply as if such payment had at all times remained owing by Giant Arizona and Guarantor shall indemnify BRC with respect thereto. (c) Guarantor hereby agrees that its obligations under the guarantee contained herein shall be unconditional and irrevocable and that Guarantor shall be fully liable irrespective of the validity, regularity, legality or enforceability against Giant Arizona of, or of any defense or counterclaim whatsoever available to Giant Arizona in relation to, the Obligations, whether or not any action has been taken to enforce the same or any judgment obtained against Giant Arizona, whether or not any time or indulgence has been granted to Giant Arizona by or on behalf of BRC, whether or not there have been any dealings or transactions between Giant Arizona and BRC, whether or not BRC has changed its status, functions, control or ownership, whether or not the Earnout has been amended, changed or otherwise modified, and whether or not any other circumstances have occurred which might otherwise constitute a legal or equitable discharge of or defense of a guarantor. Accordingly, the validity of the guarantee contained herein shall not be affected by reason of any invalidity, irregularity, illegality or unenforceability of all or any of the Obligations and this guarantee shall not be discharged nor shall the liability of Guarantor under the guarantee contained herein be affected by any act, thing or omission or means whatever whereby its liability would not have been discharged if it had been the principal obligor. (d) In furtherance of the foregoing and not in limitation thereof, no action or inaction by or on behalf of Giant Arizona, Guarantor or BRC or any other person and no change of law or circumstances shall affect, release or diminish Guarantor's obligations, liabilities, agreements or duties hereunder. Guarantor hereby expressly agrees that BRC may, from time to time, without notice to or the consent of Guarantor (i) amend, change or modify, in whole or in part, the Earnout, (ii) give or refuse to give any waivers or other indulgences, or neglect, delay, fail or refuse to take or prosecute any action in connection with the Earnout, (iii) change, rearrange, extend or renew the time, terms, or manner for payment or performance of any of Giant Arizona's obligations or duties, and (iv) compromise or settle any duties or obligations under the Earnout. Furthermore, the guarantee contained herein is a continuing guarantee and shall apply to and cover the Earnout and all renewals, extensions, amendments, modifications, supplements or restatements thereof. (e) BRC may invoke the benefits of the guarantee contained herein before pursuing any remedies against Giant Arizona or any other person. BRC may maintain an action against Guarantor on the guarantee contained herein without joining Giant Arizona therein and without bringing a separate action against Giant Arizona. (f) Guarantor hereby waives diligence, presentment, demand of payment, filing or claims with a court in the event of dissolution, liquidation, merger or bankruptcy of Giant Arizona, any right to require a proceeding first against Giant Arizona, protest or notice with respect to the Obligations and all demands whatsoever and hereby covenants that the guarantee contained herein shall be a continuing guarantee which will not be discharged except by complete payment and performance of the Obligations. (g) Notwithstanding anything contained in this Agreement to the contrary, Guarantor shall have the same rights as Giant Arizona has to assert any defense or claim under the Purchase Agreement as a defense to this guarantee. 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to BRC as follows: (a) ORGANIZATION. Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Guarantor is duly qualified to carry on its business in the State of New Mexico. (b) POWER AND AUTHORITY. Guarantor has all requisite power and authority to carry on its business as presently conducted, to enter into this Agreement, and to perform its other obligations under this Agreement. This Agreement does not violate, and is not in conflict with, any provision of Guarantor's charter, bylaws or governing documents, or any agreement or instrument to which Guarantor is a party or is bound, or any judgment, decree, order, statute, rule or regulation applicable to Guarantor. (c) DUE AUTHORIZATION. The execution, delivery and performance of this Agreement have been duly and validly authorized by all requisite action on the part of Guarantor. (d) BINDING OBLIGATIONS. This Agreement has been duly executed and delivered on behalf of Guarantor, and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws relating to or affecting the enforcement of creditors' rights generally and to general principles of equity. 4. MISCELLANEOUS. This Agreement shall bind Guarantor and inure to the benefit of BRC and its permitted successors and assigns under the Earnout. This Agreement may not be altered or amended, nor any rights hereunder be waived, except by an instrument in writing executed by the party or parties to be charged with such amendment or waiver. A waiver of any term, provision or condition of this Agreement in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement. Executed as of the date first set forth above. GIANT INDUSTRIES, INC., a Delaware corporation By:_______________________________ Fredric L. Holliger, Executive Vice President ACKNOWLEDGMENT CERTIFICATE STATE OF __________________ ) ) ss. _______ COUNTY OF _________ ) This instrument was acknowledged before me on ______________, 1995, by FREDRIC L. HOLLIGER as Executive Vice President of GIANT INDUSTRIES, INC., a Delaware corporation. Witness my hand and official seal. ________________________________ [NOTARIAL SEAL] Notary Public My commission expires: EXHIBIT I FORM OF SELLERS' CERTIFICATE Bloomfield Refinery Company, a Delaware corporation, and Gary-Williams Energy Corporation, a Delaware corporation (collectively, "SELLERS"), hereby certify as follows with respect to that certain Purchase and Sale Agreement, dated as of August 8, 1995 (the "AGREEMENT"), among Sellers and Giant Industries Arizona, Inc., an Arizona corporation ("Buyer"). 1. Those representations and warranties of Sellers contained in Section 3.01 of the Agreement are true at and as of the date hereof in all material respects. 2. Those covenants and agreements of Sellers contained in Section 4.01 of the Agreement have been performed in all material respects. 3. Those conditions to Sellers' obligations contained in Sections 6.01 and 6.03 of the Agreement have been satisfied to the satisfaction of Sellers or waived by Sellers. Executed as of the _____ day of _______________, 1995. BLOOMFIELD REFINING COMPANY By:_____________________________ __________President GARY-WILLIAMS ENERGY CORPORATION By:_____________________________ __________President EXHIBIT J FORM OF BUYER'S CERTIFICATE Giant Industries Arizona, Inc., an Arizona corporation ("BUYER"), hereby certifies as follows with respect to that certain Purchase and Sale Agreement, dated as of August 8, 1995 (the "AGREEMENT"), among the Buyer and Bloomfield Refining Company, a Delaware corporation, and Gary-Williams Energy Corporation, a Delaware corporation (collectively, "Sellers"). 1. Those representations and warranties of Buyer contained in Section 3.02 of the Agreement are true at and as of the date hereof in all material respects. 2. Those covenants and agreements of Buyer contained in Section 4.02 of the Agreement have been performed in all material respects. 3. Those conditions to Buyer's obligation contained in Sections 6.02 and 6.03 of the Agreement have been satisfied to the satisfaction of Buyer or waived by Buyer. Executed as of the _____ day of _____________________, 1995. GIANT INDUSTRIES ARIZONA, INC. By:________________________________ _________ President EXHIBIT K FORM OF NON-FOREIGN STATUS CERTIFICATE ___________________________, a _____________ corporation ("SELLER"), hereby certifies as follows with respect to that certain Purchase and Sale Agreement, dated as of August 8, 1995 (the "AGREEMENT"), among Seller, _________________ a corporation, as Sellers, and _____________________________________, a _______________ corporation ("Buyer"), as Buyer, and pursuant the Foreign Investment and Real Property Tax Act of 1980, as amended. 1. Seller is not a non-resident alien, foreign corporation, foreign partnership, foreign trust, or foreign estate alien (as those terms are defined in the Internal Revenue Code of 1986 as amended (the "Code")) and the Treasury Regulations thereunder. 2. Seller's United States of America employer identification number is ________________. 3. Seller's office address is ______________________________ __________________________________________________________. Attest: ______________________________ By:___________________________ ___________________________ ___________________________ _______________ President By:________________________ Secretary (Seal) ACKNOWLEDGMENT State of __________________) ) ss. _______ County of _________) The foregoing instrument was acknowledged before me this _____ day of ____________, 19___, by ______________ as __________________ of the _____________________________. Witness my hand and official seal. My commission expires: _______________________________ CONFIDENTIAL TREATMENT REQUESTED AND EXHIBIT FILED WITH THE SEC UNDER SEPARATE COVER EXHIBIT L GIANT INDUSTRIES, INC. 23733 NORTH SCOTTSDALE ROAD SCOTTSDALE, AZ 85255 P.O. BOX 12999, SCOTTSDALE, AZ 85255 (602) 585-8888 CRUDE OIL CONTRACT TO: GARY-WILLIAMS ENERGY CORPORATION (GWEC) DATE: 370 17th Street, Suite 5300 Denver CO 80202 GIANT CONTRACT #:7765-MKG-S - ----------------------------------------------------------------- This is to confirm conversations in which the following transaction was agreed upon: INTENT: It is the intent herein, of both Parties, to share the financial savings of GWEC's XXXXXXXXXXXXXXXXXXX Contracts (the "Contracts"), listed herein, as now or hereafter amended or extended or replaced. Contracts are deemed to have been replaced in a situation where GWEC sought a cancellation of contracts shown, and entered into a new contract with the supplier including essentially the same production under similar terms and conditions. In such a replacement contract, the shared financial savings shall only apply to volumes, which were a part of the original contract. Parties Date Type ------- ---- ---- GWEC and XXXXXXXXXX 10/14/94 XXXXXXXXXX GWEC and XXXXXXXXXX 03/02/95 XXXXXXXXXX GWEC and XXXXXXXXXX 06/20/91 XXXXXXXXXX GWEC and XXXXXXXXXX 06/29/90 XXXXXXXXXX GWEC and XXXXXXXXXX 09/06/90 XXXXXXXXXX GWEC and XXXXXXXXXX 12/09/94 XXXXXXXXXX GWEC and XXXXXXXXXX 08/16/94 XXXXXXXXXX MONTHLY PAYMENT TO GIANT FROM GWEC: Payment shall be made by GWEC on or before the 25th day of the month following the month of delivery as it relates to all XXXXXXXXXX Contracts. A good faith estimate payment shall be made by GWEC on or before the last day of the month following the month of delivery as it relates to the XXXXXXXXXX Contract. The good faith estimate payment shall be adjusted to the then current actual volumes and values on or before the 10th day of the fourth month following the month of delivery. Further payment adjustments shall be made monthly as they occur. All payments shall be made by bank wire transfer in immediately available funds to a bank into an account as designated by the recipient of the payment. Each month GWEC shall issue to Giant a complete statement supporting all payments and adjustments. GWEC's payment each month to Giant shall equal a percent, as shown below, of the difference between XXXXXXXXXXXXXXXXXX figure as published by Platt's Oilgram Price Report ("Platts"), for the month of delivery, and GWEC's Purchase Price of crude oil under the Contracts for the same month, multiplied by GWEC's monthly receipts from Contracts shown above. Percentage ---------- Retained by Paid to GWEC Giant ----------- ------- From (Date of Closing) to Six Months After Closing XXX XXX (Next Six Months) XXX XXX (Thereafter to Termination) XXX XXX TERM: A period of time equal in length to the earlier of (i) the expiration or cancellation of the Contracts, as now or hereafter amended or extended or replaced; or (ii) December 31, 2001; or, (iii) termination of Giant's obligation to make Earnout Payments pursuant to Schedule 1.01.1 of the Purchase and Sale Agreement among Bloomfield Refining Company, GWEC, and Giant Industries Arizona, Inc., dated August 8, 1995 (the "Purchase and Sale Agreement"). The XXXXXXXXX Company/GWEC Contract dated March 2, 1995 shall cease being a part of this Agreement on June 30, 1996. COVENANTS: GWEC agrees to at all times conduct their operations in good faith so as not to subvert the intent of the parties herein. AUDITS: (a) Giant, or its designated independent auditing firm, shall have the right to review and audit the books and records of GWEC respecting the payments required herein. GWEC shall provide Giant with any information required to determine such payments. Except as provided below, Giant shall bear the costs of any audit conducted by it. Giant shall maintain the confidentiality of all nonpublic information relating to GWEC. (b) Each payment shall be final unless Giant gives written objection within one year after the payment. (c) All late payments and all amounts found to be due to Giant shall bear interest at the lesser of 10 percent per annum and the maximum legal rate. If Giant objects to a payment, the payment shall not be final until it is resolved by agreement of the parties or by arbitration pursuant to this Agreement. Payments due to reasonable and customary accounting adjustments are not subject to the interest penalty described herein. ARBITRATION: (a) The parties agree to submit all controversies, claims and matters of difference relating to the determination of payments to arbitration. (b) The party desiring arbitration shall so notify the other party, identifying in reasonable detail the matters to be arbitrated and the relief sought. Arbitration hereunder shall be by a partner or member in a neutral national certified public accounting firm not affiliated with either party. The American Arbitration Association ("AAA") shall submit a list of persons meeting the criteria outlined above and the parties shall mutually agree upon the arbitrator. In the event that the parties fail to select an arbitrator as required above, the AAA shall select the arbitrator. (c) All matters arbitrated hereunder shall be arbitrated in Albuquerque, New Mexico and shall be governed by New Mexico law. Arbitration shall be conducted in accordance with the Commercial Arbitration rules of the AAA, except to the extent such Rules conflict with the express provisions of this Agreement (which shall prevail in the event of such conflict). The arbitrator shall conduct a hearing no later than 60 days after submission of the matter to arbitration, and a decision shall be rendered by the arbitrator within 30 days of the hearing. Any award entered shall be made by a written opinion stating the reasons for the award made. (d) This submission and agreement to arbitrate shall be specifically enforceable. (e) If the arbitration award reflects an underpayment of the disputed payment by an amount greater than five percent of the correct amount, GWEC shall pay the AAA's fees, the arbitrator's fee, and Giant's audit costs and attorneys' and experts' fees, provided these fees are reasonable. Giant shall pay the AAA's fees, the arbitrator's fees, and GWEC attorneys' and experts' fees, if the arbitration award reflects that the disputed payment was equal to or greater than the correct amount. Giant shall pay the AAA's fees and the arbitrator's fees, and each Party shall pay its own attorneys' and experts' fees, if the arbitration award reflects an underpayment of the disputed payment by an amount up to five percent of the correct amount. ADDITIONAL PROVISIONS: GWEC'S "Purchase Price" of the barrels shall be defined as the per barrel monthly weighted average price (i) paid to the supplier; plus or minus as applicable (ii) all reasonable pipeline charges, or credits, paid to or received from any other entity that are directly related to the transportation or exchange of the barrels that are the subject of the Contracts to a Platt's trading location, including, but not limited to, tariffs, line loss and gravity and sulfur bank fees or credits, provided said charges are not included in the price paid to the supplier; plus or minus as applicable (iii) all trading differentials for the month of delivery as published by Platt's for the respective quality from the trading locations into WTI at Cushing, Oklahoma; plus (iv) any reasonable and customary accounting adjustments necessary due to volume imbalances or other factors; plus (v) any monthly administrative fees paid under the Contracts. GWEC shall account to Giant for any rebates/additional charges when received or paid. PLEASE RETURN WHITE COPY TO GIANT REFINING COMPANY. THANK YOU. GARY-WILLIAMS ENERGY CORPORATION (GWEC) BY_____________________________________ GIANT REFINING COMPANY (GIANT) BY_____________________________________ SCHEDULE 1.01.1 EARNOUT This Schedule 1.01.1 is part of the Purchase and Sale Agreement (the "PURCHASE AGREEMENT") among Bloomfield Refining Company, a Delaware corporation ("BRC"), Gary-Williams Energy Corporation, a Delaware corporation ("GWEC") (collectively, "SELLERS"), and Giant Industries Arizona, Inc. ("BUYER") and provides for the payment by Buyer of an Earnout, as defined in the Purchase Agreement for the Refinery. ARTICLE I DEFINITIONS As used in this Schedule, the following terms shall have the following meanings. "AFFILIATE" when used with respect to any person, shall mean any entity directly or indirectly controlling, controlled by or under common control with such person. "CINIZA REFINERY" shall mean that refinery owned by Buyer located near Gallup, New Mexico. "DEEMED DAILY REFINERY CAPACITY" shall mean 14,700 barrels per day for calendar years 1997 and 2001, and 16,000 barrels per day for all other periods. Subject to the provisions of Section 5.01 regarding Force Majeure, the Deemed Daily Refinery Capacity shall be used to determine the Earnout Payment as provided below regardless of the actual level of production from or capacity of the Refinery or the Ciniza Refinery. "EFFECTIVE TIME" shall have the meaning ascribed to such term in the Purchase Agreement. "FORCE MAJEURE" shall mean any cause or causes beyond the control of Buyer that materially prevents Buyer from operating either the Refinery or the Ciniza Refinery in the same manner that it had been operating the refineries prior to the occurrence of such cause, including but not limited to the following: acts of God; fire; storm; flood; earthquake; wash outs; explosions; accidents; acts of public enemy; rebellion; strikes; lock-outs; disputes or differences with workmen; labor shortages; industry disturbances; failure of power or utilities; interruption, disruption or breakdown of supply, production, manufacture, storage, transportation, sales, distribution, or delivery; breakage or accident to machinery, equipment or pipelines; and restrictions or restraints imposed by law or by rule, regulation or order of governmental authorities, whether federal, state or local (but not including any increased costs of compliance with existing or future laws, rules, regulations or orders); provided, however, that neither lack of money, changes in market conditions nor reduced availability of raw materials due to natural decline or increased costs of raw materials shall constitute Force Majeure. "GIANT" shall mean Giant Industries, Inc., a Delaware corporation. "REFINERY MARGIN" shall mean the refinery-sourced revenues (including all business interruption insurance proceeds attributable to the Refinery or the Ciniza Refinery that Buyer accrues) less the associated cost of revenues, stated on a per barrel basis for the refinery-sourced sales barrels. The Refinery Margin will be the weighted average for both the Ciniza Refinery and the Refinery. The Refinery Margin calculation shall be based on generally accepted accounting principles applied consistently with Buyer's historical practices used in calculating the "Refinery Margin" that Buyer currently reports in its public filings with the Securities and Exchange Commission. The Refinery Margin shall be calculated based on refinery-sourced sales barrels. Refinery-sourced sales barrels shall include refinery direct sales, Affiliate sales, exchange sales, and any other disposition for value, but not outside purchases of finished products (i.e., the number of barrels of such outside products shall not be included in the number of barrels of refinery-sourced sales barrels in determining the per barrel Refinery Margin). Refinery-sourced revenues shall consist of the revenues from sales of the various finished petroleum products manufactured by the applicable refinery and sold, all of which shall be reflected in Buyer's billing system including sales to Affiliates. Revenues shall be adjusted for rebates and credits. Finished product freight and superfund tax and other taxes collected by Buyer (but not taxes levied on the Buyer, e.g. income taxes, etc.) shall be reductions to revenues. Differential income on product exchanges shall also be included in revenues. Cost of revenues shall consist of the purchase of raw materials to be manufactured at the refineries (excluding chemicals, operating expenses and catalysts). Raw material cost includes all freight to move the raw materials to the refineries and gains or losses resulting from hedging contracts associated with raw materials. Outside purchases of finished product (net of revenues) shall be included in cost of revenues. Gains or losses from raw materials exchanges shall be included in cost of revenues (including as gains all payments to Buyer by GWEC under that Crude Oil Contract to be executed by GWEC and Buyer pursuant to Section 7.03(k) of the Purchase Agreement. Inventory changes shall also be reflected in the cost of revenues and shall be stated at the lower of cost or market with cost determined by the last-in, first-out method of accounting. Finished products shall be valued in inventory based on a relative sales value method. Gains and losses resulting from speculative contracts associated with raw materials or finished products shall not be included in cost of revenues. Produced fuel consumed in refinery operations shall be included in refinery-sourced revenues and in the cost of revenues so as to have no effect on the Refinery Margin. Affiliates of Buyer may supply raw materials, purchase finished products from Buyer, and provide associated transportation services. Transactions with Affiliates shall continue to be priced competitively with similar bona fide arms' length transactions and in a manner consistent with Buyer's historical practices. The transportation cost for crude oil shipped through the Pipeline shall be the tariff charge, as in effect from time to time, provided that Buyer may seek increases in the tariff charge only to reflect increased Pipeline operating or capital costs determined in a manner consistent with the manner in which the tariff has historically been set for the Pipeline. If the Ciniza Refinery ceases to be owned by Buyer or an Affiliate of Buyer, the Refinery Margin shall be calculated by reference to the Refinery only and not the Ciniza Refinery. "PERMITTED LIEN" shall mean the following: (i) liens for taxes or assessments not yet delinquent or, if delinquent, that are being contested in good faith in the ordinary course of business and which have been reserved against if required by generally accepting accounting practices consistently applied; (ii) materialman's, mechanic's, repairman's, employee's, contractor's, operator's and other similar liens or charges arising in the ordinary course of business securing amounts not yet due and payable and which have been reserved against if required by generally accepting accounting practices consistently applied; (iii) liens, burdens and encumbrances burdening the Refinery or the Pipeline at the time the same are conveyed to Buyer; and (iv) easements, rights-of-way, and servitudes that do not interfere materially with the operation of the affected asset. "PIPELINE" shall mean the raw materials pipeline located in San Juan County, New Mexico delivering crude oil to the Refinery. "REFINERY" shall mean the refinery commonly known as the Bloomfield Refinery located near Bloomfield, New Mexico. ARTICLE II EARNOUT 2.01 EARNOUT PAYMENTS. On or before 90 days after the end of each calendar year commencing with 1995, Buyer shall pay to BRC by wire transfer at such account as BRC may specify, an amount (the "EARNOUT PAYMENT") determined as follows: (a) If the Refinery Margin is $4.25 or less for the applicable period, no Earnout Payment shall be due. (b) If the Refinery Margin is greater than $4.25 but less than or equal to $6.25 for the applicable period, the Earnout Payment shall equal (i) 60% of the amount by which the Refinery Margin exceeds $4.25, MULTIPLIED BY (ii) the sum of the Deemed Daily Refinery Capacity for each day of the applicable period. (c) If the Refinery Margin exceeds $6.25 for the applicable period, the Earnout Payment shall equal (i) (A) $1.20, plus (B) 80% of the amount by which the Refinery Margin exceeds $6.25, MULTIPLIED BY (ii) the sum of the Deemed Daily Refinery Capacity for each day of the applicable period. (d) The "applicable period" shall be (i) the period from the Effective Time through December 31, 1995, (ii) each calendar year thereafter, and (iii) if the Buyer's obligation to make Earnout Payments terminates pursuant to Section 2.02(b) other than on January 1 of a calendar year, the period from January 1 through the day such obligation terminates. (e) The Earnout Payment shall be calculated in accordance with the terms of this Schedule 1.01.1 using generally accepted accounting principles as applied to the refineries' operations, consistently applied from period to period. (f) A sample calculation of the Earnout Payment is set forth on Exhibit 2.01(f) hereto. (g) If all or substantially all of the Refinery is destroyed by fire or other casualty or taken by condemnation, and the Buyer decides to not replace or rebuild the Refinery, Buyer shall pay to BRC an amount equal to BRC's Share of any insurance proceeds, damage awards and condemnation awards received by Buyer relating to such occurrence or taking. "BRC's Share" shall be a fraction whose numerator shall be 25 multiplied by 1.5 multiplied by the number of Remaining Days and whose denominator shall be (i) 80 multiplied by (ii) the number of days from the Effective Time through December 31, 2001 plus the aggregate number of Force Majeure Days that occurred between the Effective Time and the casualty event or taking; provided that BRC's Share shall not exceed 25/80ths. The "Remaining Days" shall be the number of days from the casualty or taking through December 31, 2001 plus the aggregate number of Force Majeure Days that occurred between the Effective Time and the casualty event or taking. Such payment to BRC shall be treated as an Earnout Payment. Upon receipt of such payment, the obligation of the Buyer to make Earnout Payments shall terminate. (h) BRC shall have the right to assign its rights under this Schedule 1.01.1 to any of its or GWEC's Affiliates, subject to the Buyer's right of setoff. 2.02 TERMINATION. (a) Buyer's obligation to make the Earnout Payments shall terminate when BRC has received Earnout Payments with an aggregate net present value (as of the Effective Time) of $25,000,000.00 using a discount rate of 9.75% per annum. Each Earnout Payment shall be discounted from the date it is actually received by BRC to the Effective Time. Buyer will have the right to prepay Earnout Payments using a net present value discount rate of 9.75% per annum. (b) The Earnout Payment shall accrue and be payable with respect to the period commencing at the Effective Time and continuing through and including December 31, 2001 plus a period equal to the aggregate number of Force Majeure Days as described in Section 5.01. (c) A sample calculation of the net present value of an assumed hypothetical series of Earnout Payments, and the application of the extension for Force Majeure Days as described in Section 5.01 is set forth in Exhibit 2.012(f). ARTICLE III COVENANTS 3.01 COVENANTS OF BUYER. At all times from the date hereof until the termination of Buyer's obligation to make Earnout Payments, Buyer shall: (a) Conduct its operations in good faith so as not to subvert the intent of the parties herein. (b) Not mortgage, pledge or hypothecate the Pipeline or the Refinery or create or allow to remain thereon any lien, charge or encumbrance of any character, except Permitted Liens. (c) Not assign, sell, convey or otherwise transfer the Refinery (and Giant will not and will not permit its Affiliates, to sell, exchange, or transfer by merger or otherwise a controlling interest in the voting stock of the Affiliate of Giant owning the Refinery) other than to an Affiliate of Giant, unless in either case BRC expressly consents thereto in writing, the transferee expressly agrees to assume and perform all of Buyer's obligations under this instrument and such sale, lease, conveyance, transfer or assignment is made and accepted expressly subject and subordinate to this instrument. Buyer shall remain liable for all of its obligations under this Schedule 1.01.1 notwithstanding any such sale, transfer or assignment. (d) Not subcontract or otherwise allow any third party to operate the Refinery, until and unless the successor operator has been approved in writing by BRC, which approval will not be unreasonably withheld, or unless Buyer remains ultimately responsible for the operation of the Refinery. (e) Permit authorized representatives of BRC, at a reasonable time based on reasonable notice, but at BRC's risk and expense, to inspect the Refinery. 3.02 INCORPORATION OF INDENTURE COVENANTS-NO CHANGE OF CONTROL. Giant and Buyer hereby incorporate by reference their covenants set forth in Articles Four and Five of that Indenture attached hereto as Exhibit 3.02 and hereby make such covenants to BRC. 3.03 REMEDIES. Until the time the Buyer has fully discharged its obligation to make Earnout Payments, if Buyer shall fail to perform or observe, in any material respect, any of its obligations or covenants, BRC may recover damages and seek other remedies available to BRC at law or in equity. ARTICLE IV REPORTING 4.01 REPORTS. Buyer shall deliver to Seller the following statements and reports: (a) Quarterly, within 45 days after the end of each quarter for which such report is given and to the extent such information is available, a report reflecting the calculation of Refinery Margin for the quarter and year-to-date. (b) With each Earnout Payment, of if no Earnout Payment is due, a statement, prepared and certified by Buyer's Chief Financial Officer, together with the supporting detail, reflecting the calculation of Refinery Margin and the Earnout Payment for the applicable period. 4.02 AUDITS. (a) BRC, or it designated independent auditing firm, shall have the right to review and audit the books and records of Buyer respecting the calculation of Refinery Margin. Buyer shall provide BRC with any information required to determined Refinery Margin. Except as provided in Section 4.03(e), BRC shall bear the costs of any audit conducted by it. BRC shall maintain the confidentiality of all non-public information relating to Buyer or the refineries. (b) Each Earnout Payment shall be final unless BRC gives written objection following completion of its audit, as described in Section 4.02(a), within one year after the Earnout Payment. (c) All late payments of Earnout Payments and all amounts found to be due to BRC shall bear interest at the lesser of 15 percent per annum and the maximum legal rate. If BRC objects, the Earnout Payment shall not be final until it is resolved by agreement of the parties or arbitration pursuant to Section 4.03. If Buyer pays the interest due on a late Earnout Payment or other amounts found to be due, the net present value of such Earnout Payment for purposes of Section 2.02(a) shall be determined by discounting such Earnout Payment from the date on which it was due and payable, notwithstanding that it was later paid. 4.03 ARBITRATION. (a) The parties agree to submit all controversies, claims and matters of difference relating to the determination of Earnout Payments to arbitration. (b) The party desiring arbitration shall so notify the other party, identifying in reasonable detail the matters to be arbitrated and the relief sought. Arbitration hereunder shall be by a partner or member in a neutral national certified public accounting firm not affiliated with either party. The American Arbitration Association ("AAA") shall submit a list of persons meeting the criteria outlined above and the parties shall mutually agree upon the arbitrator. In the event that the parties fail to select an arbitrator as required above, the AAA shall select the arbitrator. (c) All matters arbitrated hereunder shall be arbitrated in Albuquerque, New Mexico and shall be governed by New Mexico law. Arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the AAA, except to the extent such Rules conflict with the express provisions of this Section 4.03 (which shall prevail in the event of such conflict). The arbitrator shall conduct a hearing no later than 60 days after submission of the matter to arbitration, and a decision shall be rendered by the arbitrator within 30 days of the hearing. (d) This submission and agreement to arbitrate shall be specifically enforceable. (e) If the arbitration award reflects an underpayment of the disputed Earnout Payment by an amount greater than five percent of the correct amount, Buyer shall pay the AAA's fees, the arbitrator's fees, and BRC's audit costs and attorneys' and experts' fees, provided those fees are reasonable. BRC shall pay the AAA's fees, the arbitrator's fees, and the Buyer's attorneys' and experts' fees (provided those fees are reasonable), if the arbitration award reflects that the disputed Earnout Payment was equal to or greater than the correct amount. BRC shall pay the AAA's fees and the arbitrator's fees, and each Party shall pay its own attorneys' and experts' fees, if the arbitration award reflects an underpayment of the disputed Earnout Payment by an amount up to five percent of the correct amount. ARTICLE V MISCELLANEOUS 5.01 FORCE MAJEURE. In the event that Buyer is rendered unable by reason of an event of Force Majeure to operate the Refinery and the Ciniza Refinery at a combined production level of at least 32,000 barrels of refined products per day, Buyer shall give BRC written notice and full particulars of any event of Force Majeure within 10 days thereafter. Each such day so specified in a timely notice from Buyer shall be called a "FORCE MAJEURE DAY" provided that no such day for which Buyer receives business interruption insurance (without regard to the amount of such coverage) shall be a Force Majeure Day. Except as provided in Section 2.01(g), Buyer shall remedy Force Majeure conditions as soon as reasonably possible, including repairing or rebuilding the Refinery and the Ciniza Refinery. 5.02 TREATMENT FOR TAX PURPOSES. BRC and Buyer shall treat and report the Earnout Payments under the installment method of accounting for taxation purposes within the meaning of section 453 of the Internal Revenue Code and as "non-quotable contingent payout" within proposed Treas. Reg. S.S. 1.1275-4(c)(4). 5.03 NOTICES. All notices and communications required or permitted under this Schedule 1.01.1 shall be in writing and shall be addressed as follows: IF TO SELLERS: Bloomfield Refining Company Gary-Williams Energy Corporation 370 Seventeenth Street, Suite 5300 Denver, Colorado 80202 Attention: David J. Younggren IF TO BUYER: Giant Industries Arizona, Inc. 23733 North Scottsdale Road Scottsdale, Arizona 85254 Attention: Frederic L. Holliger 5.04 AMENDMENT. This Schedule 1.01.1 may not be altered or amended, nor any rights hereunder be waived, except by an instrument in writing executed by the party or parties to be charged with such amendment or waiver. 5.05 GOVERNING LAW. This Schedule 1.01.1 and the transactions contemplated hereby shall be construed in accordance with, and governed by, the laws of the State of New Mexico. 5.06 LEGAL RATE. Notwithstanding anything to the contrary herein, no portion of any payment made hereunder that is treated as interest for purposes of any usury or other limitation on the rate of interest that may be charged shall exceed the maximum legal rate permitted under applicable law, and, if any such rate is found to exceed the maximum legal rate, Buyer shall be required to pay only the maximum legal rate. Exhibit 2.0100 Sample calculations of the Earnout Payment
Example Year 1996 1996 --------- --------- Base margin 4.25 4.25 Example margin 6.25 6.75 Difference 2.00 2.50 2.00 0.50 --------- Earnout percentage 60% 60% 60% Earnout margin 1.20 1.20 0.40 --------- --------- --------- "Deemed Daily Refinery Capacity" 16,000 16,000 16,000 Number of days 366 365 365 Annual refinery capacity 5,840,000 5,840,000 5,840,000 ========= ========= ========= "Earnout Payment" 7,008,000 9,344,000 7,008,000 2,336,000 ========= ========= ========= =========
Exhibit 2.0200 Sample calculation of the net present value of an assumed hypothetical series of Earnout Payments
Net Present 1997 1998 1999 2000 2001 2002 Value --------- --------- --------- --------- --------- ---- ------- Assumed "Earnout Payments" 1996 7,008,000 6,385,421 1997 0 6,438,600 5,345,427 1998 0 0 7,008,000 5,301,277 1999 0 0 0 7,008,000 4,830,321 2000 0 0 0 0 4,995,901 3,137,554 2001 0 0 0 0 0 0 0 25,000,000
Note 1: Assumed "Effective Time" is January 1, 1996 Note 2: Assumed "Earnout Payment" date is January 1 of each subsequent year Example of application of the extension for Force Majeure Days If an explosion at the Refinery shuts it down for a period of 45 days in 1996, and the deductible period for business interruption insurance is 15 days, then the Earnout Payment period is extended through January 15, 2002. If the explosion was not covered by business interruption insurance, then the Earnout Payment period is extended through February 14, 2002. In the first example, the Force Majeure Days are 15 days since that is the period not covered by business interruption insurance. In the second example, the Force Majeure Days are 45 days since the incident was not covered by business interruption insurance. In either case, the complete cessation of production at the Refinery would reduce the combined production level of both refineries to less than 32,000 barrels of refined products per day. Prior to the Closing, the parties shall jointly expand Exhibit 2.01(f) to explain in reasonable detail the computation of Refinery Margin for the Refinery and the Ciniza Refinery using the accounting information for calendar year 1994. SCHEDULE 1.01.2 Excluded Contracts CONTRACT DESCRIPTION PARTIES DATE NOTES Crude Purchase Gary-Williams Energy 6/1/87 Amendment #28 Contract-On Shore Corporation ("GWEC") and U.S. Minerals Management Service ("MMS") Crude Purchase GWEC and U.S. MMS 10/14/94 Contract-Royalty- in-Kind Crude Contract GWEC and Conoco 9/6/90 Crude Contract GWEC and Unocal Refining 12/9/94 & Marketing Division Crude Contract GWEC and Texaco Trading 6/29/90 and Transportation Inc. Crude Contract GWEC and Shell Oil 3/2/95 Company Crude Contract GWEC and Amoco 8/16/94 Production Company Crude Contract GWEC and Conoco Inc. 5/22/95 Crude Contract GWEC and Mobil Oil 6/20/91 Corporation Marketing Agreement GWEC and Bloomfield 7/1/91 Refining Company Management Agreement GWEC and Bloomfield 7/1/91 Refining Company SCHEDULE 1.01.3 PROCESSING UNITS, SHIPPING FACILITIES AND TERMINALS REFINERY UNITS Crude Distillation Unit. Catalytic Reforming Unit. Fluid Catalytic Cracking Unit (FCCU). Catalytic Polymerization (Cat/Poly) Unit. Distillate Hydrotreater. Naphtha Hydrotreater. Sulfur Recovery Unit. Merox Treaty Unit (LPG). Merox Treaty Unit (Jet Fuel). SUPPORTING REFINERY FACILITIES Refinery Tankage: 630,000 barrels of total storage, along with additive addition systems. Crude Oil and Other Product Truck Unloading Facilities: Five truck unloading stations. Product Truck Loading: Four-bay product truck terminal, with cardlock, mixing, additive, computer and other peripheral systems. Office and Lab: Laboratory facility and an office building. Fire and Safety Systems: The fire fighting system, includes process area, tank farm, product rack, and crude and LPG unloading area fire loop headers, a 65,000 barrel firewater reservoir tank and a 1500 gpm diesel-driven firewater pump. Steam Generation Systems: Water Treatment System and two natural gas fired boilers for steam generation. Cooling Water System: Two main cooling towers, water distribution and treating systems. Electrical System. Process Water Disposal System. Maintenance and Warehouse Facilities. Vapor Relief and Flare System. SCHEDULE 1.01.4 REFINERY SITE The South One-Half of the Northwest Quarter (S1/2NW1/4); The Northeast Quarter of the Southwest Quarter (NE1/4SW1/4); The North One-Half of the Northwest Quarter of the Southwest Quarter (N1/2NW1/4SW1/4) and the Southeast Quarter of the Northwest Quarter of the Southwest Quarter (SE1/4NW1/4SW1/4) of Section 26; AND The Southeast Quarter of the Northeast Quarter (SE1/4NE1/4) and the North One-Half of the Northeast Quarter of the Southeast Quarter (N1/2NE1/4SE1/4) of Section 27; AND The West One-Half of the Northeast Quarter (W1/2NE1/4) of Section 27; EXCEPT the following part of said tract, to wit: BEGINNING at the Northwest corner of said tract; THENCE South 30 feet; THENCE east parallel to the north line of said tract, 676.6 feet; THENCE North 30 feet; THENCE West along the North line of said tract 676.6 feet to the place of beginning. AND; BEGINNING at a point which is 826.08 feet North 31 degrees 16' East from the West Quarter Corner of said Section 27; THENCE North 7 degrees 55' East 135.0 feet along the East Right of Way of State Highway #44; THENCE South 82 degrees 05' East 161.3 feet; THENCE South 7 degrees 55' West 135.0 feet; THENCE North 82 degrees 05' West 161.3 feet to the point of beginning. AND; A tract of land situated in the Southeast Quarter of the Northwest Quarter (SE1/4NW1/4) of said Section 27, more particularly described as follow: BEGINNING at a point which is the center of said SECTION 27; THENCE N 00 degrees 23' 49" E along the North-South Centerline of Section 27, a Distance of 554.30 feet, more or less, to a point on the Easterly Right of Way of the Hammond Canal as described in the San Juan County records in Book 633, Page 243B (Parcel No. HMC); THENCE Southwesterly along a non-tangent curve to the left as described in said description 90 feet, more or less; THENCE South 04 degrees 21' 30" West along a line tangent to said curve 487.17 feet, more or less, along the Easterly Right of Way line of the Hammond Canal to a point on the East-West Centerline of Section 27; THENCE North 89 degrees 24' 29" East 79.81 feet along said East-West Centerline to the point of beginning. All in Township 29 North of Range 11 West, N.M.P.M., San Juan County, New Mexico. SCHEDULE 1.01.5 REFINERY SITE ENCUMBRANCES 1. Taxes for the year 1995, and thereafter. 2. Reservations contained in U.S. Patent recorded in Book 59, Page 222 and in Book 48, Page 270 all of the San Juan County Records. 3. Right of Way Easement from Austin A. Davis, a single person to El Paso Natural Gas Company, dated March 13, 1951, recorded January 11, 1952 in Book 172, Page 367 of the San Juan County Records. 4. Right of Way Easement From August A. Davis to El Paso Natural Gas Company dated September 22, 1952, recorded November 6, 1952 in Book 192, Page 171 of the San Juan County Records. 5. Right of Way Easement from Austin A. Davis, a single person to El Paso Natural Gas Company, dated November 29, 1957, recorded December 12, 1957 in Book 352, Page 126 of the San Juan County Records. 6. Oil and Gas Lease between Austin A. Davis, single and Al Greer, dated April 18, 1957, recorded January 2, 1958 in Book 351, Page 154 of the San Juan County Records. Any subsequent assignments thereof. 7. Order Amending Decree Incorporating Hammond Conservancy District in the District Court to the Public dated December 1, 1958, recorded December 2, 1958 in Book 396, Page 85 of the San Juan County Records, and the decrees and orders referred to therein. 8. Right of Way Easement from France R. Bryan and Jo Claire Bryan, husband and wife to El Paso Natural Gas Company, dated June 14, 1961, recorded June 19, 1961 in Book 487, Page 42 of the San Juan County Records. 9. Grant of Right of Way Easement by and between F.R. Bryan and Jo Claire Bryan, husband and wife and San Juan County, New Mexico, dated November 26, 1962, recorded November 30, 1962 in Book 536, Page 271 of the San Juan County Records. 10. Right of Way Easement by and between Buster Webb and Mrs. Buster Webb, husband and wife and The City of Farmington Electric Utility System and the Mountain States Telephone & Telegraph Company, dated February 11, 1970, recorded April 24, 1970 in Book 681, Page 594 of the San Juan County Records. 11. Amended Easement by and between A.R. Webb and Barbara Webb; F.M. Webb and Betty Webb and El Paso Natural Gas Company, dated August 4, 1970, recorded September 21, 1970 in Book 686, Page 345 amending easement recorded in Book 487, Page 42 all of the San Juan County Records. 12. Ratification Agreement of Grant of Easement by A.R. Webb and Barbara S. Webb, his wife to MAPCO, Inc., dated August 26, 1974 recorded September 23, 1974 in Book 733, Page 154 of the San Juan County Records. 13. Grant of Easement from A.R. Webb and Barbara S. Webb, his wife to MAPCO, Inc., a Delaware Corporation dated July 11, 1974, recorded August 9, 1974 in Book 737, Page 55 of the San Juan County Records. 14. Right of Way Easement from W.L. Dooley, Vice President of Plateau, Inc., to El Paso Natural Gas Company, dated June 9, 1980, recorded July 7, 1980, in Book 885, Page 435 of the San Juan County Records. 15. Right of Way Easement from W.L. Dooley, Vice President of Plateau, Inc., to El Paso Natural Gas Company, dated June 9, 1980, recorded July 7, 1980 in Book 885, Page 436 of the San Juan County Records. 16. Right of Way Easement from W.L. Dooley, Vice President of Plateau, Inc. to El Paso Natural Gas Company, dated June 9, 1980, recorded August 5, 1980 in Book 888, Page 404 of the San Juan County Records. 17. Right of Way Easement from Plateau, Inc., to Union Texas Petroleum Corporation, dated April 2, 1983, recorded April 22, 1983 in Book 962, Page 532 of the San Juan County Records. 18. Right of Way Easement by and between Plateau, Inc., by W.L. Dooley, Vice President and The City of Farmington Electric Utility System and the Mountain States Telephone & Telegraph Company, dated May 11, 1984, recorded June 27, 1984 in Book 996, Page 153 of the San Juan County Records. 19. Right of Way Easement from W.L. Dooley, Vice President of Plateau, Inc., to Northwest Pipeline Corporation, dated July 17, 1984, recorded August 3, 1984 in Book 999, Page 226 of the San Juan County Records. 20. Right of Way Easement from Austin A. Davis, a single person, to El Paso Natural Gas Company, dated January 20, 1956, recorded February 6, 1956 in Book 295, Page 52 of the San Juan County Records. 21. Right of Way Easement by and between Kimbell-Campbell Corp., and the Basin Light and Power Company and Mountain States Telephone & Telegraph Company, dated January 27, 1959, recorded April 14, 1959 in Book 414, Page 35 of the San Juan County Records. 22. Grant of Right of Way Easement by and between F.R. Bryan and Jo Claire Bryan, husband and wife, and County of San Juan, New Mexico, dated November 27, 1962, recorded November 30, 1962 in Book 536, Page 272 of the San Juan County Records. 23. Amended Right of Way Easement between Plateau, Inc., by O. L. Garretson, President and El Paso Natural Gas Company, dated July 7, 1970, recorded September 21, 1970, in Book 686, Page 346 of the San Juan County Records. 24. Amending easement recorded in Book 487, Page 42 of the San Juan County Records. 25. Partial Assignment of Right of Way from Southern Union Gas Company to Southern Union Gathering Company, dated January 1, 1964, recorded March 4, 1964 in Book 574, Page 67 of the San Juan County Records. 26. Amendment of Partial Assignment of Right of Way between Southern Union Gathering Company, dated February 25, 1964, recorded March 20, 1964 in Book 574, Page 109 amending right of way recorded in Book 574, Page 67 all of the San Juan County Records. 27. Right of Way Easement by and between Plateau, Inc., and the City of Farmington Electric Utility System and the Mountain States Telephone & Telegraph Company, dated June 14, 1976, recorded August 2, 1976 in Book 770, Page 303 of the San Juan County Records. 28. Right of Way Easement by and between Plateau, Inc., and the Mountain States Telephone & Telegraph Company, dated July 23, 1976, recorded September 15, 1976 in Book 773, Page 437 of the San Juan County Records. 29. Grant of Right of Way Easement by and between Plateau, Inc., and Joe M. Kaime and Wilma Jean Kaime, husband and wife, dated March 1, 1977, recorded June 15, 1978 in Book 790, Page 286 of the San Juan County Records. 30. Assignment from El Paso Natural Gas Company to Shell Pipe Line Corporation, dated December 29, 1977, recorded February 24, 1978, in Book 797, Page 203 of the San Juan County Records. 31. Assignment from Shell Pipe Line Corporation to Plateau, Inc., a New Mexico Corporation and Thriftway Oil Company, a New Mexico Corporation, dated March 29, 1978, recorded May 23, 1978 in Book 826, Page 533 of the San Juan County Records. 32. Grant of Right of Way Easement by and between Plateau, Inc., and Joe W. Kaime and Wilma Jean Kaime, husband and wife, dated June 14, 1979, recorded August 22, 1979 in Book 861, Page 474 to correct right of way recorded in Book 790, Page 286 all of the San Juan County Records. 33. Right of Way Easement from W.L. Dooley, Vice President of Plateau, Inc., to El Paso Natural Gas Company, dated June 9, 1980, recorded July 24, 1980 in Book 888, Page 194 of the San Juan County Records. 34. Assignment from Giant Industries, Inc., an Arizona Corporation, to Ciniza Pipe Line, Inc., a New Mexico Corporation, dated May 1, 1983, recorded May 6, 1983 in Book 965, Page 229 of the San Juan County Records. 35. Notice of Right of Way from the United States for the construction of the Hammon Main Canal, dated July 12, 1983, recorded July 12, 1983 in Book 970, Page 220 of the San Juan County Records. 36. Reservations contained in U.S. Patent recorded in Book 2, Page 240 of the San Juan County Records. 37. Right of Way Easement from Lloyd D. Fitts, a single person, to El Paso Natural Gas Company, dated January 15, 1953, recorded March 14, 1953 in Book 203, Page 166 of the San Juan County Records. 38. Right of Way Easement from Lloyd D. Fitts, a single person, to El Paso Natural Gas Company, dated January 19, 1956, recorded February 6, 1956, in Book 295, Page 53 of the San Juan County Records. 39. Oil and Gas Lease between Grace Irene Pearce, a single woman and Enid M. (Neibaur) Price, dated August 3, 1957, recorded August 5, 1957 in Book 338, Page 194 of the San Juan County Records. 40. Oil and Gas Lease between Grace Irene Pearce, a single woman and Enid M. (Neibaur) Price, dated July 27, 1957, recorded July 29, 1957 in Book 338, Page 140 corrected in Book 338, Page 194 all of the San Juan County Records. Any subsequent assignments thereof. 41. Right of Way Easement by and between Grace Irene Pearce, divorced and the Basin Light and Power Company and Mountain States Telephone & Telegraph Company, dated June 13, 1958, recorded June 30, 1958 in Book 375, Page 261 of the San Juan County Records. 42. Agreement by and between Grace Pearce and Pete Roberts, doing business as Pete Roberts Construction Company, dated January 13, 1959, recorded February 2, 1959 in Book 404, Page 71 of the San Juan County Records. 43. Assignment of Lease from Pete Roberts, doing business as Pete Roberts Construction Company, to Bloomfield Sand & Gravel, Inc., dated January 30, 1959, recorded February 2, 1959 in Book 404, Page 72, assignment agreement recorded in Book 404, Page 71 all of the San Juan County Records. 44. Right of Way Easement by and between Grace Pearce, a single woman and the Basin Light and Power Company and Mountain States Telephone & Telegraph Company, dated December 3, 1958, recorded January 28, 1959, in Book 402, Page 273 of the San Juan County Records. 45. Lease Amendment between Grace Pearce and Pete Roberts dated March 3, 1959, recorded March 16, 1959 in Book 409, Page 164 amending lease recorded in Book 404, Page 71 all of the San Juan County Records. 46. Assignment of Lease from Bloomfield Sand & Gravel, Inc., to River Sand & Gravel Co., a New Mexico Corporation, dated March 3, 1959, recorded March 16, 1959 in Book 409, Page 165 assigning lease recorded in Book 404, Page 71 and assigned in Book 404, Page 72 all of the San Juan County Records. 47. Right of Way Easement by and between Grace Irene Pearce divorced and the Town of Farmington Electric System and Mountain States Telephone & Telegraph Company, dated May 25, 1959, recorded September 21, 1959 in Book 430, Page 103 of the San Juan County Records. 48. Contract Compensating Landowner for Government use of reserved right of way between the United States of America and Plateau, Inc., dated November 25, 1966, recorded January 24, 1967 in Book 645, Page 66 of the San Juan County Records. 49. Lease for Sand and Gravel by and between Donald L. Mangum and Myrna J. Mangum and Alcora Materials Company, dated March 9, 1973, recorded July 7, 1973 in Book 752, Page 113 of the San Juan County Records. 50. Assignment of Lease between Alcora Materials Company and Arco Materials, Inc., dated April 14, 1977, recorded April 15, 1977, in Book 780, Page 549 assigning lease dated March 9, 1973 all of the San Juan County Records. 51. Right of Way Easement by and between Plateau, Inc., and the City of Farmington Electric Utility System and the Mountain States Telephone & Telegraph Company, dated August 12, 1977, recorded September 8, 1977 in Book 796, Page 66 of the San Juan County Records. 52. Lease for Sand & Gravel by and between Donald L. Mangum and Myrna J. Mangum and Alcora Materials Company, dated March 9, 1973, recorded September 10, 1980 in Book 886, Page 443 of the San Juan County Records. 53. Right of Way Easement from W.L. Dooley, Vice President of Plateau, Inc., to the Mountain States Telephone & Telegraph Company, dated November 3, 1980, recorded November 7, 1980 in Book 895, Page 534 of the San Juan County Records. 54. Right of Way by and between Plateau, Inc., by R.G. Perry Executive Vice President and the City of Farmington Electric Utility System and the Mountain States Telephone & Telegraph Company, dated September 10, 1982, recorded October 14, 1982 in Book 944, Page 420 of the San Juan County Records. 55. Right of Way Easement by and between Plateau, Inc., by Lee S. Woodside, Vice President of Refining and the City of Farmington Electric Utility System and the Mountain States Telephone & Telegraph Company, dated March 16, 1983, recorded April 5, 1983 in Book 962, Page 234 of the San Juan County Records. 56. Right of Way deed from J.T. Lynn, Administrator, estate of John P. Lynn, deceased, Fred L. Lawson and Grace P. Lawson, his wife to Southern Union Production Company of New Mexico dated September 3, 1932, recorded September 16, 1932 in Book 91, Page 69 of the San Juan County Records. 57. Right of Way Grant from Fred L. Lawson and Grace Lawson, his wife to New Mexico Gas Company, dated January 18, 1940, recorded January 18, 1940 in Book 102, Page 53 of the San Juan County Records. 58. Right of Way from Joe Mangum to Mountain States Telephone & Telegraph Co., dated June 15, 1945, recorded October 8, 1945 in Book 102, Page 630 of the San Juan County Records. 59. Oil and Gas Lease by and between Joe Mangum and Mamie Mangum and Southern Union Production Company, dated August 30, 1946, recorded May 20, 1946 in Book 89, Page 819 of the San Juan County Records. Any Subsequent Assignments thereof. 60. Right of Way Easement by and between Mamie Mangum, a single person and the Basin Light and Power Company, dated October 19, 1954, recorded October 25, 1984 in Book 259, Page 159 of the San Juan County Records. 61. Right of Way Easement by and between Mamie Mangum, a widow and Plateau, Inc., dated May 18, 1960, recorded May 18, 1960 in Book 453, Page 16 of the San Juan County Records. 62. Right of Way Easement by and between Harvey Salmon and Eva S. Salmon, husband and wife and Plateau, Inc., dated June 29, 1960, recorded August 4, 1960 in Book 459, Page 93 of the San Juan County Records. 63. Right of Way Easement by and between Mamie Mangum, a widow and the Town of Farmington Electric Utility System and the Mountain States Telephone & Telegraph Company, dated May 23, 1962, recorded October 12, 1962 in Book 531, Page 210 of the San Juan County Records. 64. Right of Way Easement from Mamie Mangum, a widow to Southern Union Gas Company, dated August 13, 1963, recorded September 18, 1963 in Book 561, Page 181 of the San Juan County Records. 65. Right of Way Easement from Mamie Mangum, a widow to Southern Union Gas Company, dated August 13, 1963, recorded September 18, 1963 in Book 561, Page 182 of the San Juan County Records. 66. Contract Compensating Landowner for Government use of reserved right of way between the United States of America and Mamie Mangum, a widow and Donald L. Mangum and Myrna Mangum, aka Myrna J. Mangum, his wife, dated December 8, 1965, recorded July 11, 1966 in Book 633, Page 243 of the San Juan County Records. 67. Partial Assignment of right of way from Southern Union Gas Company, a Delaware Corporation to Southern Union Production Company, a Delaware Corporation, dated December 5, 1975, recorded January 15, 1976 in Book 759, Page 421 assigning right of way recorded in Book 91, Page 69 all of the San Juan County Records. 68. Any loss or damage by virtue of Hammon Canal not being within its designated right of way. 69. Right of Way from Plateau, Inc., to Union Texas Petroleum Corporation dated March 2, 1983, recorded April 1, 1983 in Book 962, Page 170 of the San Juan County Records. 70. Reservations contained in U.S. Patent recorded in Book 1, Page 191 of the San Juan County Records. 71. Assignment and Delegation from Southern Union Company to Public Service Company of New Mexico dated January 28, 1985, recorded February 1, 1985 in Book 1012, Page 24 and as amended by Amended Assignment and Delegation recorded February 17, 1986 in Book 1037, Page 601, all of the San Juan County Records. 72. Assignment from Thirftway Co., a New Mexico corporation to Thirftway Pipeline Transportation dated November 15, 1988, recorded April 10, 1989 in Book 1101, Page 291 of the San Juan County Records. 73. Right of Way Easement by and between Mrs. Mamie Mangum, widow and the Basin Light and Power Company and Mountain States Telephone & Telegraph Company, dated January 28, 1959, recorded April 14, 1959 in Book 414, Page 34 of the San Juan County Records. 74. Right of Way Easement by and between Austin A. Davis, a single person to El Paso Natural Gas Company, a corporation dated February 9, 1953, recorded February 21, 1953 in Book 202, Page 92 of the San Juan County Records. 75. Title to all of the oil, gas and other minerals and mineral substances, and all rights, privileges and easements appurtenant thereto as reserved/conveyed in Mineral Deeds recorded in Book 465, page 194, Book 465, page 196, Book 465, page 310 and in Book 515, page 130 and in Warranty Deeds recorded in Book 467, page 3 and in Book 467, page 4, of the San Juan County Records. 76. Terms, conditions and provisions of the Oil and Gas Leases recorded in Book 51, page 39 and in Book 145, page 321 of the San Juan County Records. 77. Easement to United States of America recorded in Book 93, page 624 of the San Juan County Records. 78. Easement to City of Farmington Electric Utility System and Mountain States Telephone and Telegraph Company recorded in Book 1191, page 583 of the San Juan County Records. 79. Right-of-way for Hammond Canal and Sullivan Road as presently in existence across subject property. 80. Title to all of the oil, gas and other minerals and mineral substances, and all rights, privileges and easements appurtenant thereto as reserved/conveyed in Mineral Deeds recorded in Book 457, page 82 and in Book 473, page 98 of the San Juan County Records. 81. Terms, conditions and provisions of the Oil and Gas Leases recorded in Book 99, page 370 of the San Juan County Records. 82. Easement to Kutz Canyon Water Users Association recorded in Book 118, page 288 of the San Juan County Records. 83. Easement to San Juan County recorded in Book 107, page 80, in Book 107, page 82 and in Book 107, page 83 of the San Juan County Records. 84. Title to all of the oil, gas and other minerals and mineral substances, and all rights, privileges and easements appurtenant thereto as reserved/conveyed in Warranty Deed recorded in Book 474, page 257, of the San Juan County Records. 85. Any adverse claim based upon the assertion that some portion of subject property has been brought within the boundaries thereof by an avulsive movement of the San Juan River, or has been formed by accretion to any such portion. 86. Deviation of fences from the West and South property lines as revealed and depicted by that certain Retracement Survey prepared for Bloomfield Refinery by San Juan Engineers dated July 18, 1991. Buyer has received copies of the foregoing and a Retracement Survey for Bloomfield Refinery, prepared by San Juan Engineers, dated July 18, 1991 (the "Survey"). The terms and provisions of the easements described above are acceptable to Buyer, but the Survey does not set forth all such easements (the easements not set forth on the Survey shall be referred to as the "Excepted Easements"). Buyer shall have until August 31, 1995, to determine the location of the Excepted Easements on the Refinery Site. Buyer shall notify Sellers in writing on or before such date if Buyer believes that the location of the Excepted Easements would interfere materially with the operation or use of the Refinery as it is now operated or used and as it has been operated or used on a historical basis, or result in a Material Effect. If Buyer has given such a notice and the location of the Excepted Easements does, in fact, interfere materially with the operation or use of the Refinery as it is now operated or used and it has been operated or used on a historical basis or result in a Material Effect, notwithstanding anything contained in this Agreement to the contrary, this Agreement shall terminate and neither Buyer nor Sellers shall have any further duties, obligations or liabilities to each other. If Buyer notifies Sellers on or before August 31, 1995, that Buyer believes that location of the Excepted Easements does not interfere with the operation or use of the Refinery as it is now operated or used and as it has been operated or used on a historical basis or result in a Material Effect, or if Buyer does not notify Sellers by such date, this Agreement shall continue and be in full force and effect in accordance with its terms and the Excluded Easements will be deemed to not interfere with the operation or use of the Refinery as it is now operated or used and it has been operated or used on a historical basis, and the Excepted Easements shall be Refinery Site Encumbrances all in accordance with this Agreement. SCHEDULE 2.04 ALLOCATION OF PURCHASE PRICE Refinery units & facilities $53,750,000 Buildings and contents 850,000 Autos 100,000 Remote lact units 150,000 San Juan pipeline assets 150,000 $55,000,000 SCHEDULE 3.01(E) CONTESTED TAXES NONE SCHEDULE 3.01(g) LITIGATION NONE SCHEDULE 3.01(J) CAPITAL PROJECTS PROJECT IN WORK ADDITIONAL STORAGE TANKS. This project involves the movement of two 55,000 barrel, internal floating roof, storage tanks from Fruita, Colorado to the Refinery. The tanks have been dismantled and moved to the Refinery and the first tank is currently being constructed. The foundation construction is also in progress. Much of the piping materials have been received and construction is starting by use of a contract welder. These tanks are being built as additional naphtha and gasoline storage for periods of reduced crude availability. One of the tanks will eventually replace existing bolted naphtha tanks and the other would be used as an Isomerate storage tank if the unit was constructed. Total Estimated Costs: $850,000 Estimated Costs Remaining To Be Paid: $660,000 PROJECTS TO BE DONE 1. REFORMER FIREPROOFING. Ongoing projects to repair refinery fireproofing. Total Estimated Costs: $41,850 Estimated Costs Remaining To Be Paid: $41,850 2. FIREFIGHTING FOR TANK 31. Improvement to the firefighting for tank 31 (crude storage). Total Estimated Costs: $25,000 Estimated Costs Remaining To Be Paid: $25,000 3. TANK FARM STAIRWAYS. Add stairways in the tank farm to allow safer access into the tank dikes. Total Estimated Costs: $15,000 Estimated Costs Remaining To Be Paid: $15,000 4. BLENDING. Change to blending premium gasoline instead of reformate to make the higher octane products. Total Estimated Costs: $25,000 Estimated Costs Remaining To Be Paid: $25,000 5. CONVERTING TO ELECTRIC BLEND METERS. Convert bay III of the loading rack to electronic blend meters. Total Estimated Costs: $50,000 Estimated Costs Remaining To Be Paid: $50,000 SCHEDULE 3.01(K) COLLECTIVE BARGAINING AGREEMENTS Collective Bargaining Agreement, dated effective June 1, 1993, between Bloomfield Refining Company and its refinery employees represented by the Oil, Chemical and Atomic Workers International Union, AFL-CIO and its Local Union 2-972. SCHEDULE 3.01(L) WATER AND WATER RIGHTS BRC uses approximately 417 acre feet of water per year in its refining operations. Of such amount, 340 acre feet per year have been purchased from the Bureau of Reclamation (the "BUREAU") out of the Navajo Reservoir and 77.838 acre feet are owned by BRC. A. PURCHASED RIGHTS. Prior to 1990, BRC regularly obtained one year water service contacts from the Bureau. Since 1990, however, the Bureau has been required by the Endangered Species Act to consult with the Fish and Wildlife Service ("FWS") prior to entering into each new water service contract with BRC (and other water users). As a result, BRC has had only one water contract since April of 1990. The term of the last water contract ran from October 21, 1992 through October 20, 1993. The Bureau and the FWS have been conducting an informal consultation for close to a year in connection with BRC's proposed water contract. In late 1994, the FWS notified the Bureau that FWS would require formal consultation because of the likely effect of BRC's water contract on the critical habitat of the Colorado squawfish and the razorback sucker, which have been listed by the EPA as endangered. The Bureau has prepared a biological assessment of the effects of the proposed contract on the endangered species, and has concluded that there will be no adverse effects on the various species or their designated critical habitat. The biological assessment prepared by the Bureau reviewed and analyzed all relevant data from water quality testing which was done in the area surrounding the Refinery, and found no indications of pollutants emanating from the Refinery. This biological assessment has been sent to the FWS for its use in preparing its official biological opinion. FWS has a statutory time period of 90 days (which may be extended for an additional 60 days) within which to complete the formal consultation. FWS must deliver its biological opinion within 45 days after formal consultation has been completed. Although not assured, it is likely that the final biological opinion of the FWS will be similar to the biological opinion prepared by FWS for the 1992 water service contract, and will result in a "no jeopardy" finding. A "no jeopardy" finding would permit the Bureau to enter into a water service contract with BRC. B. OWNED RIGHTS. BRC owns the following water rights to 77.838 acre feet of water from the San Juan River: NM STATE ENGINEER CONTRACT DESCRIPTION ACRE FT/YR FILE NO. 2593-2 Water Rights Ownership 24.850 2593-2A Water Rights Ownership 10.000 2593-2B Water Rights Ownership 32.820 2593-2C Water Rights Ownership 10.168 SCHEDULE 3.01(M) FINANCIAL STATEMENTS INDEX 1. Bloomfield Refining Company -- Financial Statements, together with Report of Independent Public Accountants, as of December 31, 1991 and 1990. 2. Bloomfield Refining Company -- Financial Statements, together with Report of Independent Public Accountant, as of December 31, 1992 and 1991. 3. Bloomfield Refining Company -- Financial Statements, together with Report of Independent Public Accountant, as of December 31, 1993 and 1992. 4. Bloomfield Refining Company -- Financial Statements, together with Report of Independent Public Accountant, as of December 31, 1994 and 1993. 5. Bloomfield Refining Company -- Interim Financial Statements, as of March 31, 1995 (unaudited). 6. Bloomfield Refining Company -- Operating Results for April, 1995. 7. Bloomfield Refining Company -- Operating Results for May, 1995. ARTHUR ANDERSEN ARTHUR ANDERSEN & CO. SC BLOOMFIELD REFINING COMPANY FINANCIAL STATEMENTS TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS OF DECEMBER 31, 1991, AND 1990 _____________________ Arthur Andersen & Co. _____________________ 717-17th Street Denver CO 80202 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholder of Bloomfield Refining Company: We have audited the accompanying balance sheets of Bloomfield Refining Company (a Delaware corporation), as of December 31, 1991 and 1990, and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial statements referred to above present fairly, in all material respects, the financial position of Bloomfield Refining Company as of December 31, 1991 and 1990, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN & CO. Denver, Colorado, March 30, 1992. BLOOMFIELD REFINING COMPANY BALANCE SHEETS DECEMBER 31, 1991 AND DECEMBER 31, 1990
ASSETS CURRENT ASSETS 1991 1990 ----------- ----------- Cash and temporary investments $ 6,769,190 $ 6,980,463 Accounts receivable - affiliates 4,405,176 9,936,051 Accounts receivable 277,136 39,943 Inventories 7,899,175 9,609,612 Prepaid expenses and other 2,408,952 573,975 ----------- ----------- Total current assets 21,759,629 27,140,044 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 12,127,034 11,113,501 Gas plants, property and equipment 3,932,621 --- Less: Accumulated depreciation (2,555,378) (1,622,876) ----------- ----------- 13,504,277 9,490,625 Construction in progress 523,427 198,068 ----------- ----------- Total property, plant and equipment 14,027,704 9,688,693 ----------- ----------- Prepaid expenses and other 399,146 11,585 ----------- ----------- TOTAL ASSETS $36,186,479 $36,840,322 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES 1991 1990 ----------- ----------- Accounts payable - affiliates $ 9,180,281 $12,199,594 Accounts payable 487,414 661,459 Current portion of long-term debt 4,450,000 --- Income taxes payable - affiliate 1,191,500 155,240 Accrued liabilities 875,788 690,281 Accrued turnaround costs --- 660,986 ----------- ----------- Total current liabilities 16,184,983 14,367,560 ----------- ----------- NON-CURRENT LIABILITIES Long-term debt, excluding current portion 3,693,763 --- Accrued turnaround costs 1,418,741 801,110 Other 83,260 16,302 ----------- ----------- Total non-current liabilities 5,195,764 817,412 ----------- ----------- Deferred income taxes 238,000 238,000 Commitments and contingencies (Note 9) SHAREHOLDER'S EQUITY Common stock, .01 par value: 1,000 voting shares authorized, issued and outstanding 10 10 Contributed capital 3,200,090 3,200,090 Retained earnings 11,367,632 18,217,250 ----------- ----------- Total shareholder's equity 14,567,732 21,417,350 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $36,186,479 $36,840,322 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. BLOOMFIELD REFINING COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
1991 1990 ------------ ------------ Operating revenues $134,027,081 $156,400,077 Operating expenses 124,267,090 141,760,077 ------------ ------------ Gross margin 9,759,991 14,640,000 General and administrative expenses 6,310,348 3,958,008 ------------ ------------ Operating income 3,449,643 10,681,992 ------------ ------------ OTHER INCOME (EXPENSE) Interest income 120,508 --- Interest expense (415,401) (5) Other 89,632 16,632 ------------ ------------ (205,261) 16,627 ------------ ------------ Income before income taxes 3,244,382 10,698,619 INCOME TAX (EXPENSE) BENEFIT (NOTE 4) Current (1,094,000) (57,740) Deferred --- 115,000 ------------ ------------ (1,094,000) 57,260 ------------ ------------ NET INCOME $ 2,150,382 $ 10,755,879 ============ ============ STATEMENTS OF RETAINED EARNINGS Balance at January 1 $ 18,217,250 $ 12,461,371 Net income 2,150,382 10,755,879 Dividends (9,000,000) (5,000,000) ------------ ------------ BALANCE AT DECEMBER 31 $ 11,367,632 $ 18,217,250 ============ ============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
1991 1990 ------------- ------------- Cash flows from operating activities: Cash received from customers $ 139,358,483 $ 154,264,371 Cash paid to suppliers and employees (132,338,157) (142,755,496) Cash outlay for turnaround (844,354) (156,024) Interest received 113,933 --- Interest paid (363,237) (5) Income taxes 81,163 --- Deposit 5,689 (5,689) Other (34,370) 46,117 ------------- ------------- Net cash provided by operating activities 5,979,150 11,393,274 ------------- ------------- Cash flows used by investing activities: Capital expenditures - refinery (1,386,071) (757,222) Acquisition of gas plants (3,792,060) --- Capital expenditures - gas plants (156,055) --- ------------- ------------- Net cash used by investing activities (5,334,186) (757,222) ------------- ------------- Cash flows used by financing activities: Borrowings under term loan agreement 8,500,000 --- Proceeds received from acquisition of gas plant note 775,218 --- Principal payments on debt (1,131,455) --- Dividends distributed (9,000,000) (5,000,000) ------------- ------------- Net cash used by financing activities (856,237) (5,000,000) ------------- ------------- Net (decrease) increase in cash and temporary investments (211,273) 5,636,052 Cash and temporary investments at beginning of year 6,980,463 1,344,411 ------------- ------------- Cash and temporary investments at end of year $ 6,769,190 $ 6,980,463 ============= =============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990
1991 1990 ----------- ----------- Reconciliation of net income to net cash provided by operating activities: Net income $ 2,150,382 $10,755,879 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 932,502 602,035 Accrued turnaround costs 800,999 970,872 Changes in assets and liabilities: Decrease (increase) in accounts receivable 5,309,176 (1,772,673) Decrease (increase) in inventories 1,710,437 (1,406,551) Increase in prepaid expenses and other (2,222,538) (225,244) Decrease in other assets --- 665 (Decrease) increase in accounts payable (3,146,179) 2,633,853 Increase in income taxes payable - affiliate 1,036,260 57,740 Increase in accrued liabilities 185,507 47,722 Decrease in accrued turnaround costs (844,354) (156,024) Increase in other liabilities 66,958 --- Decrease in deferred income taxes --- (115,000) ----------- ----------- Net cash provided by operating activities $ 5,979,150 $11,393,274 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY NOTES TO FINANCIAL STATEMENTS (1) BACKGROUND AND ORGANIZATION --------------------------- On August 31, 1984, Bloomfield Refining Company, a Delaware corporation (the Company), was incorporated. The Company's primary activities are the refining of petroleum products and gas plant operations. The Company is a wholly-owned subsidiary of Gary-Williams Energy Corporation (GWEC) and operates a refinery in Bloomfield, New Mexico with a throughput capacity of 17,000 barrels per day. Effective July 1, 1991, the Company purchased certain ownership interests in two gas plants located in Utah and the net assets of a gas plant located in Colorado from GWEC. (2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES -------------------------------------------- CASH AND TEMPORARY INVESTMENTS - ------------------------------ For purposes of these statements, the Company considers investments purchased with an original maturity of three months or less to be cash or temporary investments. INVENTORIES - ----------- Inventories are valued at the lower of first-in, first-out cost or market. Inventories at December 31, 1991 and 1990 are as follows:
1991 1990 ---------- ---------- Refined, unrefined and intermediate products $5,412,447 $6,861,818 Crude oil 1,411,844 1,765,125 Materials and supplies 1,074,884 982,669 ---------- ---------- $7,899,175 $9,609,612 ========== ==========
PROPERTY, PLANT AND EQUIPMENT - ----------------------------- The initial purchase and additions to property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method based on estimated useful lives ranging from 2 to 35 years. Ownership interests in gas plants are recorded at cost and proportionately consolidated for financial statement purposes. Depreciation is provided using the straight-line method with estimated useful lives ranging from 5 to 12 years. GENERAL AND ADMINISTRATIVE EXPENSES - ----------------------------------- The Company reimburses GWEC and an affiliate for general and administrative services relating to the supply and marketing of raw materials and refined products and gas plant operations. ACCRUED TURNAROUND COSTS - ------------------------ Major repair and maintenance expenses (turnaround costs) are accrued and charged to current operations in anticipation of the work to be performed in future periods to renew the related refinery assets. Accrued turnaround costs are classified as either current or non- current liabilities based upon the current scheduling of major expenditures. (3) LONG-TERM DEBT -------------- Long-term debt consists of the following:
Current Long-Term Total Portion Portion ---------- ---------- ---------- Note payable to a bank (a) $7,437,500 $4,250,000 $3,187,500 Note payable-affiliate (b) 706,263 200,000 506,263 ---------- ---------- ---------- December 31, 1991 $8,143,763 $4,450,000 $3,693,763 ========== ========== ==========
(a) On September 4, 1991, the Company and GWEC (collectively, the Borrower) jointly entered into an amended credit agreement whereby the Company received loan proceeds of $8,500,000. The proceeds of the loan were used to acquire, from GWEC, the gas plants located in Utah and Colorado, to pay dividends to GWEC and for general corporate purposes. On December 6, 1991, the Borrower entered into a new credit agreement whereby loan proceeds of $7,791,667 were received and used to repay the outstanding balance on the $8,500,000 bank term loan and whereby a new revolving credit facility was established. Under terms of the revolving credit facility, the Borrower may borrow up to $5,000,000 in cash and/or issue letters of credit which in the aggregate cannot exceed the lesser of $35,000,000 or the borrowing base. The borrowing base, which consists principally of accounts receivable, inventory, and exchange balances was approximately $24,000,000 and $20,000,000 as of December 31, 1991 and March 30, 1992. The Borrower had no amounts outstanding under the revolving credit facility, however, had issued letters of credit totalling approximately $21,000,000 as of December 31, 1991. The revolving credit facility and term loan bear interest at a rate based on the bank's prime rate. Alternatively, interest rates can be fixed for 30,60, or 90 day periods on portions of the term loan at a floating Eurocurrency rate. At December 31, 1991, the weighted average rate being paid was approximately 7.50%. The term notes call for minimum monthly principal payments of $354,167 with the final payment due in August, 1993. These loans are secured by substantially all of the assets of the Company and, among other things, require maintenance of certain financial covenants and ratios. The revolving credit facility matures November 30, 1992; however, the credit agreement allows for the Borrower to request extensions of the maturity date. (b) The note is a 9% interest bearing non-recourse note issued in connection with the acquisition of a partial ownership interest in a gas plant. The note is secured by the ownership interest and is payable over a maximum period of 15 years, ending September 30, 2001. The monthly installments are determined by the prior month's net cash flow. The note is payable to an affiliate. (4) INCOME TAXES ------------ The Company and GWEC are members of a consolidated tax group which files a consolidated federal income tax return. On January 1, 1991, an agreement was entered into between the Company and GWEC whereby the Company determines, on a stand alone basis, the tax liability or benefit as if it were not a member of the tax group. The Company then reimburses or is reimbursed by GWEC for its income tax liability or benefit. Deferred income taxes are provided as a result of recording income and expenses, principally depreciation and turnaround expenses, in different periods for financial and tax accounting purposes. The Company has adopted the provisions of Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes" which was superseded in February 1992 by Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes" which provides for the recognition of deferred tax assets arising from existing potential future tax benefits. The Company is required to adopt SFAS 109 in calendar year 1993 and does not anticipate that such adoption will have a material impact on the Company's financial position. (5) OPERATING REVENUES AND EXPENSES BY SEGMENTS -------------------------------------------- The following segment information reflects operating revenues, operating expenses and gross margins for the twelve months ended December 31, 1991 and 1990.
Refining Gas Plants Total ------------ ---------- ------------ December 31, 1991 ------------------------------------------ Operating Revenues $131,917,131 $2,109,950 $134,027,081 Operating Expenses 122,884,788 1,382,302 124,267,090 ------------ ---------- ------------ Gross Margin $ 9,032,343 $ 727,648 $ 9,759,991 ============ ========== ============ December 31, 1990 ------------------------------------------ Operating Revenues $156,400,077 $ --- $156,400,077 Operating Expenses 141,760,077 --- 141,760,077 ------------ ---------- ------------ Gross Margin $ 14,640,000 $ --- $ 14,640,000 ============ ========== ============
(6) RELATED PARTY TRANSACTIONS -------------------------- Effective July 1, 1991, a supply and marketing service agreement was entered into between the Company and GWEC, whereas GWEC purchases crude oil and other raw materials for resale to the Company, at cost, for processing at the refinery. The intercompany purchase of raw materials include all amounts legally accrued and owing by GWEC to third parties, including prepayments and offsite inventory. Also, the Company sells refined petroleum products to GWEC, at market, for resale by GWEC. For the supply and marketing services provided by GWEC, the Company pays a management fee pursuant to the terms of a management agreement. Prior to July 1, 1991, GWEC sold crude oil and raw materials to the Company at cost plus $.01 per gallon and purchased refined products from the Company at market less $.01 per gallon. (7) EMPLOYEE BENEFIT PLANS ---------------------- The Company has a profit sharing plan (defined contribution plan) covering certain non-union employees who meet eligibility requirements as to age and length of service. Contributions to the plan are determined annually by the Company. Contributions of $162,515 and $67,050 were accrued for the twelve months ended December 31, 1991 and 1990, respectively. The Company has a defined benefit pension plan for union employees. The benefits are based on a percentage of the employee's final earnings, as defined, and years of credited service, up to a maximum of 30 years. The Company's funding policy is to contribute annually an amount to fund normal cost and amortize unfunded actuarial liabilities over 19 years. Plan assets at December 31, 1991 and 1990 consist primarily of private and public debt and equity investments. The following table sets forth the funded status and amounts recognized in the Company's statements of financial position and income at December 31, 1991 and 1990:
1991 1990 --------- --------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $228,124 and $147,652 at December 31, 1991 and 1990, respectively $(248,606) $(161,342) ========= ========= Projected benefit obligation for service rendered to date (248,606) (161,342) Plan assets at fair value 165,346 118,846 --------- --------- Projected benefit obligation in excess of plan assets (83,260) (42,496) Unrecognized net obligation existing at January 1, 10,920 11,585 Prior service cost not yet recognized 15,811 --- Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 78,558 27,917 Adjustment to recognize minimum liability (105,289) (39,502) --------- --------- Accrued pension liability included in other liabilities $ (83,260) $ (42,496) ========= ========= Net pension cost includes the following components: Service cost $ 26,500 $ 30,174 Interest cost 14,302 10,568 Actual return on plan assets (14,298) (2,792) Net amortization and deferral of other components 4,823 (5,342) --------- --------- Net periodic pension cost $ 31,327 $ 32,608 ========= =========
The discount rate used in determining the actuarial present value of the projected benefit obligation was 6.75% and 7.499% for 1991 and 1990, respectively. The average rate of increase in future compensation levels and the expected long-term rate of return on pension plan assets was 0% and 9.0%, respectively in both years. (8) MAJOR CUSTOMERS --------------- During the years ended December 31, 1991 and 1990, the Company sold 100% of the refined products to GWEC. Also, during that period, the Company purchased 100% of the crude oil and raw materials from GWEC. (9) COMMITMENTS AND CONTINGENCIES ----------------------------- The Company paid (received) a retainer fee to (from) a third party based on 5% of the net income (loss) before taxes. This fee is included in general and administrative expenses and was $(22,207) and $550,300 for the years ended December 31, 1991 and 1990, respectively. Effective February 1, 1991, this agreement was terminated and new agreements were entered into between GWEC and affiliates of the third party providing for payment of consulting fees of $50,000 per month until January 31, 1992 and $15,000 per calendar quarter from 1992 to 2001. In addition, a retainer fee of $1,000,000, plus interest, is payable for services to be provided in 1992 and 1993. The Company is subject to various environmental and other regulations primarily administered by the United States Environmental Protection Agency, the New Mexico Health and Environmental Department and the New Mexico Environmental Improvement Division. Management of the Company believes it has complied with all aspects associated with these regulations. A Company affiliate entered into a ten year lease agreement for office space in November 1989. The Company has guaranteed the performance of the affiliate's obligations. Terms of the lease provide for annual rentals of $396,000 in the second year and escalating to $796,000 in years six through ten. In addition to the rent, the Company has guaranteed the annual payment of $276,000 in occupancy costs with provisions for escalation based on actual expenses. The total estimated costs for rentals and operating expenses for 1992 amounts to $735,000. ARTHUR ANDERSEN ARTHUR ANDERSEN & CO. SC BLOOMFIELD REFINING COMPANY FINANCIAL STATEMENTS TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS OF DECEMBER 31, 1992 AND 1991 ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholder of Bloomfield Refining Company: We have audited the accompanying balance sheets of Bloomfield Refining Company (a Delaware corporation), as of December 31, 1992 and 1991, and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial statements referred to above present fairly, in all material respects, the financial position of Bloomfield Refining Company as of December 31, 1992 and 1991, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN & CO. Denver, Colorado, March 30, 1993. BLOOMFIELD REFINING COMPANY BALANCE SHEETS DECEMBER 31, 1992 AND 1991
ASSETS CURRENT ASSETS 1992 1991 ----------- ----------- Cash and temporary investments $ 7,291,275 $ 6,769,190 Accounts receivable - affiliates 5,486,216 4,405,176 Accounts receivable 57,241 277,136 Inventories 7,861,852 7,899,175 Prepaid expenses - crude oil 432,432 1,431,245 Prepaid expenses and other 1,556,214 977,707 ----------- ----------- Total current assets 22,685,230 21,759,629 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 12,517,487 12,127,034 Gas plants, property and equipment 4,584,015 3,932,621 Less: Accumulated depreciation (3,641,734) (2,555,378) ----------- ----------- 13,459,768 13,504,277 Construction in progress 950,020 523,427 ----------- ----------- Total property, plant and equipment 14,409,788 14,027,704 ----------- ----------- Prepaid expenses and other 25,206 399,146 ----------- ----------- TOTAL ASSETS $37,120,224 $36,186,479 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES 1992 1991 ----------- ----------- Accounts payable - affiliates $ 9,319,171 $ 9,180,281 Accounts payable 429,096 487,414 Current portion of long-term debt 2,767,496 4,450,000 Accrued liabilities 1,201,860 875,788 Accrued turnaround costs 2,604,232 --- Income taxes payable - affiliate 1,122,000 1,191,500 ----------- ----------- Total current liabilities 17,443,855 16,184,983 ----------- ----------- NON-CURRENT LIABILITIES Long-term debt, excluding current portion --- 3,693,763 Accrued turnaround costs --- 1,418,741 Other 160,692 83,260 ----------- ----------- Total non-current liabilities 160,692 5,195,764 ----------- ----------- Deferred income taxes 238,000 238,000 Commitments and contingencies (Note 9) SHAREHOLDER'S EQUITY Common stock, .01 par value: 1,000 voting shares authorized, issued and outstanding 10 10 Contributed capital 3,200,090 3,200,090 Retained earnings 16,077,577 11,367,632 ----------- ----------- Total shareholder's equity 19,277,677 14,567,732 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $37,120,224 $36,186,479 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. BLOOMFIELD REFINING COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
1992 1991 ------------ ------------ Operating revenues $143,974,427 $134,027,081 Operating expenses 124,573,250 124,190,901 ------------ ------------ Gross margin 19,401,177 9,836,180 General and administrative expenses 8,542,979 6,386,537 ------------ ------------ Operating income 10,858,198 3,449,643 ------------ ------------ OTHER INCOME (EXPENSE) Gain on sale of gas plant assets (Note 1) 1,495,553 --- Interest income 272,471 120,508 Interest expense (753,046) (415,401) Other 89,671 89,632 ------------ ------------ 1,104,649 (205,261) ------------ ------------ Income before income taxes 11,962,847 3,244,382 INCOME TAX EXPENSE (NOTE 4) Current (4,993,000) (1,094,000) Deferred --- --- ------------ ------------ (4,993,000) (1,094,000) ------------ ------------ NET INCOME $ 6,969,847 $ 2,150,382 ============ ============ STATEMENTS OF RETAINED EARNINGS Balance at January 1 $ 11,367,632 $ 18,217,250 Net income 6,969,847 2,150,382 Dividends (2,230,572) (9,000,000) Excess of additional pension liability over unrecognized prior service cost (29,330) --- ------------ ------------ BALANCE AT DECEMBER 31 $ 16,077,577 $ 11,367,632 ============ ============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
1992 1991 ------------- ------------- Cash flows from operating activities: Cash received from customers $ 143,704,941 $ 139,358,483 Cash paid to suppliers and employees (130,035,607) (132,338,157) Cash outlay for turnaround (3,522) (844,354) Interest received 264,519 113,933 Interest paid (806,318) (363,237) Income taxes (5,062,500) 81,163 Deposits --- 5,689 Other 135,602 (34,370) ------------- ------------- Net cash provided by operating activities 8,197,115 5,979,150 ------------- ------------- Cash flows from investing activities: Capital expenditures - refinery (743,730) (1,386,071) Acquisition of gas plant interests (Note 1) (2,544,653) (3,792,060) Capital expenditures - gas plants (88,426) (156,055) Proceeds from sale of gas plant assets 3,308,618 --- ------------- ------------- Net cash used in investing activities (68,191) (5,334,186) ------------- ------------- Cash flows from financing activities: Borrowings under term loan agreement --- 8,500,000 Proceeds received from acquisition of gas plant note --- 775,218 Principal payments on debt (5,376,267) (1,131,455) Dividends distributed (2,230,572) (9,000,000) ------------- ------------- Net cash used in financing activities (7,606,839) (856,237) ------------- ------------- Net increase (decrease) in cash and temporary investments 522,085 (211,273) Cash and temporary investments at beginning of year 6,769,190 6,980,463 ------------- ------------- Cash and temporary investments at end of year $ 7,291,275 $ 6,769,190 ============= =============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
1992 1991 ----------- ----------- Reconciliation of net income to net cash provided by operating activities: Net income $ 6,969,847 $ 2,150,382 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of assets (1,495,553) --- Depreciation 1,288,601 932,502 Accrued turnaround costs 883,716 800,999 Changes in assets and liabilities: (Increase) decrease in accounts receivable (873,550) 5,309,176 Decrease in inventories 37,323 1,710,437 Decrease (increase) in prepaid expenses and other 461,337 (2,222,538) Decrease in other assets 387,561 --- Decrease in accounts payable (13,964) (3,146,179) (Decrease) increase in income taxes payable - affiliate (69,500) 1,036,260 Increase in accrued liabilities 242,090 185,507 Increase (decrease) in accrued turnaround costs 301,775 (844,354) Increase in other liabilities 77,432 66,958 ----------- ----------- Net cash provided by operating activities $ 8,197,115 $ 5,979,150 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY NOTES TO FINANCIAL STATEMENTS (1) BACKGROUND AND ORGANIZATION --------------------------- Organization - ------------ On August 31, 1984, Bloomfield Refining Company, a Delaware corporation (the Company), was incorporated. The Company's primary activities are the refining of petroleum products and gas plant operations. The Company is a wholly-owned subsidiary of Gary-Williams Energy Corporation (GWEC) and operates a refinery in Bloomfield, New Mexico with a throughput capacity of 17,000 barrels per day. Effective July 1, 1991, the Company purchased certain ownership interests in two gas plants located in Utah and the net assets of a gas plant located in Colorado from GWEC. Gas Plants - ---------- On August 7, 1992, the Company purchased an additional twenty-six percent (26%) undivided interest in a gas plant GWEC operates in Uintah and Duchesne Counties, Utah for cash and a promissory note, paid in full in September, 1992. Net ownership income of $455,750, including interest expense, from the effective date of the purchase, March 1, 1992, through July 31, 1992 relating to the increased ownership interest was offset against the gross purchase price of $2,550,000. On December 8, 1992, the Company increased its ownership interest in the same gas plant GWEC operates in Uintah and Duchesne Counties, Utah to forty-five percent (45%) by purchasing another ten percent (10%) undivided interest from a third party. Net ownership income of $134,508 from the effective date of the purchase, September 1, 1992, through November 30, 1992 relating to the increased ownership interest was offset against the gross purchase price of $612,168. During 1992, the Company sold all rights, title and interest in a gas plant gathering system, an extraction plant, and certain related equipment and appurtenances located in Colorado to third parties for $3,296,943, resulting in a gain on sale of gas plant assets of $1,495,553. (2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES -------------------------------------------- Cash and Temporary Investments - ------------------------------ For purposes of these statements, the Company considers investments purchased with an original maturity of three months or less to be cash or temporary investments. Inventories - ----------- Inventories are valued at the lower of first-in, first-out cost or market. Inventories at December 31, 1992 and December 31, 1991 are as follows:
December 31, December 31, 1992 1991 ----------- ----------- Refined, unrefined and intermediate products $5,361,150 $5,412,447 Crude oil 1,580,418 1,411,844 Materials and supplies 920,284 1,074,884 ---------- ---------- $7,861,852 $7,899,175 ========== ==========
Property, Plant and Equipment - ----------------------------- The initial purchase and additions to property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method based on estimated useful lives ranging from 2 to 35 years. Ownership interests in gas plants are recorded at cost and proportionately consolidated for financial statement purposes. Depreciation is provided using the straight-line method with estimated useful lives ranging from 5 to 10 years. General and Administrative Expenses - ----------------------------------- The Company reimburses GWEC and an affiliate for general and administrative services relating to the supply and marketing of raw materials and refined products and gas plant operations. Accrued Turnaround Costs - ------------------------ Major repair and maintenance expenses (turnaround costs) are accrued and charged to current operations in anticipation of the work to be performed in future periods to renew the related refinery assets. Accrued turnaround costs are classified as either current or non- current liabilities based upon the scheduling of major expenditures. Reclassifications - ----------------- Certain prior year amounts have been reclassified for consistency with the current year presentation. (3) LONG-TERM DEBT -------------- Long-term debt consists of the following:
Current Long-Term Total Portion Portion ---------- ---------- ---------- Note payable to a bank (a) $2,767,496 $2,767,496 $ --- ---------- ---------- ---------- December 31, 1992 $2,767,496 $2,767,496 $ --- ========== ========== ========== Note payable to a bank (a) $7,437,500 $4,250,000 $3,187,500 Note payable-affiliate (b) 706,263 200,000 506,263 ---------- ---------- ---------- December 31, 1991 $8,143,763 $4,450,000 $3,693,763 ========== ========== ==========
(a) The Company has a revolving credit facility with a bank under which it may borrow up to $5,000,000 in cash and/or issue letters of credit which in the aggregate cannot exceed the lesser of $35,000,000 or the borrowing base. The borrowing base, which consists principally of accounts receivable, inventory, and exchange balances was approximately $22,000,000 and $24,000,000 as of December 31, 1992 and 1991. The Company had no amounts outstanding under the revolving credit facility, however, letters of credit totalling approximately $18,000,000 and $21,000,000 had been issued as of December 31, 1992 and 1991. The revolving credit facility and term loan bear interest at a rate based on the bank's prime rate. Alternatively, interest rates can be fixed for 30, 60, or 90 day periods on portions of the term loan at a floating Eurocurrency rate. At December 31, 1992 and 1991, the weighted average rate being paid was approximately 6.50% and 7.50%, respectively. The term notes call for minimum monthly principal payments of $354,167 with the final payment due in August, 1993. These loans are secured by substantially all of the assets of the Company and, among other things, require maintenance of certain financial covenants and ratios. The revolving credit facility matures August 31, 1993; however, the credit agreement provides for extensions of the maturity date. On October 15, 1992, the credit agreement was amended to allow the Company to draw up to $7,000,000 by December 31, 1993, for capital projects (see Note 9) at the Bloomfield refinery at an interest rate of 2% over prime. This loan will be amortized monthly over two years beginning the earlier of January, 1994, or the month following completion of the projects at which time the interest rate is reduced to 1.50% over prime. No amounts had been drawn on this note as of December 31, 1992 and as of March 30, 1993, $1,700,000 has been drawn. (b) The note was a 9% interest bearing non-recourse note issued in connection with the acquisition of a partial ownership interest in a gas plant. The note was secured by the ownership interest and in June, 1992, the note was paid in full. (4) INCOME TAXES ------------ The Company and GWEC are members of a consolidated tax group which files a consolidated federal income tax return. On January 1, 1991, an agreement was entered into between the Company and GWEC whereby the Company determines, on a stand alone basis, the tax liability or benefit as if it were not a member of the tax group. The Company then reimburses or is reimbursed by GWEC for its income tax liability or benefit. Deferred income taxes are provided as a result of recording income and expenses, principally depreciation and turnaround expenses, in different periods for financial and tax accounting purposes. The Company has adopted the provisions of Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes" which was superseded in February 1992 by Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes" which provides for the recognition of deferred tax assets arising from existing potential future tax benefits. The Company is required to adopt SFAS 109 in calendar year 1993 and does not anticipate that such adoption will have a material impact on the Company's financial position. (5) OPERATING REVENUES AND EXPENSES BY SEGMENTS -------------------------------------------- The following segment information reflects operating revenues, operating expenses and gross margins for the years ended December 31, 1992 and 1991.
Refining Gas Plants Total ------------ ---------- ------------ December 31, 1992 ------------------------------------------ Operating Revenues $140,088,307 $3,886,120 $143,974,427 Operating Expenses 122,005,814 2,567,436 124,573,250 ------------ ---------- ------------ Gross Margin $ 18,082,493 $1,318,684 $ 19,401,177 ============ ========== ============ December 31, 1991 ------------------------------------------ Operating Revenues $131,917,131 $2,109,950 $134,027,081 Operating Expenses 122,808,599 1,382,302 124,190,901 ------------ ---------- ------------ Gross Margin $ 9,108,532 $ 727,648 $ 9,836,180 ============ ========== ============
(6) RELATED PARTY TRANSACTIONS -------------------------- Effective July 1, 1991, a supply and marketing service agreement was entered into between the Company and GWEC, whereas GWEC purchases crude oil and other raw materials for resale to the Company, at cost, for processing at the refinery. The intercompany purchase of raw materials include all amounts legally accrued and owing by GWEC to third parties, including prepayments and offsite inventory. Also, the Company sells refined petroleum products to GWEC, at market, for resale by GWEC. For the supply and marketing services provided by GWEC, the Company pays a management fee pursuant to the terms of a management agreement. Prior to July 1, 1991, GWEC sold crude oil and raw materials to the Company at cost plus $.01 per gallon and purchased refined products from the Company at market less $.01 per gallon. On December 1, 1992, the Company guaranteed the payment by GWEC of an aggregate maximum at any one time of $2,000,000 of present and/or future indebtedness owed to a third party crude supplier. (7) EMPLOYEE BENEFIT PLANS ---------------------- The Company has a profit sharing plan (defined contribution plan) covering certain non-union employees who meet eligibility requirements as to age and length of service. Contributions to the plan are determined annually by the Company. Contributions of $169,002 and $162,515 were accrued for the years ended December 31, 1992 and December 31, 1991, respectively. The Company has a defined benefit pension plan for union employees. The benefits are based on a percentage of the employee's final earnings, as defined, and years of credited service, up to a maximum of 30 years. The Company's funding policy is to contribute annually an amount to fund normal cost and amortize unfunded actuarial liabilities over 19 years. Plan assets at December 31, 1992 and 1991 consist primarily of private and public debt and equity investments. The following table sets forth the funded status and amounts recognized in the Company's statements of financial position and operations at December 31, 1992 and 1991:
1992 1991 --------- --------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $364,702 and $228,124 at December 31, 1992 and 1991, respectively $(377,359) $(248,606) ========= ========= Projected benefit obligation for service rendered to date (377,359) (248,606) Plan assets at fair value 216,667 165,346 --------- --------- Projected benefit obligation in excess of plan assets (160,692) (83,260) Unrecognized net obligation existing at January 1, 10,255 10,920 Prior service cost not yet recognized 14,951 15,811 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 176,517 78,558 Adjustment to recognize minimum liability (201,723) (105,289) --------- --------- Accrued pension liability included in other liabilities $(160,692) $ (83,260) ========= ========= Net pension cost includes the following components: Service cost $ 35,988 $ 26,500 Interest cost 18,060 14,302 Actual return on plan assets (18,597) (14,298) Net amortization and deferral of other components 6,712 4,823 --------- --------- Net periodic pension cost $ 42,163 $ 31,327 ========= =========
The discount rate used in determining the actuarial present value of the projected benefit obligation was 5.75% and 6.75% for 1992 and 1991, respectively. The average rate of increase in future compensation levels was 0% and the expected long-term rate of return on pension plan assets was 9.0% in both years. (8) MAJOR CUSTOMERS --------------- During the years ended December 31, 1992 and 1991, the Company sold 100% of the refined products to GWEC. Also, during that period, the Company purchased 100% of the crude oil and raw materials from GWEC. (9) COMMITMENTS AND CONTINGENCIES ----------------------------- The Company paid (received) a retainer fee to (from) a third party based on 5% of the net income (loss) before taxes. This fee is included in general and administrative expenses. Effective February 1, 1991, this agreement was terminated and new agreements were entered into between GWEC and affiliates of the third party providing for payment of consulting fees of $15,000 per calendar quarter from 1992 to 2001. In addition, a retainer fee of $1,000,000 was paid by GWEC and reimbursed by the Company for services to be provided in 1992 and 1993 and is being amortized on a straight-line basis. The Company is subject to various environmental and other regulations primarily administered by the United States Environmental Protection Agency, the New Mexico Health and Environmental Department and the New Mexico Environmental Improvement Division. Management of the Company believes it has complied with all aspects associated with these regulations. In December, 1992 the Company entered into an administrative order with the Environmental Protection Agency to perform certain environmental work. An environmental liability reserve in the amount of $362,000 was accrued in 1992 for work to be performed in 1993 to assess the nature of any environmental cleanup requirements at the refinery. A Company affiliate entered into a ten year lease agreement for office space in November 1989. The Company has guaranteed the performance of the affiliate's obligations. Terms of the lease provide for annual rentals of $396,000 in the second year and escalating to $796,000 in years six through ten. In addition to the rent, the Company has guaranteed the annual payment of $276,000 in occupancy costs with provisions for escalation based on actual expenses. The total estimated costs for rentals and operating expenses for 1993 amounts to $799,000. In December, 1992, the Company engaged a contractor to engineer, fabricate and install a diesel desulfurization unit to be operational at the refinery in 1993 for a total contract price of $3,646,391 exclusive of any applicable sales and/or use taxes and subject to adjustment for any changes in the work directive. ARTHUR ANDERSEN ARTHUR ANDERSEN & CO. SC BLOOMFIELD REFINING COMPANY FINANCIAL STATEMENTS TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS OF DECEMBER 31, 1993 AND 1992 ARTHUR ANDERSEN & CO. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholder of Bloomfield Refining Company: We have audited the accompanying balance sheets of Bloomfield Refining Company (a Delaware corporation), as of December 31, 1993 and 1992, and the related statements of operations, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial statements referred to above present fairly, in all material respects, the financial position of Bloomfield Refining Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN & CO. Denver, Colorado, March 25, 1994. BLOOMFIELD REFINING COMPANY BALANCE SHEETS DECEMBER 31, 1993 AND 1992
ASSETS CURRENT ASSETS 1993 1992 ----------- ----------- Cash and temporary investments $ 9,501,500 $ 7,291,275 Accounts receivable - affiliates 5,646,661 5,486,216 Accounts receivable 35,783 57,241 Inventories 6,046,026 7,861,852 Prepaid expenses - crude oil 819,868 432,432 Prepaid expenses and other 879,839 1,556,214 Deferred tax asset 291,500 --- ----------- ----------- Total current assets 23,221,177 22,685,230 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 22,177,094 12,517,487 Gas plants, property and equipment 4,652,324 4,584,015 Less: Accumulated depreciation (4,854,519) (3,641,734) ----------- ----------- 21,974,899 13,459,768 Construction in progress 409,970 950,020 ----------- ----------- Total property, plant and equipment 22,384,869 14,409,788 ----------- ----------- Other 240,720 25,206 ----------- ----------- TOTAL ASSETS $45,846,766 $37,120,224 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES 1993 1992 ----------- ----------- Accounts payable - affiliates $ 8,513,020 $ 9,319,171 Accounts payable 935,698 429,096 Current portion of long-term debt 2,875,000 2,767,496 Accrued liabilities 1,260,047 1,201,860 Accrued turnaround costs --- 2,604,232 Income taxes payable - affiliate 2,496,600 1,122,000 ----------- ----------- Total current liabilities 16,080,365 17,443,855 ----------- ----------- NON-CURRENT LIABILITIES Deferred income taxes 1,750,300 238,000 Accrued turnaround costs 810,119 --- Other 151,359 160,692 ----------- ----------- Total non-current liabilities 2,711,778 398,692 ----------- ----------- Commitments and contingencies (Note 9) SHAREHOLDER'S EQUITY Common stock, .01 par value: 1,000 voting shares authorized, issued and outstanding 10 10 Contributed capital 3,200,090 3,200,090 Retained earnings 23,854,523 16,077,577 ----------- ----------- Total shareholder's equity 27,054,623 19,277,677 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $45,846,766 $37,120,224 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. BLOOMFIELD REFINING COMPANY STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992 ------------ ------------ Operating revenues $148,822,139 $143,974,427 Operating expenses 118,026,762 124,573,250 ------------ ------------ Gross margin 30,795,377 19,401,177 General and administrative expenses 8,470,542 8,542,979 ------------ ------------ Operating income 22,324,835 10,858,198 ------------ ------------ OTHER INCOME (EXPENSE) (Loss) gain on sale of assets (Note 1) (8,503) 1,495,553 Interest income 259,062 272,471 Interest expense (357,446) (753,046) Other 15,839 89,671 ------------ ------------ (91,048) 1,104,649 ------------ ------------ Income before income taxes 22,233,787 11,962,847 INCOME TAX EXPENSE (NOTE 4) Current (7,635,100) (4,993,000) Deferred (1,220,800) --- ------------ ------------ (8,855,900) (4,993,000) ------------ ------------ NET INCOME $ 13,377,887 $ 6,969,847 ============ ============ STATEMENTS OF RETAINED EARNINGS Balance at January 1 $ 16,077,577 $ 11,367,632 Net income 13,377,887 6,969,847 Dividends (5,600,941) (2,230,572) Excess of additional pension liability over unrecognized prior service cost --- (29,330) ------------ ------------ BALANCE AT DECEMBER 31 $ 23,854,523 $ 16,077,577 ============ ============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992 ------------- ------------- Cash flows from operating activities: Cash received from customers $ 148,745,079 $ 143,704,941 Cash paid to suppliers and employees (122,246,277) (130,035,607) Cash outlay for turnaround (3,202,273) (3,522) Interest received 263,429 264,519 Interest paid (359,739) (806,318) Income taxes paid (6,260,500) (5,062,500) Other 7,703 135,602 ------------- ------------- Net cash provided by operating activities 16,947,422 8,197,115 ------------- ------------- Cash flows from investing activities: Capital expenditures - refinery (8,744,591) (743,730) Capital expenditures - gas plants (528,826) (2,633,079) Proceeds from sale of assets 29,657 3,308,618 ------------- ------------- Net cash used in investing activities (9,243,760) (68,191) ------------- ------------- Cash flows from financing activities: Borrowings under term loan agreement 3,000,000 --- Principal payments on debt (2,892,496) (5,376,267) Dividends distributed (5,600,941) (2,230,572) ------------- ------------- Net cash used in financing activities (5,493,437) (7,606,839) ------------- ------------- Net increase in cash and temporary investments 2,210,225 522,085 Cash and temporary investments at beginning of year 7,291,275 6,769,190 ------------- ------------- Cash and temporary investments at end of year $ 9,501,500 $ 7,291,275 ============= =============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
1993 1992 ----------- ----------- Reconciliation of net income to net cash provided by operating activities: Net income $13,377,887 $ 6,969,847 Adjustments to reconcile net income to net cash provided by operating activities: Loss (gain) on sale of assets 8,503 (1,495,553) Depreciation 1,370,415 1,288,601 Accrued turnaround costs 1,014,887 883,716 Changes in assets and liabilities: Increase in accounts receivable (150,662) (873,550) Decrease in inventories 1,815,826 37,323 Decrease in prepaid expenses and other 462,695 461,337 Increase in deferred tax asset (291,500) --- Decrease in other assets --- 387,561 Decrease in accounts payable (787,383) (13,964) Increase (decrease) in income taxes payable - affiliate 1,374,600 (69,500) Increase in accrued liabilities 58,187 242,090 (Decrease) increase in accrued turnaround costs (2,809,000) 301,775 (Decrease) increase in other liabilities (9,333) 77,432 Increase in deferred income taxes 1,512,300 --- ----------- ----------- Net cash provided by operating activities $16,947,422 $ 8,197,115 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY NOTES TO FINANCIAL STATEMENTS (1) BACKGROUND AND ORGANIZATION --------------------------- Organization - ------------ On August 31, 1984, Bloomfield Refining Company, a Delaware corporation (the Company), was incorporated. The Company's primary activities are the refining of petroleum products and gas plant operations. The Company is a wholly-owned subsidiary of Gary-Williams Energy Corporation (GWEC). The Company operates a refinery in Bloomfield, New Mexico with a throughput capacity of 17,000 barrels per day and has ownership interests in two gas plants located in Utah. Gas Plants - ---------- On August 7, 1992, the Company purchased an additional twenty-six percent (26%) undivided interest in a gas plant GWEC operates in Uintah and Duchesne Counties, Utah for cash and a promissory note, paid in full in September, 1992. Net ownership income of $455,750, including interest expense, from the effective date of the purchase, March 1, 1992, through July 31, 1992 relating to the increased ownership interest was offset against the gross purchase price of $2,550,000. On December 8, 1992, the Company increased its ownership interest in the same gas plant GWEC operates in Uintah and Duchesne Counties, Utah to approximately forty-eight percent (48%) by purchasing another ten percent (10%) undivided interest from a third party. Net ownership income of $134,508 from the effective date of the purchase, September 1, 1992, through November 30, 1992, relating to the increased ownership interest was offset against the gross purchase price of $612,168. During 1992, the Company sold all rights, title and interest in a gas plant gathering system, an extraction plant, and certain related equipment and appurtenances located in Colorado to third parties, resulting in a gain on sale of gas plant assets of $1,495,553. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Cash and Temporary Investments - ------------------------------ For purposes of these statements, the Company considers investments purchased with an original maturity of three months or less to be cash or temporary investments. Inventories - ----------- Inventories are valued at the lower of first-in, first-out cost or market. Inventories at December 31, 1993 and 1992, are as follows:
December 31, December 31, 1993 1992 ----------- ----------- Refined, unrefined and intermediate products $3,692,757 $5,361,150 Crude oil 1,432,350 1,580,418 Materials and supplies 920,919 920,284 ---------- ---------- $6,046,026 $7,861,852 ========== ==========
Property, Plant and Equipment - ----------------------------- The initial purchase and additions to property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method based on estimated useful lives ranging from 2 to 35 years, with an average life of approximately 19 years. Ownership interests in gas plants are recorded at cost and proportionately consolidated for financial statement purposes. Depreciation is provided using the straight-line method with estimated useful lives ranging from 5 to 10 years, with an average life of approximately 7 years. General and Administrative Expenses - ----------------------------------- The Company reimburses GWEC for general and administrative services relating to the supply and marketing of raw materials and refined products and gas plant operations. Accrued Turnaround Costs - ------------------------ Major repair and maintenance expenses (turnaround costs) are accrued and charged to current operations in anticipation of the work to be performed in future periods to renew the related refinery assets. Accrued turnaround costs are classified as either current or non-current liabilities based upon the scheduling of major expenditures. Capitalized Interest - -------------------- The Company capitalizes interest on debt associated with the financing of capital construction projects. During 1993, interest of $109,480 was capitalized to property, plant and equipment. Reclassifications - ----------------- Certain prior year amounts have been reclassified to conform with the current year presentation. (3) LONG-TERM DEBT -------------- The Company has a revolving credit facility with a bank under which it may borrow up to $5,000,000 in cash and/or issue letters of credit which in the aggregate cannot exceed the lesser of $35,000,000 or the borrowing base. The borrowing base, which consists principally of accounts receivable, inventory, and exchange balances was approximately $18,000,000 and $22,000,000 as of December 31, 1993 and 1992. The Company had no amounts outstanding under the revolving credit facility, however, letters of credit totalling approximately $14,000,000 and $18,000,000 had been issued as of December 31, 1993 and 1992. The revolving credit facility and a related term loan facility bear interest at a rate based on the bank's prime rate. Alternatively, interest rates can be fixed for 30, 60, or 90 day periods on portions of the term loan at a floating Eurocurrency rate. The term notes called for minimum monthly principal payments of $354,167 with the final payment due in August, 1993; however, the Company prepaid the loan in June, 1993. At December 31, 1992, the weighted average interest rate being paid was approximately 6.5%. The credit facility and related term loan are secured by substantially all of the assets of the Company and, among other things, requires the maintenance of certain financial covenants and ratios. The revolving credit facility matures November 15, 1994; however, the credit agreement provides for extensions of the maturity date. The Company borrowed $3,000,000 for capital projects at the Bloomfield refinery pursuant to an October 15, 1992 amendment to the credit agreement. Interest is based on the bank's prime rate or alternatively, interest rates can be fixed for 30, 60 or 90 day periods on portions of the term loan at a floating Eurocurrency rate. At December 31, 1993, the weighted average interest rate being paid was approximately 6.2%. This loan is being amortized monthly over two years commencing December, 1993. Additional loan payments are required when operating cash flows exceed levels as defined in the credit agreement. However, the entire balance has been classified as current in the accompanying financial statements as management expectS to pay the entire balance before December 31, 1994. (4) INCOME TAXES ------------ The Company and GWEC are members of a consolidated tax group which files a consolidated federal income tax return. An agreement was entered into between the Company and GWEC whereby the Company determines, on a stand alone basis, the tax liability or benefit as if it were not a member of the tax group. The Company then reimburses GWEC for its income tax liability. The Company is entitled to be reimbursed by GWEC for its income tax benefit when the Company could otherwise have utilized such benefit on a stand alone basis. Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", (SFAS 109). SFAS 109 requires that deferred income taxes be recognized for the differences between the tax and financial reporting bases of assets and liabilities at each year- end based on enacted tax laws and statutory tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The adoption of SFAS 109 had no material impact on the Company's financial position or results of operations for the year ended December 31, 1993. The net deferred tax liability as of December 31, 1993 consists of the following:
Gross deferred tax assets $ (606,640) Gross deferred tax liabilities 2,065,440 ---------- 1,458,800 Valuation allowance --- ---------- Net deferred tax liability $1,458,800 ==========
Deferred tax assets and liabilities result primarily from inventory costs capitalized for tax, accounting reserves and from recording depreciation and turnaround expenses in different periods for financial and tax accounting purposes. In management's opinion, it is more likely than not that the gross deferred tax assets will be realized based on past earnings history. The difference between the Company's tax provision at the federal statutory rate and the effective rate for the years ended December 31, 1993 and 1992 is due primarily to state income taxes. (5) OPERATING REVENUES AND EXPENSES BY SEGMENTS -------------------------------------------- The following segment information reflects operating revenues, operating expenses and gross margins for the years ended December 31, 1993 and 1992.
Refining Gas Plants Total ------------ ---------- ------------ December 31, 1993 ------------------------------------------ Operating Revenues $145,878,017 $2,944,122 $148,822,139 Operating Expenses 115,829,494 2,197,268 118,026,762 ------------ ---------- ------------ Gross Margin $ 30,048,523 $ 746,854 $ 30,795,377 ============ ========== ============ December 31, 1992 ------------------------------------------ Operating Revenues $140,088,307 $3,886,120 $143,974,427 Operating Expenses 122,005,814 2,567,436 124,573,250 ------------ ---------- ------------ Gross Margin $ 18,082,493 $1,318,684 $ 19,401,177 ============ ========== ============
(6) RELATED PARTY TRANSACTIONS -------------------------- A supply and marketing service agreement was entered into between the Company and GWEC, whereas GWEC purchases crude oil and other raw materials for resale to the Company, at cost, for processing at the refinery. The intercompany purchase of raw materials includes all amounts accrued and owing by GWEC to third parties, including prepayments and offsite inventory. Also, the Company sells refined petroleum products to GWEC, at market, for resale by GWEC. On December 1, 1993 and 1992, the Company guaranteed the payment of GWEC of an aggregate maximum at any one time of $2,000,000 of present and/or future indebtedness owed to a third party crude supplier. (7) EMPLOYEE BENEFIT PLANS ---------------------- The Company has a profit sharing plan (defined contribution plan) covering certain non-union employees who meet eligibility requirements as to age and length of service. Contributions to the plan are determined annually by the Company. Contributions of $173,139 and $169,002 were accrued for the years ended December 31, 1993 and December 31, 1992, respectively. The Company also has a defined benefit pension plan for union employees. The benefits are based on a percentage of the employee's final earnings, as defined, and years of credited service, up to a maximum of 30 years. The Company's funding policy is to contribute annually an amount to fund normal cost and amortize unfunded actuarial liabilities over 19 years. Plan assets at December 31, 1993 and 1992 consist primarily of private and public debt and equity investments. The following table sets forth the funded status and amounts recognized in the Company's statements of financial position and operations at December 31, 1993 and 1992:
1993 1992 --------- --------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $406,405 and $364,702 at December 31, 1993 and 1992, respectively $(424,162) $(377,359) ========= ========= Projected benefit obligation for service rendered to date $(424,162) $(377,359) Plan assets at fair value 272,803 216,667 --------- --------- Projected benefit obligation in excess of plan assets (151,359) (160,692) Unrecognized net obligation existing at January 1 9,590 10,255 Prior service cost not yet recognized 14,091 14,951 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 160,797 176,517 Adjustment to recognize minimum liability (184,478) (201,723) --------- --------- Accrued pension liability included in other liabilities $(151,359) $(160,692) ========= ========= Net pension cost includes the following components: Service cost $ 49,580 $ 35,988 Interest cost 23,202 18,060 Actual return on plan assets (31,641) (18,597) Net amortization and deferral of other components 20,237 6,712 --------- --------- Net periodic pension cost $ 61,378 $ 42,163 ========= =========
The discount rate used in determining the actuarial present value of the projected benefit obligation was 6.00% and 5.75% for 1993 and 1992, respectively. The average rate of increase in future compensation levels was 0% and the expected long-term rate of return on pension plan assets was 8.0% and 9.0% in 1993 and 1992, respectively. (8) MAJOR CUSTOMERS AND SUPPLIERS ----------------------------- During the years ended December 31, 1993 and 1992, the Company sold 100% of the refined products to GWEC. Also, during that period, the Company purchased 100% of the crude oil and raw materials from GWEC. (9) COMMITMENTS AND CONTINGENCIES ----------------------------- The Company is subject to certain environmental and other regulations primarily administered by the United States Environmental Protection Agency and various state agencies. Management of the Company believes it has complied with all material aspects associated with these regulations. In December, 1992, the Company entered into an administrative order with the Environmental Protection Agency to perform certain environmental work. An environmental liability reserve in the amount of $362,000 was accrued in 1992 for work to be performed in 1993 and 1994 to assess the nature of any environmental cleanup requirements at the refinery. As of December 31, 1993, the cash outlay recorded against the reserve was $87,759. The Company is subject to various claims and business disputes in the ordinary course of business. Management does not anticipate that the ultimate outcome of these issues will have a material impact on the Company's financial position or results of operations. An affiliate of the Company entered into a ten year lease agreement for office space in November 1989. The Company has guaranteed the performance of the affiliate's obligations. Terms of the lease provide for annual rentals of $490,000 in the fourth year (1993) and escalating to $796,000 in years six through ten. In addition to the rent, the Company has guaranteed the annual payment of $276,000 in occupancy costs with provisions for escalation based on actual expenses. The total estimated costs for rentals and operating expenses for 1994 amounts to $871,000. Currently, the affiliate of the Company is subleasing certain office space to a third party and a related party. ARTHUR ANDERSEN LLP BLOOMFIELD REFINING COMPANY FINANCIAL STATEMENTS TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS OF DECEMBER 31, 1994 AND 1993 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholder of Bloomfield Refining Company: We have audited the accompanying balance sheets of Bloomfield Refining Company (a Delaware corporation) as of December 31, 1994 and 1993, and the related statements of operations, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial statements referred to above present fairly, in all material respects, the financial position of Bloomfield Refining Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Denver, Colorado, March 30, 1995. BLOOMFIELD REFINING COMPANY BALANCE SHEETS DECEMBER 31, 1994 AND 1993
ASSETS CURRENT ASSETS 1994 1993 ----------- ----------- Cash and temporary investments $ 8,379,601 $10,800,111 Accounts receivable - affiliates 6,008,872 5,646,661 Accounts receivable 257,820 35,783 Inventories 7,887,826 6,046,026 Prepaid crude oil - affiliate 2,312,338 819,868 Prepaid expenses and other 584,495 879,839 Deferred tax asset --- 291,500 ----------- ----------- Total current assets 25,430,952 24,519,788 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 23,165,353 22,177,094 Gas plants, property and equipment 4,855,654 4,652,324 Less: Accumulated depreciation (6,550,919) (4,854,519) ----------- ----------- 21,470,088 21,974,899 Construction in progress 147,712 409,970 ----------- ----------- Total property, plant and equipment 21,617,800 22,384,869 ----------- ----------- Other 289,005 240,720 ----------- ----------- TOTAL ASSETS $47,337,757 $47,145,377 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES 1994 1993 ----------- ----------- Accounts payable - affiliates $10,853,802 $ 8,513,020 Accounts payable 649,983 935,698 Current portion of long-term debt --- 2,875,000 Accrued liabilities 2,227,067 2,558,658 Income taxes payable - affiliate --- 2,496,600 ----------- ----------- Total current liabilities 13,730,852 17,378,976 ----------- ----------- NON-CURRENT LIABILITIES Deferred income taxes, net 1,184,500 1,750,300 Accrued turnaround costs 1,953,671 810,119 Other 130,312 151,359 ----------- ----------- Total non-current liabilities 3,268,483 2,711,778 ----------- ----------- Commitments and contingencies (Note 9) SHAREHOLDER'S EQUITY Common stock, .01 par value: 1,000 voting shares authorized, issued and outstanding 10 10 Contributed capital 3,200,090 3,200,090 Retained earnings 27,138,322 23,854,523 ----------- ----------- Total shareholder's equity 30,338,422 27,054,623 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $47,337,757 $47,145,377 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. BLOOMFIELD REFINING COMPANY STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993 ------------ ------------ Operating revenues $141,701,590 $148,822,139 Operating expenses 114,999,480 118,026,762 ------------ ------------ Gross margin 26,702,110 30,795,377 General and administrative expenses 7,529,972 8,470,542 ------------ ------------ Operating income 19,172,138 22,324,835 ------------ ------------ OTHER INCOME (EXPENSE) Gain (loss) on sale of assets 8,568 (8,503) Interest income 375,022 259,062 Interest expense (265,862) (357,446) Other 268,858 15,839 ------------ ------------ 386,586 (91,048) ------------ ------------ Income before income taxes 19,558,724 22,233,787 INCOME TAX EXPENSE (NOTE 4) Current (7,396,500) (7,635,100) Deferred (248,800) (1,220,800) ------------ ------------ (7,645,300) (8,855,900) ------------ ------------ Net Income $ 11,913,424 $ 13,377,887 ============ ============ STATEMENTS OF RETAINED EARNINGS Balance at January 1 $ 23,854,523 $ 16,077,577 Net income 11,913,424 13,377,887 Dividends (8,629,625) (5,600,941) ------------ ------------ BALANCE AT DECEMBER 31 $ 27,138,322 $ 23,854,523 ============ ============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993 ------------- ------------- Cash flows from operating activities: Cash received from customers $ 141,129,762 $ 148,745,079 Cash paid to suppliers and employees (120,708,328) (120,947,666) Cash outlay for turnaround --- (3,202,273) Interest received 382,751 263,429 Interest paid (266,117) (359,739) Income taxes (10,416,200) (6,260,500) Other 266,933 7,703 ------------- ------------- Net cash provided by operating activities 10,388,801 18,246,033 ------------- ------------- Cash flows from investing activities: Capital expenditures - refinery (1,276,862) (8,744,591) Capital expenditures - gas plants (29,574) (528,826) Proceeds from sale of assets 1,750 29,657 ------------- ------------- Net cash used in investing activities (1,304,686) (9,243,760) ------------- ------------- Cash flows from financing activities: Borrowings under revolving credit agreement --- 3,000,000 Principal payments on debt (2,875,000) (2,892,496) Dividends distributed (8,629,625) (5,600,941) ------------- ------------- Net cash used in financing activities (11,504,625) (5,493,437) ------------- ------------- Net (decrease) increase in cash and temporary investments (2,420,510) 3,508,836 Cash and temporary investments at beginning of year 10,800,111 7,291,275 ------------- ------------- Cash and temporary investments at end of year $ 8,379,601 $ 10,800,111 ============= =============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993 ----------- ----------- Reconciliation of net income to net cash provided by operating activities: Net income $11,913,424 $13,377,887 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,739,979 1,370,415 Accrued turnaround costs 1,143,552 1,014,887 (Gain) loss on sale of assets (8,568) 8,503 Changes in assets and liabilities: Increase in accounts receivable (584,248) (150,662) (Increase) decrease in inventories (1,841,800) 1,815,826 (Increase) decrease in prepaid expenses and other (1,370,882) 462,695 Decrease (increase) in deferred tax asset 291,500 (291,500) Increase in other assets (48,285) --- Increase (decrease) in accounts payable 2,569,167 (787,383) (Decrease) increase in accrued liabilities (331,591) 1,356,798 (Decrease) increase in income taxes payable - affiliate (2,496,600) 1,374,600 Decrease in accrued turnaround costs --- (2,809,000) Decrease in other liabilities (21,047) (9,333) (Decrease) increase in deferred income taxes (565,800) 1,512,300 ----------- ----------- Net cash provided by operating activities $10,388,801 $18,246,033 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY NOTES TO FINANCIAL STATEMENTS (1) BACKGROUND AND ORGANIZATION --------------------------- Organization - ------------ On August 31, 1984, Bloomfield Refining Company, a Delaware corporation (the Company), was incorporated. The Company's primary activities are the refining of petroleum products and gas plant operations. The Company is a wholly-owned subsidiary of Gary-Williams Energy Corporation (GWEC). The Company operates a refinery in Bloomfield, New Mexico with a throughput capacity of 17,000 barrels per day and has ownership interests in two gas plants located in Utah. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Cash and Temporary Investments - ------------------------------ For purposes of these statements, the Company considers investments purchased with an original maturity of three months or less to be cash or temporary investments. Temporary investments consist primarily of certificates of deposit and commercial paper. These securities are classified as held to maturity investments as defined by Statement of Financial Accounting Standards No. 115. At December 31, 1994 and 1993, these securities are recorded at a market value of $7,663,000 and $8,520,000, respectively. Realized gains and losses from sales of these securities are included in interest income in the accompanying statements of operations. The net unrealized gain or loss on these securities was not material as of December 31, 1994 and 1993. Inventories - ----------- Inventories are valued at the lower of first-in, first-out cost or market. Inventories at December 31, 1994 and 1993 are as follows:
December 31, December 31, 1994 1993 ----------- ----------- Refined, unrefined and intermediate products $4,181,728 $3,692,757 Crude oil 2,811,004 1,432,350 Materials and supplies 895,094 920,919 ---------- ---------- $7,887,826 $6,046,026 ========== ==========
Property, Plant and Equipment - ----------------------------- The initial purchase and additions to property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method based on estimated useful lives ranging from 2 to 35 years, with an average initial life of approximately 19 years. Ownership interests in gas plants are recorded at cost and proportionately consolidated for financial statement purposes. Depreciation is provided using the straight-line method with estimated useful lives ranging from 5 to 10 years, with an average initial life of approximately 7 years. General and Administrative Expenses - ----------------------------------- The Company reimburses GWEC for general and administrative services relating to the supply and marketing of raw materials and refined products and gas plant operations. Accrued Turnaround Costs - ------------------------ Major repair and maintenance expenses (turnaround costs) are accrued and charged to current operations in anticipation of the work to be performed in future periods to renew the related refinery assets. Accrued turnaround costs are classified as either current or non-current liabilities based upon the scheduling of major expenditures. Capitalized Interest - -------------------- The Company capitalizes interest on debt associated with the financing of capital construction projects. During 1993 interest of $109,480 was capitalized to property, plant and equipment. No such interest was capitalized during 1994. Reclassifications - ----------------- Certain prior year amounts have been reclassified for consistency with the current year presentation. (3) LONG-TERM DEBT -------------- The Company has a revolving credit facility, as amended, with a group of banks under which it may borrow up to $8,000,000 in cash and/or issue letters of credit which in the aggregate cannot exceed the lesser of $35,000,000 or the borrowing base. The borrowing base, which consists principally of accounts receivable, inventory, exchange balances and unused outstanding letters of credit was approximately $21,000,000 and $18,000,000 as of December 31, 1994 and 1993. The Company had no amounts outstanding under the revolving credit facility, however, letters of credit totaling approximately $20,000,000 and $14,000,000 had been issued as of December 31, 1994 and 1993. Borrowings under the revolving credit facility bear interest at a rate based on the bank's prime rate. The credit facility is secured by substantially all of the assets of the Company and, among other things, requires the maintenance of certain financial covenants and ratios. The revolving credit facility matures June 1, 1996; however, the credit agreement provides for extensions of the maturity date. The Company borrowed $3,000,000 in 1993 for capital projects at the Bloomfield refinery pursuant to an amendment to the credit agreement. Interest was based on the bank's prime rate or alternatively, interest rates could be fixed for 30, 60 or 90 day periods on portions of the term loan at a floating Eurocurrency rate. At December 31, 1993, the weighted average interest rate being paid was approximately 6.2%. The entire balance was paid during 1994. (4) INCOME TAXES ------------ The Company and GWEC are members of a consolidated tax group which files a consolidated federal income tax return. An agreement was entered into between the Company and GWEC whereby the Company determines, on a stand alone basis, the tax liability or benefit as if it were not a member of the tax group. The Company then reimburses GWEC for its current income tax liability on a quarterly basis. Deferred income taxes are paid to GWEC periodically. The Company is entitled to be reimbursed by GWEC for its income tax benefit when the Company could otherwise have utilized such benefit on a stand alone basis. Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", (SFAS 109). SFAS 109 requires that deferred income taxes be recognized for the differences between the tax and financial reporting bases of assets and liabilities at each year- end based on enacted tax laws and statutory tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The adoption of SFAS 109 had no material impact on the Company's financial position or results of operations for the year ended December 31, 1993. The net deferred tax liability consists of the following:
December 31, December 31, 1994 1993 ------------ ------------ Gross deferred tax assets $(1,090,700) $ (606,640) Gross deferred tax liabilities 2,798,300 2,065,440 ----------- ----------- 1,707,600 1,458,800 Payments to affiliate (523,100) --- Valuation allowance --- --- ----------- ----------- Net deferred tax liability $ 1,184,500 $ 1,458,800 =========== ===========
Deferred tax assets and liabilities result primarily from inventory costs capitalized for tax, accounting reserves and from recording depreciation and turnaround expenses in different periods for financial and tax accounting purposes. In management's opinion, it is more likely than not that the gross deferred tax assets will be realized based on past earnings history. The difference between the Company's tax provision at the federal statutory rate and the effective rate for the years ended December 31, 1994 and 1993 is due primarily to state income taxes. Tax Deficiency - -------------- The Internal Revenue Service concluded a field audit of the consolidated tax group's income tax return for the fiscal year 1990 resulting in a "Notice of Deficiency" for that fiscal year. Proposed adjustments to income and tax credits resulted in a proposed tax deficiency of approximately $4,800,000 plus penalties. The Company filed a petition with the United States Tax Court contesting the notice and believes that it has meritorious legal defenses to the proposed tax deficiency, but the ultimate outcome of the Tax Court case is uncertain. (5) OPERATING REVENUES AND EXPENSES BY SEGMENTS -------------------------------------------- The following segment information reflects operating revenues, operating expenses and gross margins for the years ended December 31, 1994 and 1993.
Refining Gas Plants Total ------------ ---------- ------------ December 31, 1994 ------------------------------------------ Operating Revenues $139,073,511 $2,628,079 $141,701,590 Operating Expenses 112,824,818 2,174,662 114,999,480 ------------ ---------- ------------ Gross Margin $ 26,248,693 $ 453,417 $ 26,702,110 ============ ========== ============ December 31, 1993 ------------------------------------------ Operating Revenues $145,878,017 $2,944,122 $148,822,139 Operating Expenses 115,829,494 2,197,268 118,026,762 ------------ ---------- ------------ Gross Margin $ 30,048,523 $ 746,854 $ 30,795,377 ============ ========== ============
(6) RELATED PARTY TRANSACTIONS -------------------------- A supply and marketing service agreement was entered into between the Company and GWEC, whereby GWEC purchases crude oil and other raw materials for resale to the Company, at cost, for processing at the refinery. The intercompany purchase of raw materials include all amounts accrued and owing by GWEC to third parties, including prepayments and offsite inventory. Also, the Company sells refined petroleum products to GWEC, at market, for resale by GWEC. The Company has guaranteed the payment by GWEC of an aggregate maximum at any one time of $2,000,000 of present and/or future indebtedness owed to a third party crude oil supplier. (7) EMPLOYEE BENEFIT PLANS ---------------------- The Company has a profit sharing plan (defined contribution plan) covering certain non-union employees who meet eligibility requirements as to age and length of service. Contributions to the plan are determined annually by the Company. Contributions of $187,357 and $173,139 were accrued for the years ended December 31, 1994 and 1993, respectively. The Company also has a defined benefit pension plan for union employees. The Company's funding policy is to contribute annually an amount to fund normal cost and amortize unfunded actuarial liabilities over 19 years. Plan assets at December 31, 1994 and 1993 consist primarily of private and public debt and equity investments. In prior years, benefits were based on a percentage of the employee's earnings, as defined, as of June 1, 1990, and years of credited service up to a maximum of 30 years. In 1994, the plan was amended to base benefits on a percentage of the employee's earnings as of June 1, 1993. The following table sets forth the funded status and amounts recognized in the Company's statements of financial position and operations at December 31, 1994 and 1993, for the defined benefit pension plan:
1994 1993 --------- --------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $417,559 and $406,405 at December 31, 1994 and 1993, respectively $(433,264) $(424,162) ========= ========= Projected benefit obligation for service rendered to date $(433,264) $(424,162) Plan assets at fair value 302,952 272,803 --------- --------- Projected benefit obligation in excess of plan assets (130,312) (151,359) Unrecognized net obligation existing at January 1, 1989 being recognized over 19 years 8,926 9,590 Prior service cost not yet recognized 77,483 14,091 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 70,391 160,797 Adjustment to recognize minimum liability (156,800) (184,478) --------- --------- Accrued pension liability included in other liabilities $(130,312) $(151,359) ========= ========= Net pension cost includes the following components: Service cost $ 55,079 $ 49,580 Interest cost 29,266 23,202 Actual return on plan assets 6,557 (31,641) Net amortization and deferral of other components (19,922) 20,237 --------- --------- Net periodic pension cost $ 70,980 $ 61,378 ========= =========
The discount rate used in determining the actuarial present value of the projected benefit obligation was 7.0% for 1994 and 6.0% for 1993. The expected long-term rate of return on pension plan assets was 8.0% in 1994 and 1993. (8) MAJOR CUSTOMERS --------------- During the years ended December 31, 1994 and 1993, the Company sold 100% of the refined products to GWEC. Also, during that period, the Company purchased 100% of the crude oil and raw materials from GWEC. (9) COMMITMENTS AND CONTINGENCIES ----------------------------- The Company is subject to certain environmental and other regulations primarily administered by the United States Environmental Protection Agency (E.P.A.) and various state agencies. Management of the Company believes it has complied with all material aspects associated with these regulations. The Company entered into an administrative order with the E.P.A. to perform a study to assess the nature of any environmental cleanup requirements at the refinery which was substantially completed in 1994. Management is currently evaluating the E.P.A.'s response and is uncertain as to what, if any, additional costs may be required. The Company is subject to various claims and business disputes in the ordinary course of business. Management does not anticipate that the ultimate outcome of these issues will have a material impact on the Company's financial position or results of operations. An affiliate of the Company entered into a ten year lease agreement for office space in November 1989. The Company has guaranteed the performance of the affiliate's obligations. Terms of the lease provided for annual rent of $553,000 in 1994 and escalating to $796,000 in years six through ten. In addition to the rent, the Company has guaranteed the annual payment of $318,000 in occupancy costs with provisions for escalation based on actual expenses. Currently, the affiliate of the Company is subleasing certain office space to a third party and a related party. BLOOMFIELD REFINING COMPANY INTERIM FINANCIAL STATEMENTS AS OF MARCH 31, 1995 (UNAUDITED) BLOOMFIELD REFINING COMPANY BALANCE SHEETS MARCH 31, 1995 AND DECEMBER 31, 1994
ASSETS March 31, 1995 December 31, CURRENT ASSETS (Unaudited) 1994 ----------- ----------- Cash and temporary investments $ 2,620,153 $ 4,888,567 Accounts receivable - affiliates 7,047,961 6,008,872 Accounts receivable 239,707 257,820 Inventories 9,143,322 7,887,826 Prepaid crude oil - affiliate 6,018,887 5,803,372 Prepaid expenses and other 352,072 584,495 ----------- ----------- Total current assets 25,422,102 25,430,952 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 23,165,353 23,165,353 Gas plants, property and equipment 4,901,295 4,855,654 Less: Accumulated depreciation (6,980,954) (6,550,919) ----------- ----------- 21,085,694 21,470,088 Construction in progress 630,830 147,712 ----------- ----------- Total property, plant and equipment 21,716,524 21,617,800 ----------- ----------- Other 285,394 289,005 ----------- ----------- TOTAL ASSETS $47,424,020 $47,337,757 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY March 31, 1995 December 31, CURRENT LIABILITIES (Unaudited) 1994 ----------- ----------- Accounts payable - affiliates $11,408,489 $10,853,802 Accounts payable 449,592 649,983 Accrued liabilities 2,238,788 2,227,067 Income taxes payable - affiliate 963,000 --- ----------- ----------- Total current liabilities 15,059,869 13,730,852 ----------- ----------- NON-CURRENT LIABILITIES Deferred income taxes, net 9,500 1,184,500 Accrued turnaround costs 2,239,559 1,953,671 Other 114,733 130,312 ----------- ----------- Total non-current liabilities 2,363,792 3,268,483 ----------- ----------- Commitments and contingencies (Note 9) SHAREHOLDER'S EQUITY Common stock, .01 par value 1,000 voting shares authorized, issued and outstanding 10 10 Contributed capital 3,200,090 3,200,090 Retained earnings 26,800,259 27,138,322 ----------- ----------- Total shareholder's equity 30,000,359 30,338,422 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $47,424,020 $47,337,757 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. BLOOMFIELD REFINING COMPANY STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
1995 1994 ------------ ------------ Operating revenues $ 29,962,961 $ 29,495,052 Operating expenses 25,799,986 24,052,808 ------------ ------------ Gross margin 4,162,975 5,442,244 General and administrative expenses 1,740,486 1,795,578 ------------ ------------ Operating income 2,422,489 3,646,666 ------------ ------------ OTHER INCOME (EXPENSE) Interest income 73,510 68,042 Interest expense (64,197) (81,550) Other 66,335 25,458 ------------ ------------ 75,648 11,950 ------------ ------------ Income before income taxes 2,498,137 3,658,616 INCOME TAX EXPENSE (NOTE 4) Current (963,000) (1,350,000) Deferred (9,500) (43,300) ------------ ------------ (972,500) (1,393,300) ------------ ------------ Net Income $ 1,525,637 $ 2,265,316 ============ ============ STATEMENTS OF RETAINED EARNINGS Balance at January 1 $ 27,138,322 $ 23,854,523 Net income 1,525,637 2,265,316 Dividends (1,863,700) --- ------------ ------------ BALANCE AT MARCH 31 $ 26,800,259 $ 26,119,839 ============ ============
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
1995 1994 ----------- ----------- Cash flows from operating activities: Reconciliation of net income to net cash provided by (used in) operating activities: Net income $ 1,525,637 $ 2,265,316 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 430,035 428,055 Accrued turnaround costs 285,888 285,888 Changes in assets and liabilities: Increase in accounts receivable (1,020,976) (452,743) Increase in inventories (1,255,496) (441,575) Decrease in prepaid expenses and other 16,908 426,263 Increase in deferred tax asset --- (21,300) Decrease in other assets 3,611 3,611 Increase (decrease) in accounts payable 244,523 (1,921,652) Increase (decrease) in accrued liabilities 11,721 (219,324) Increase in income taxes payable-affiliate 963,000 1,350,000 Decrease in other liabilities (15,579) --- (Decrease) increase in deferred income taxes (1,175,000) 64,600 ----------- ----------- Net cash (used in) provided by operating activities $ 14,272 $ 1,767,139 =========== =========== Cash flows used in investing activities: Capital expenditures - refinery (373,345) (756,002) Capital expenditures - gas plants (45,641) (15,889) ----------- ----------- Net cash used in investing activities (418,986) (771,891) ----------- ----------- Cash flows used in financing activities: Principal payments on debt --- (975,000) Dividends distributed (1,863,700) --- ----------- ----------- Net cash used in financing activities (1,863,700) (975,000) ----------- ----------- Net (decrease) increase in cash and temporary investments (2,268,414) 20,248 Cash and temporary investments at beginning of year 4,888,567 9,501,500 ----------- ----------- Cash and temporary investments at end of period $ 2,620,153 $ 9,521,748 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. BLOOMFIELD REFINING COMPANY NOTES TO FINANCIAL STATEMENTS (1) BACKGROUND AND ORGANIZATION --------------------------- Organization - ------------ On August 31, 1984, Bloomfield Refining Company, a Delaware corporation (the Company), was incorporated. The Company's primary activities are the refining of petroleum products and gas plant operations. The Company is a wholly-owned subsidiary of Gary-Williams Energy Corporation (GWEC). The Company operates a refinery in Bloomfield, New Mexico with a throughput capacity of 17,000 barrels per day and has ownership interests in two gas plants located in Utah. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Cash and Temporary Investments - ------------------------------ For purposes of these statements, the Company considers investments purchased with an original maturity of three months or less to be cash or temporary investments. Temporary investments consist primarily of commercial paper and money market funds. These securities are classified as held to maturity investments as defined by Statement of Financial Accounting Standards No. 115. At March 31, 1995 and December 31, 1994, these securities are recorded at a market value of $2,082,000 and $7,663,000, respectively. Realized gains and losses from sales of these securities are included in interest income in the accompanying statements of operations. The net unrealized gain or loss on these securities was not material as of March 31, 1995 and December 31, 1994. Inventories - ----------- Inventories are valued at the lower of first-in, first-out cost or market. Inventories at March 31, 1995 and December 31, 1994 are as follows:
March 31, December 31, 1995 1994 ----------- ----------- Refined, unrefined and intermediate products $5,276,421 $4,181,728 Crude oil 2,985,248 2,811,004 Materials and supplies 881,653 895,094 ---------- ---------- $9,143,322 $7,887,826 ========== ==========
Property, Plant and Equipment - ----------------------------- The initial purchase and additions to property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method based on estimated useful lives ranging from 2 to 35 years, with an average initial life of approximately 19 years. Ownership interests in gas plants are recorded at cost and proportionately consolidated for financial statement purposes. Depreciation is provided using the straight-line method with estimated useful lives ranging from 5 to 10 years, with an average initial life of approximately 7 years. General and Administrative Expenses - ----------------------------------- The Company reimburses GWEC for general and administrative services relating to the supply and marketing of raw materials and refined products and gas plant operations. Accrued Turnaround Costs - ------------------------ Major repair and maintenance expenses (turnaround costs) are accrued and charged to current operations in anticipation of the work to be performed in future periods to renew the related refinery assets. Accrued turnaround costs are classified as either current or non-current liabilities based upon the scheduling of major expenditures. Capitalized Interest - -------------------- The Company capitalizes interest on debt associated with the financing of capital construction projects. No interest was capitalized during the three months ended March 31, 1995 or during 1994. Reclassifications - ----------------- Certain prior year amounts have been reclassified for consistency with the current year presentation. (3) LONG-TERM DEBT -------------- The Company has a revolving credit facility, as amended, with a group of banks under which it may borrow up to $8,000,000 in cash and/or issue letters of credit which in the aggregate cannot exceed the lesser of $35,000,000 or the borrowing base. The borrowing base, which consists principally of accounts receivable, inventory, exchange balances and unused outstanding letters of credit was approximately $29,000,000 and $21,000,000 as of March 31, 1995 and December 31, 1994. The Company had no amounts outstanding under the revolving credit facility, however, letters of credit totaling approximately $23,000,000 and $20,000,000 had been issued as of March 31, 1995 and December 31, 1994. Borrowings under the revolving credit facility bear interest at a rate based on the bank's prime rate. The credit facility is secured by substantially all of the assets of the Company and, among other things, requires the maintenance of certain financial covenants and ratios. The revolving credit facility matures June 1, 1996; however, the credit agreement provides for extensions of the maturity date. The Company borrowed $3,000,000 in 1993 for capital projects at the Bloomfield refinery pursuant to an amendment to the credit agreement. The entire balance was paid during 1994. (4) INCOME TAXES ------------ The Company and GWEC are members of a consolidated tax group which files a consolidated federal income tax return. An agreement was entered into between the Company and GWEC whereby the Company determines, on a stand alone basis, the tax liability or benefit as if it were not a member of the tax group. The Company then reimburses GWEC for its current income tax liability on a quarterly basis. Deferred income taxes are paid to GWEC periodically. The Company is entitled to be reimbursed by GWEC for its income tax benefit when the Company could otherwise have utilized such benefit on a stand alone basis. Deferred income taxes are recognized for the differences between the tax and financial reporting bases of assets and liabilities at each period-end based on enacted tax laws and statutory tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The net deferred tax liability consists of the following:
March 31, December 31, 1995 1994 ------------ ------------ Gross deferred tax assets $(1,212,600) $(1,090,700) Gross deferred tax liabilities 2,929,700 2,798,300 ----------- ----------- 1,717,100 1,707,600 Payments to affiliate (1,707,600) (523,100) Valuation allowance --- --- ----------- ----------- Net deferred tax liability $ 9,500 $ 1,184,500 =========== ===========
Deferred tax assets and liabilities result primarily from inventory costs capitalized for tax, accounting reserves and from recording depreciation and turnaround expenses in different periods for financial and tax accounting purposes. In management's opinion, it is more likely than not that the gross deferred tax assets will be realized based on past earnings history. The difference between the Company's tax provision at the federal statutory rate and the effective rate is due primarily to state income taxes. Tax Deficiency - -------------- The Internal Revenue Service concluded a field audit of the consolidated tax group's income tax return for the fiscal year 1990 resulting in a "Notice of Deficiency" for that fiscal year. Proposed adjustments to income and tax credits resulted in a proposed tax deficiency of approximately $4,800,000 plus penalties. The Company filed a petition with the United States Tax Court contesting the notice and believes that it has meritorious legal defenses to the proposed tax deficiency, but the ultimate outcome of the Tax Court case is uncertain. (5) OPERATING REVENUES AND EXPENSES BY SEGMENTS -------------------------------------------- The following segment information reflects operating revenues, operating expenses and gross margins for the three months ended March 31, 1995 and 1994.
Refining Gas Plants Total ------------ ---------- ------------ March 31, 1995 ------------------------------------------ Operating Revenues $ 29,359,316 $ 603,645 $ 29,962,961 Operating Expenses 25,223,910 576,076 25,799,986 ------------ ---------- ------------ Gross Margin $ 4,135,406 $ 27,569 $ 4,162,975 ============ ========== ============ March 31, 1994 ------------------------------------------ Operating Revenues $ 28,877,145 $ 617,907 $ 29,495,052 Operating Expenses 23,429,533 623,275 24,052,808 ------------ ---------- ------------ Gross Margin $ 5,447,612 $ (5,368) $ 5,442,244 ============ ========== ============
(6) RELATED PARTY TRANSACTIONS -------------------------- A supply and marketing service agreement was entered into between the Company and GWEC, whereby GWEC purchases crude oil and other raw materials for resale to the Company, at cost, for processing at the refinery. The intercompany purchases of raw materials include all amounts accrued and owing by GWEC to third parties, including prepayments and offsite inventory. Also, the Company sells refined petroleum products to GWEC, at market, for resale by GWEC. The Company has guaranteed the payment by GWEC of an aggregate maximum at any one time of $2,000,000 of present and/or future indebtedness owed to a third party crude oil supplier. (7) EMPLOYEE BENEFIT PLANS ---------------------- The Company has a profit sharing plan (defined contribution plan) covering certain non-union employees who meet eligibility requirements as to age and length of service. Contributions to the plan are determined annually by the Company. Contributions of $47,522 and $45,537 were accrued for the three months ended March 31, 1995 and 1994, respectively. The Company also has a defined benefit pension plan for union employees. The Company's funding policy is to contribute annually an amount to fund normal cost and amortize unfunded actuarial liabilities over 19 years. Plan assets at March 31, 1995 and December 31, 1994 consist primarily of private and public debt and equity investments. Benefits are based on a percentage of the employee's earnings, as defined, as of June 1, 1993, and years of credited service up to a maximum of 30 years. The following table sets forth the funded status and amounts recognized in the Company's statements of financial position and operations at December 31, 1994 for the defined benefit pension plan:
1994 --------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $417,559 at December 31, 1994 $(433,264) ========= Projected benefit obligation for service rendered to date $(433,264) Plan assets at fair value 302,952 --------- Projected benefit obligation in excess of plan assets (130,312) Unrecognized net obligation existing at January 1, 1989 being recognized over 19 years 8,926 Prior service cost not yet recognized 77,483 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 70,391 Adjustment to recognize minimum liability (156,800) --------- Accrued pension liability included in other liabilities $(130,312) ========= Net pension cost includes the following components: Service cost $ 55,079 Interest cost 29,266 Actual return on plan assets 6,557 Net amortization and deferral of other components (19,922) --------- Net periodic pension cost $ 70,980 =========
The discount rate used in determining the actuarial present value of the projected benefit obligation was 7.0% for 1994. The expected long-term rate of return on pension plan assets was 8.0% in 1994. (8) MAJOR CUSTOMERS --------------- During the three months ended March 31, 1995 and 1994, the Company sold 100% of the refined products to GWEC. Also, during that period, the Company purchased 100% of the crude oil and raw materials from GWEC. (9) COMMITMENTS AND CONTINGENCIES ----------------------------- The Company is subject to certain environmental and other regulations primarily administered by the United States Environmental Protection Agency (E.P.A.) and various state agencies. Management of the Company believes it has complied with all material aspects associated with these regulations. The Company entered into an administrative order with the E.P.A. to perform a study to assess the nature of any environmental cleanup requirements at the refinery which was substantially completed in 1994. Management is currently evaluating the E.P.A.'s response and is uncertain as to what, if any, additional costs may be required. The Company is subject to various claims and business disputes in the ordinary course of business. Management does not anticipate that the ultimate outcome of these issues will have a material impact on the Company's financial position or results of operations. An affiliate of the Company entered into a ten year lease agreement for office space in November 1989. The Company has guaranteed the performance of the affiliate's obligations. Terms of the lease provided for annual rent of $796,000 in 1995 through 1999. In addition to the rent, the Company has guaranteed the annual payment of $328,000 in occupancy costs with provisions for escalation based on actual expenses. Currently, the affiliate of the Company is subleasing certain office space to a third party and a related party. BLOOMFIELD REFINING COMPANY OPERATING RESULTS FOR APRIL, 1995
BBLS/ $/GAL/ DAY BBL $/AMOUNT ------------------------ SALES: Regular Gasoline 454 $0.6133 $351 Unleaded Gasoline 6,921 0.6333 5,523 Premium Unleaded 653 0.7057 581 #2 Diesel 4,040 0.5933 3,021 #1 Diesel 0 - 0 Jet Fuel JP-4 1,039 0.5933 777 Naphtha 153 0.4341 84 Propane/Butane 21 0.3501 9 #6 Burner Fuel 350 0.1276 56 Saturated LPG 1,136 0.3232 463 Refined Product - Other 0 - 0 ------------------------ 14,767 $24.52 $10,864 COST OF SALES: Crude Oil 15,710 $18.54 $8,869 Crude Oil Value Change 0 - (130) Reduced Crude 124 18.02 67 Butane 0 - 0 Natural Gasoline 441 17.36 230 MTBE 0 - 0 Misc Product - API (Other) 0 - 0 Product Purchases 0 - 0 Inventory Change - Volume (1,375) 27.59 (802) Inventory Change - Value 0 - (336) ------------------------ 14,899 $17.67 $7,897 GROSS MARGIN $6.64 $2,967 Yield 99.11% PRODUCTION COSTS: Direct Operating Costs $631 Maintenance 254 Utilities 239 Depreciation 92 ------- $1,216 ------- OTHER COSTS General and Administrative $590 Interest and Other Expense 0 Interest and Other Income (34) ------- $556 ------- INCOME BEFORE DIVISIONS $1,195 ------- TRANSPORTATION DIVISION ($34) PIPELINE DIVISION 17 GAS PLANTS - BLUEBELL/ALTONAH 13 ------- TOTAL DIVISIONS ($4) ------- INCOME (LOSS) BEFORE TAXES $1,191 ------- PROVISION FOR INCOME TAXES (463) ------- NET INCOME (LOSS) AFTER TAXES $728 ======= /TABLE BLOOMFIELD REFINING COMPANY STATEMENT OF CASH FLOWS FOR THE FOUR MONTHS ENDED APRIL 30, 1995 INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS
MONTH Y-T-D ---------- ---------- Reconciliation of net income to net cash provided by operating activities: Net Income (Loss) 858,795 2,505,649 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 143,182 573,217 Turnaround costs 95,296 381,184 (Gain) loss on Sale of Assets 0 0 Changes in assets and liabilities: Decrease (increase) in accounts receivable-affiliate (4,262,448) (5,152,298) Decrease (increase) in accounts receivable, net 97,396 14,008 Decrease (increase) in inventories 39,777 (1,215,720) Decrease (increase) in prepaid expenses 91,217 (3,744,982) Decrease (increase) in deferred tax asset 0 0 Decrease (increase) in other assets 1,204 4,815 Decrease (increase) in interco def inc tax rec 0 0 Increase (decrease) in accounts payable - affiliate 372,033 (1,709,383) Increase (decrease) in accounts payable 2,474,103 4,193,931 Increase (decrease) in income tax payable 463,000 1,249,000 Increase (decrease) in accrued liabilities (105,416) (1,716,545) Increase (decrease) in other liabilities 0 26,487 Increase (decrease) in deferred income taxes 0 (1,184,500) ---------- ---------- Net cash provided (used) by operating activities 268,139 (5,775,137) ---------- ---------- Cash flows from investing activities: Capital expenditures-refinery and construction in progress (208,537) (635,521) Capital expenditures-gas plants (59,602) (105,243) ---------- ---------- Net cash provided (used) in investing activities (268,139) (740,764) ---------- ---------- Cash flows from financing activities: Borrowings under note payable 0 0 Principal payments on debt 0 0 Dividends distributed 0 (1,863,700) ---------- ---------- Net cash provided (used) by financing activities 0 (1,863,700) ---------- ---------- Net increase(decrease) in cash and temporary investments 0 (8,379,601) Cash and temporary investments at beginning of period 0 8,379,601 ---------- ---------- Cash and temporary investments at end of period 0 (0) ========== ==========
BLOOMFIELD REFINING COMPANY BALANCE SHEETS APRIL 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED)
ASSETS APRIL 30 DECEMBER 31 1995 1994 ----------- ----------- CURRENT ASSETS Cash and temporary investments $ --- $ 8,379,601 Accounts receivable - affiliates 11,161,170 6,008,872 Accounts receivable, net 243,812 257,820 Inventories 9,103,546 7,887,826 Prepaid expenses and other 6,641,815 2,896,833 Deferred tax asset --- --- ----------- ----------- Total current assets 27,150,343 25,430,952 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 23,165,353 23,165,353 Gas plant, property and equipment 4,960,897 4,855,654 Less: Accumulated depreciation (7,124,136) (6,550,919) ----------- ----------- 21,002,114 21,470,088 Construction in progress 783,233 147,712 ----------- ----------- Total property, plant and equipment 21,785,347 21,617,800 ----------- ----------- OTHER ASSETS Interco Deferred Inc Tax Rec --- --- Other Assets 284,190 289,005 ----------- ----------- Total other assets 284,190 289,005 ----------- ----------- TOTAL ASSETS $49,219,880 $47,337,757 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY APRIL 30 DECEMBER 31 CURRENT LIABILITIES 1995 1994 ----------- ----------- Accounts payable - affiliates $ 9,144,419 $10,853,802 Accounts payable 4,843,914 649,983 Income taxes payable - affiliate 1,249,000 --- Accrued liabilities 510,522 2,227,067 ----------- ----------- Total current liabilities 15,747,855 13,730,852 ----------- ----------- NON-CURRENT LIABILITIES Deferred income taxes --- 1,184,500 Accrued turnaround costs 2,334,855 1,953,671 Other 156,799 130,312 ----------- ----------- Total non-current liabilities 2,491,654 3,268,483 ----------- ----------- SHAREHOLDER'S EQUITY Common stock, .01 par value: 1,000 voting shares authorized, issued and outstanding 10 10 Contributed capital 3,200,090 3,200,090 Dividends distributed (58,644,838) (56,781,138) Retained earnings 86,425,109 83,919,460 ----------- ----------- Total shareholder's equity 30,980,371 30,338,422 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $49,219,880 $47,337,757 =========== =========== /TABLE BLOOMFIELD REFINING COMPANY OPERATING RESULTS FOR MAY, 1995
BBLS/ $/GAL/ DAY BBL $/AMOUNT ------------------------ SALES: Regular Gasoline 73 0.6519 $62 Unleaded Gasoline 8,359 0.6792 7,392 Premium Unleaded 1,033 0.7451 1,002 #2 Diesel 5,005 0.6226 4,057 #1 Diesel 0 - 0 Jet Fuel JP-4 978 0.6617 842 Naphtha 267 0.4361 152 Propane/Butane 35 0.3409 16 #6 Burner Fuel 228 0.1262 38 Saturated LPG 1,159 0.3273 494 Refined Product - Other 0 - 0 ------------------------ 17,137 $26.46 $14,055 COST OF SALES: Crude Oil 16,103 $18.86 $9,404 Crude Oil Value Change 0 - 9 Reduced Crude 371 21.65 249 Butane 0 - 0 Natural Gasoline 286 18.37 163 MTBE 44 37.04 50 Misc Product - API (Other) 476 26.10 385 Product Purchases 0 - 0 Inventory Change - Volume 224 (22.32) (15) Inventory Change - Value 0 - (140) ------------------------ 17,503 $18.62 $10,105 GROSS MARGIN $7.28 $3,950 Yield 97.91% PRODUCTION COSTS: Direct Operating Costs $519 Maintenance 272 Utilities 237 Depreciation 92 ------- $1,119 ------- OTHER COSTS General and Administrative $576 Interest and Other Expense 0 Interest and Other Income (33) ------- $543 ------- INCOME BEFORE DIVISIONS $2,288 ------- TRANSPORTATION DIVISION ($28) PIPELINE DIVISION 26 GAS PLANTS - BLUEBELL/ALTONAH 48 ------- TOTAL DIVISIONS $46 ------- INCOME (LOSS) BEFORE TAXES $2,334 ------- PROVISION FOR INCOME TAXES (908) ------- NET INCOME (LOSS) AFTER TAXES $1,426 ======= /TABLE BLOOMFIELD REFINING COMPANY STATEMENT OF CASH FLOWS FOR THE FIVE MONTHS ENDED MAY 31, 1995 INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS
MONTH Y-T-D ---------- ---------- Reconciliation of net income to net cash provided by operating activities: Net Income (Loss) 1,582,185 4,065,820 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 142,638 715,855 Turnaround costs 95,296 476,480 (Gain) loss on Sale of Assets 0 0 Changes in assets and liabilities: Decrease (increase) in accounts receivable-affiliate 3,192,934 (1,959,364) Decrease (increase) in accounts receivable, net (49,048) (35,040) Decrease (increase) in inventories (938,822) (2,161,418) Decrease (increase) in prepaid expenses 13,128 (3,731,853) Decrease (increase) in deferred tax asset 0 0 Decrease (increase) in other assets 1,204 6,018 Decrease (increase) in interco def inc tax rec 0 0 Increase (decrease) in accounts payable - affiliate 1,667,350 (42,033) Increase (decrease) in accounts payable (2,517,577) 1,676,355 Increase (decrease) in income tax payable 908,000 2,144,000 Increase (decrease) in accrued liabilities 64,635 (1,651,910) Increase (decrease) in other liabilities 0 26,487 Increase (decrease) in deferred income taxes 0 (1,184,500) ---------- ---------- Net cash provided (used) by operating activities 4,161,923 (1,655,103) ---------- ---------- Cash flows from investing activities: Capital expenditures-refinery and construction in progress (155,183) (790,704) Capital expenditures-gas plants (32,983) (138,226) ---------- ---------- Net cash provided (used) in investing activities (188,166) (928,930) ---------- ---------- Cash flows from financing activities: Borrowings under note payable 0 0 Principal payments on debt 0 0 Dividends distributed 0 (1,863,700) ---------- ---------- Net cash provided (used) by financing activities 0 (1,863,700) ---------- ---------- Net increase(decrease) in cash and temporary investments 3,973,757 (4,447,733) Cash and temporary investments at beginning of period (41,889) 8,379,601 ---------- ---------- Cash and temporary investments at end of period 3,931,868 3,931,868 ========== ==========
BLOOMFIELD REFINING COMPANY BALANCE SHEETS MAY 31, 1995 AND DECEMBER 31, 1994 (UNAUDITED)
ASSETS MAY 31 DECEMBER 31 1995 1994 ----------- ----------- CURRENT ASSETS Cash and temporary investments $ 3,931,868 $ 8,379,601 Account receivable - affiliates 7,968,236 6,008,872 Accounts receivable, net 292,860 257,820 Inventories 10,049,244 7,887,826 Prepaid expenses and other 6,628,686 2,896,833 Deferred tax asset --- --- ----------- ----------- Total current assets 28,870,894 25,430,952 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Refinery property, plant and equipment 23,172,404 23,165,353 Gas plant, property and equipment 4,993,880 4,855,654 Less: Accumulated depreciation (7,266,774) (6,550,919) ----------- ----------- 20,899,510 21,470,088 Construction in progress 931,365 147,712 ----------- ----------- Total property, plant and equipment 21,830,875 21,617,800 ----------- ----------- OTHER ASSETS Interco Deferred Inc Tax Rec --- --- Other Assets 282,987 289,005 ----------- ----------- Total other assets 282,987 289,005 ----------- ----------- TOTAL ASSETS $50,984,756 $47,337,757 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY MAY 31 DECEMBER 31 CURRENT LIABILITIES 1995 1994 ----------- ----------- Accounts payable - affiliates $10,811,769 $10,853,802 Accounts payable 2,326,338 649,983 Income taxes payable - affiliate 2,144,000 --- Accrued liabilities 575,157 2,227,067 ----------- ----------- Total current liabilities 15,857,264 13,730,852 ----------- ----------- NON-CURRENT LIABILITIES Deferred income taxes --- 1,184,500 Accrued turnaround costs 2,430,151 1,953,671 Other 156,799 130,312 ----------- ----------- Total non-current liabilities 2,586,950 3,268,483 ----------- ----------- SHAREHOLDER'S EQUITY Common stock, .01 par value: 1,000 voting shares authorized, issued and outstanding 10 10 Contributed capital 3,200,090 3,200,090 Dividends distributed (58,644,838) (56,781,138) Retained earnings 87,985,280 83,919,460 ----------- ----------- Total shareholder's equity 32,540,542 30,338,422 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $50,984,756 $47,337,757 =========== =========== /TABLE SCHEDULE 3.01(n) SUMMARY OF OPERATIONS BLOOMFIELD REFINING COMPANY FIVE YEAR HISTORICAL EBITD ($ IN THOUSANDS)
1990 1991 1992 1993 1994 Average ------- ------- ------- ------- ------- ------- Sales - BPD 14,738 13,820 14,616 15,585 16,009 14,954 Gross Margin - $/B 6.25 4.77 5.63 7.41 6.82 6.18 Sales $172,244 $132,814 $140,123 $145,864 $139,040 $146,017 Raw Materials 138,608 108,742 110,089 103,684 99,218 112,068 ------- ------- ------- ------- ------- ------- Gross Margin 33,636 24,072 30,034 42,180 39,822 33,949 Direct Operating Costs 5,309 5,694 5,808 5,892 6,078 5,756 Maintenance (Incl. Turnaround Accrual) 3,195 3,105 2,964 3,022 3,677 3,193 Utilities 2,505 2,542 2,425 2,607 3,152 2,646 Refinery G&A (1) 1,190 1,355 1,405 1,329 1,599 1,376 Transportation & Pipeline Divisions (2) (221) (127) (137) (263) (665) (283) ------- ------- ------- ------- ------- ------- EARNINGS BEFORE INTEREST, TAXES AND DEPRECIATION 21,658 11,503 17,569 29,593 25,981 21,261 ======= ======= ======= ======= ======= =======
(1) Excludes G&A allocated from Denver Office. (2) Transportation and pipeline fees are included as costs in raw materials expense and as revenues in these divisions. CONFIDENTIAL TREATMENT REQUESTED AND SCHEDULE FILED WITH THE SEC UNDER SEPARATE COVER. SCHEDULE 3.02.g CERTAIN PERMITS, LICENSES AND CONTRACTS ACCEPTED BY PURCHASER Contract Description: Refined Product Exchange Parties: Gary-Williams Energy Corporation ("GWEC") and XXXXXXXXXX Date: 3/24/88, effective 5/1/88 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of other party Contract Description: Refined Product Sales Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 2/1/95 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of other party, approval will not be unreasonably withheld Contract Description: Refined Product Sales Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 12/17/91, effective 1/1/92 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent Contract Description: Refined Product Exchange Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 12/6/90, effective 12/1/90 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with notice and consent of other party Contract Description: Refined Product Exchange Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 8/12/91, effective 9/1/91 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of other party Contract Description: Refined Product Sales Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 1/24/94, effective 2/1/94 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of other party Contract Description: Refined Product Sales Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXX Date: 7/26/94, effective 8/1/94 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of other party Contract Description: Refined Product Exchange Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 8/25/89, effective 9/1/89 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of other party Contract Description: Y Grade Sales Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXX Date: 5/1/88 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with consent of both parties Contract Description: Refined Product Exchange/Buyback Parties: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Date: 12/20/84, effective 1/1/85 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of other party Contract Description: JP-8 Sales Contract on a bulk basis Parties: Defense Fuel Supply Center Date: 3/30/95, effective 10/1/95 Termination: Government may terminate performance of work under the contract in whole or in part Assignability: Yes, covered by F.A.R. regulations as a "novation" Contract Description: JP-4 Sales Contract on a bulk basis Parties: Defense Fuel Supply Center Date: 9/19/94, effective 10/1/94 Termination: Government may terminate performance of work under the contract in whole or in part Assignability: Yes, covered by F.A.R. regulations as a "novation" Contract Description: Loading Rack Agreement Parties: GWEC Notes: Sample form provided Contract Description: Truck Lease Parties: GWEC Notes: Sample form provided Contract Description: Standby Services Agreement Parties: Bloomfield Refining Company ("BRC") and City of Bloomfield Date: 7/1/90, as amended 6/5/95 Termination: Year to year after 6/30/95, terminable on 90 days' notice prior to end of term Assignability: Yes, with prior written consent of other party Notes: Agreement shall terminate immediately if BRC ceases to own the Site or use the Site for operation of a refinery Contract Description: Electric Utility System General Service Agreement Parties: BRC and City of Farmington Date: 7/14/87, as amended Termination: Terminates 6/30/98 Assignability: Silent Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 3/1/93 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of other party Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 6/5/95 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX notice prior to end of term Assignability: Yes, with prior written consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 6/5/95 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 6/29/90 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 5/18/94 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of both parties Notes: Term is 18 months from date of first purchase, then month to month Contract Description: Pipeline Services Parties: BRC and Llaves Pipeline Limited Date: 2/8/94 Termination: Month to month, terminable upon 30 days' notice by either party Assignability: Silent Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 4/6/95 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Silent Notes: General Provisions not in file Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 1994 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of GWEC Notes: Crude purchased under 100% indemnifying Dos Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 11/4/92, as amended Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 1/6/92 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 1/21/94 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 11/1/94 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 5/17/94 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes with prior written consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Notes: Appears crude purchase contract with XXXXXXXXXXX was assigned to XXXXXXXXXX; however, no contract and no assignment or assumption agreement in file Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 11/9/93 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 3/5/93 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior consent of both parties Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXX Date: 7/1/87, as amended Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Silent Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 12/16/92 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Silent Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 1/24/95 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Silent Notes: General provisions not in file Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 8/9/90 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of other party Contract Description: Sulferox Usage Contract Parties: BRC and Coastal Chemical Company, Inc. Date: 1/11/95 Termination: Silent Assignability: Silent Contract Description: Sulferox Usage Contract Parties: BRC and The Dow Chemical Company Date: 9/29/94 Termination: Terminates 24 months from 1/1/94 Assignability: Silent Contract Description: Shell Sulferox Process - Confidence Agreement Parties: BRC and The Dow Chemical Company Date: 10/25/91 Termination: Silent Assignability: Silent Contract Description: Sulferox Process License Agreement Parties: BRC and The Dow Chemical Company Date: 1/19/93 Termination: Expires 20 years from 1/19/93 Assignability: Yes, with prior written consent of other party Contract Description: Nondisclosure Letter Agreement Parties: BRC and UOP Date: 8/24/94 Termination: Silent Assignability: Silent Contract Description: Service Agreement Parties: BRC and UOP Date: 1/19/95 Termination: Silent Assignability: Silent Contract Description: Supplemental Agreement to Termination and Transfer Agreement Parties: BRC and UOP Process Division Date: 11/1/84 Termination: Silent Assignability: Silent Contract Description: Termination and Transfer Agreement Parties: BRC and UOP Process Division Date: 11/1/84 Termination: Silent Assignability: Silent Contract Description: UOP Fluid Catalytic Cracking Process License Agreement Parties: BRC and UOP Process Division Date: 11/1/84 Termination: Terminable upon 6 months' prior written notice Assignability: Yes, with prior written consent of other party (see Section 11.1 for other options) Contract Description: UOP Fixed-Bed Platforming Process License Agreement Parties: BRC and UOP Process Division Date: 11/1/84 Termination: Terminable upon six months' prior written notice Assignability: Yes, with prior written consent of other party (see Section 11.1 for other options) Contract Description: UOP Merox Process License Agreement Parties: BRC and UOP Process Division Date: 11/1/84 Termination: Terminable upon six months' prior written notice Assignability: Yes, with prior written consent of other party (see Section 11.1 for other options) Contract Description: Radiation Machine Registration #IN 45086 Parties: BRC and State of New Mexico Date: 1/4/94 Termination: Silent Assignability: Silent Contract Description: Stormwater General Permit No. NMR00A013 Parties: BRC and U.S. EPA Date: 12/31/92 Contract Description: Oil Spill Response Plan* Parties: BRC and U.S. EPA Date: 12/20/94 Contract Description: Part B Operating Permit Application for Hazardous Wastewater Treatment Surface Impoundments NMD 089 416416* Parties: BRC and New Mexico Environment Department Date: 9/24/94 Contract Description: Air Quality Permit No. 402-M-6 Parties: BRC and New Mexico Environment Department Date: 5/30/95 Contract Description: Operating Permit Application No. P024 Parties: BRC and New Mexico Environment Department, Air Pollution Control Bureau Date: 6/21/95 Contract Description: Right-of-Way NM 65269* Parties: BRC and U.S. Department of Interior Bureau of Land Management Date: 10/30/87 Contract Description: Right-of-Way NMNM 68405* Parties: BRC and U.S. Department of Interior Bureau of Land Management Date: 1/14/92 Contract Description: Right-of-Way NMNM 93645* Parties: BRC and U.S. Department of Interior Bureau of Land Management Date: 12/29/94 Contract Description: Right-of-Way NMNM 91447* Parties: BRC and U.S. Department of Interior Bureau of Land Management Date: 5/6/94 Contract Description: Letter from the New Mexico Oil Conservation Division approving the installation of Recovery Well Nos. 14, 15, 16, 17, 18, 19* Parties: BRC and State of New Mexico Energy, Minerals and Natural Resources Dept., Oil Conservation Division Date: 6/4/90 Contract Description: Application filed with the Office of the State Engineer for permitting of Recovery Well Nos. 1, 2, 3* Parties: BRC and State of New Mexico Date: 10/4/88 Contract Description: Discharge Plan GW-01* Parties: BRC and State of New Mexico Energy, Minerals and Natural Resources Dept., Oil Conservation Division Date: 5/24/94 Contract Description: Certificate of Construction No. 2593-2 and 3385 Evaporation Ponds Parties: BRC and State of New Mexico Date: 10/21/94 Contract Description: Discharge Plan GW-130* Parties: BRC and State of New Mexico Energy, Minerals and Natural Resources Dept., Oil Conservation Division Date: 11/5/93 Contract Description: Application for Permit for Alternate Point of Diversion of Surface Waters No. 3385 River Terrace Parties: BRC and State of New Mexico Date: 7/17/89 Contract Description: Application for Permit for Alternate Point of Diversion of Surface Waters No. 3385 Hammond Ditch Parties: BRC and State of New Mexico Date: 8/6/87 Contract Description: Administrative Order on Consent Docket No. V1-303-H Parties: BRC and U.S. EPA Date: 12/31/92 Contract Description: Gas Sales/Purchase Contract Parties: BRC and Conoco Inc. Date: 7/1/95 Termination: One year term, then month to month, terminable on 30 days' written notice. Assignability: Silent Notes: See Paragraph 13 - Confidentiality Contract Description: Crude Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 8/1/95 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Silent Contract Description: Crude Exchange Contract Parties: GWEC and XXXXXXXXXXXXXXXXXXXXXXXXXX Date: 5/27/87 Termination: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Assignability: Yes, with prior written consent of other party *Buyer has not reviewed these documents in their entirety. Notwithstanding Section 3.02(g), as soon as practicable after the date hereof, Sellers shall supply such documents to Buyer. Buyer shall notify Sellers in writing within 3 business days after receipt thereof if such documents do not meet the criteria of Section 3.02(g), in which event, and notwithstanding anything contained in this Agreement to the contrary, this Agreement shall terminate and neither Buyer nor Seller shall have any further duties, obligations or liabilities to each other under this Agreement. If Buyer notifies Sellers within such 3-day period that such documents meet the criteria set forth in Section 3.02(g), or if Buyer does not notify Sellers within such 3-day period, this Agreement shall continue and be in full force and effect in accordance with its terms and such documents will be deemed to meet the criteria of Section 3.02(g). SCHEDULE 5.02(A) RETAINED EMPLOYEES Dave Roderick Contract No.__________ SCHEDULE 6.02(i) BOR Draft Permit UNITED STATES DEPARTMENT OF THE INTERIOR BUREAU OF RECLAMATION COLORADO RIVER STORAGE PROJECT NAVAJO UNIT DRAFT WATER SERVICE CONTRACT BETWEEN THE UNITED STATES AND BLOOMFIELD REFINING COMPANY FOR FURNISHING WATER THIS CONTRACT, made this _____ day of _____________________, 19_____, pursuant to the Act of Congress approved June 17, 1902 (32 Stat. 388), and acts amendatory thereof or supplementary thereto, and particularly pursuant to the Colorado River Storage Project Act approved April 11, 1956 (70 Stat. 105), between THE UNITED STATES OF AMERICA, hereinafter referred to as the United States, represented by the officer executing this contract, his duly appointed successor or his duly authorized representative, hereinafter referred to as the Contracting Officer, and Bloomfield Refining Company, a company organized under the laws of the State of Delaware, and subsidiary of Gary Williams Energy Corporation, with an office at 370 17th St., Suite 5300, Denver, CO 80202, hereinafter referred to as the Contractor. WITNESSETH: WHEREAS, the following statements are made in explanation: (a) The United States has constructed Navajo Dam and Reservoir as a unit of the Colorado River Storage Project, for the furnishing of water for irrigation, municipal, industrial, and other beneficial uses. (b) The Contractor is in need of a municipal water supply for industrial use in the area for a petroleum refinery, and water is available on a temporary basis to supply the Contractor from Navajo Reservoir. NOW, THEREFORE, in consideration of the mutual and dependent covenants herein contained, the parties hereto agree as follows: GENERAL DEFINITIONS (1) Where used in this contract: (a) "Federal Reclamation Laws" means the Act of June 17, 1902 (32 Stat. 388), and all acts amendatory thereafter supplementary thereto. (b) "Secretary" or "Contracting Officer", or either of them means the Secretary of the Interior or his duly authorized representative. (c) "Contractor" means Bloomfield Refining Company, a company organized under the laws of the State of Delaware. (d) "Service" means the United States Fish and Wildlife Service. TERM OF CONTRACT 2. (a) This contract shall be effective for 5 years from the date of execution contingent upon reviews of the Contractor's refinery operation as it relates to and is in compliance with the Environmental Protection Agency (EPA), Region 6, Resource Conversation and Recovery Act, Section 3013 Final Order, Section 3008(h) Final Order on Consent. Depending on reviews conducted by the Contracting Officer, with EPA personnel for compliance with the above requirements, the contract can be terminated by a 2-week advance notice by the Contracting Officer for noncompliance with these environmental laws as required in Articles 11(F) and 11(G) of this contract. (b) This contract is contingent on the issuance of a current Diversion Permit by the State of New Mexico. WATER DELIVERY 3. (a) The United States grants the Contractor the right, during the term of this contract, to have delivered from Navajo Reservoir, as hereinafter provided, 340 acre-feet of water per year at such times as best suits its needs and the Contractor shall pay for the water as provided in Article 5. (b) The Contractor shall have no holdover rights to water supplied under this contract from year to year. Any water purchased hereunder not called for by the end of each contract year shall become integrated with the water supply for all purposes of the Navajo Reservoir and be available for all purposes at that time. FOR INDUSTRIAL USE 4. The water sold hereunder shall be used by the Contractor for industrial use. The Contractor shall prepare and furnish such reports on water use and related data as required by the Contracting Officer. RATE AND METHOD OF PAYMENT FOR WATER 5. The Contractor shall pay in advance for the quantity of water which it has contracted to take and pay for, whether or not it actually takes and uses such water, at a rate of $49.27 per acre-foot, plus $1.00 per acre-foot for operation and maintenance charges, for a total payment of $17,091.80. COMPLIANCE WITH THE NATIONAL ENVIRONMENTAL POLICY ACT AND THE ENDANGERED SPECIES ACT 6. (a) Net impacts on endangered species must be identified and mitigated in order to comply with the National Environmental Policy Act of 1969 (Public Law 91-190). The Contracting Officer has consulted with the United States Fish and Wildlife Service under Section 7 of the Endangered Species Act of 1973 (Public Law 93-205) to determine if use of water under this contract will adversely impact endangered species. (b) Pursuant to Section 7 of the Endangered Species Act, the United States Fish and Wildlife Service rendered a biological opinion, dated March 5, 1992, which identified adverse impacts to the endangered Colorado squawfish and razorback sucker in connection with use of water under this contract. As a conversation measure taken against these adverse impacts, the Service has recommended, and the Contractor agrees to pay a surcharge as a condition of water service. This surcharge shall be commensurate with the established rate for all municipal and industrial water service from the initial units of the Colorado River Storage Project. The rate has been set for the year 1995 at $49.27 per acre-foot. (c) The conservation measure surcharge payment is separate from the payment to the Contracting Officer for water service. The surcharge payment shall be made prior to the execution of this contract. The surcharge payment shall be sent to the United States Fish and Wildlife Service, P. O. Box 1306, Albuquerque, New Mexico 87103. MEASUREMENT AND RESPONSIBILITY FOR DISTRIBUTION 7. (a) The water to be furnished to the Contractor will be measured by facilities of the United States and delivered into San Juan River at the outlet works of Navajo Reservoir. The Contractor shall suffer all distribution and administration losses from the point of such delivery to the place of use. The Contractor agrees to provide a measuring device, which is acceptable to the Contracting Officer, at or near the Contractor's point of diversion, to measure the quantity of water delivered and diverted under this contract. The Contractor is responsible for making arrangements with the State of New Mexico and others needed for the transportation and diversion of such water. The Contractor shall pay any charges from the New Mexico State Engineer's Office for the distribution, handling, or administration of this water. (b) The United States shall not be responsible for the control, carriage, handling, use, disposal, or distribution of water taken by the Contractor hereunder, and the Contractor shall hold the United States harmless on account of damage or claim of damage of any nature whatsoever, including property damage, personal injury or death arising out of or connected with the control, carriage, handling, use, disposal, or distribution of such water by the Contractor. (c) This contract and all water taken pursuant thereto shall be subject to and controlled by the Colorado River Compact dated November 24, 1922, and proclaimed by the President of the United States, June 25, 1929, the Boulder Canyon Project Act approved December 21, 1928, the Boulder Canyon Project Adjustment Act of July 19, 1940, the Upper Colorado River Basin Compact dated October 11, 1948, the Mexican Water Treaty of February 3, 1944, and the Colorado River Basin Project Act of September 30, 1968, Public Law 90-537. In the event water available to the Contractor is required to be curtailed under and by reason of the provisions of the foregoing acts, including the reaching of maximum use of water allotted to the State of New Mexico, no liability shall attach to the United States for such curtailment, and the Contractor agrees to reduction of the amount of water taken hereunder as the Secretary determines necessary to comply with the provisions of said acts. UNITED STATES NOT LIABLE FOR WATER SHORTAGE ADJUSTMENTS 8. On account of drought, errors in operation, or other causes, there may occur at times, a shortage during any year in the quantity of water available to the Contractor by the United States pursuant to this contract through and by means of the project, and in no event shall any liability accrue against the United States or any of its officers, agents, or employees for any damage direct or indirect, arising therefrom. In any year in which there may occur such a shortage, the United States reserves the right to apportion the available water supply among the Contractor and others entitled, under existing and future contracts, to receive water from the same project water supply all in a manner to be prescribed by the Contracting Officer. CHARGES FOR DELINQUENT PAYMENTS 9. (a) The Contractor shall be subject to interest, administrative and penalty charges on delinquent installments or payments, pursuant to Section 11 of the Debt Collection Act of 1982 (Public Law 97-365). When a payment is not received within 30 days of the due date, the Contractor shall pay an interest charge for each day the payment is delinquent beyond the due date. When a payment becomes 60 days delinquent, the Contractor shall pay an administrative charge to cover additional costs of billing and processing the delinquent payment. When a payment is delinquent 90 days or more, the Contractor shall pay an additional penalty charge of 6 percent per year for each day the payment is delinquent beyond the due date. Further, the Contractor shall pay any fees incurred for debt collection services associated with a delinquent payment. (b) The interest charge rate shall be the greater of the rate prescribed quarterly in the FEDERAL REGISTER by the Department of the Treasury for application to overdue payments, or the interest rate of 0.5 percent per month prescribed by Section 6 of the Reclamation Project Act of 1939 (Public Law 76-260). The interest charge rate shall be determined as of the due date and remain fixed for the duration of the delinquent period. (c) When a partial payment on a delinquent account is received, the amount received shall be applied first to the penalty and administrative charges, second, to the accrued interest, and third to the overdue payment. NOTICES 10. Any notice, demand, or request authorized or required by this contract shall be deemed to have been given, on behalf of the Contractor when mailed, postage prepaid, or delivered to the Regional Director, Upper Colorado Region, Bureau of Reclamation, PO Box 11568, 125 South State Street, Salt Lake City, Utah 84147, and on behalf of the United States, when mailed, postage prepaid, or delivered, to the Gary Williams Energy Corporation, 370 17th Street, Suite 5300, Denver, Colorado 80202. The designation of the addressee or the address may be changed by notice given in the same manner as provided in this article for other notices. STANDARD CONTRACT ARTICLES 11. The standard contract articles applicable to this contract are listed below. The full text of these standard articles is attached as Exhibit A and is hereby made a part of this contract. A. Contingent Upon Appropriation or Allotment of Funds B. Officials Not to Benefit C. Assignment Limited - Successor's and Assigns Obligated D. Books, Records, and Reports E. Rules, Regulation, and Determinations F. Quality of Water G. Water and Air Pollution Control H. Equal Opportunity I. Compliance with Civil Rights Laws and Regulations IN WITNESS WHEREOF, the parties hereto have signed their names the day and year first above written. THE UNITED STATES OF AMERICA By:_______________________________ (seal) Regional Director Bureau of Reclamation By:_______________________________ ATTEST: __________________________________ Secretary EXHIBIT A A. CONTINGENT ON APPROPRIATION OR ALLOTMENT OF FUNDS The expenditure or advance of any money or the performance of any obligation of the United States under this contract shall be contingent upon appropriation or allotment of funds. Absence of appropriation or allotment of funds shall not relieve the Contractor from any obligations under this contract. No liability shall accrue to the United States in case funds are not appropriated or allotted. B. OFFICIALS NOT TO BENEFIT No Member of or Delegate to Congress, Resident Commissioner or official of the Contractor shall benefit from this contract other than as a water user or landowner in the same manner as other water users or landowners. C. ASSIGNMENT LIMITED-SUCCESSORS AND ASSIGNS OBLIGATED The provisions of this contract shall apply to and bind the successors and assigns of the parties hereto, but no assignment or transfer of this contract or any right or interest therein shall be valid until approved in writing by the Contracting Officer. D. BOOKS, RECORDS AND REPORTS The Contractor shall establish and maintain accounts and other books and records pertaining to administration of the terms and conditions of this contract, including: the Contractor's financial transactions, water supply data, project operation, maintenance and replacement logs, and project land and right-of-way use agreements; the water users' land-use (crop census), land-ownership, land-leasing and water-use data; and other matters that the Contracting Officer may require. Reports thereon shall be furnished to the Contracting Officer in such form and on such date or dates as the Contracting Officer may require. Subject to applicable Federal laws and regulations, each party to this contract shall have the right during office hours to examine and make copies of the other party's books and records relating to matters covered by this contract. E. RULES, REGULATIONS, AND DETERMINATIONS (1) The parties agree that the delivery of water or the use of Federal facilities pursuant to this contract is subject to Reclamation law, as amended and supplemented, and the rules and regulations promulgated by the Secretary of the Interior under Reclamation law. (2) The Contracting Officer shall have the right to make determinations necessary to administer this contract that are consistent with the expressed and implied provisions of this contract, the laws of the United States and the State, and the rules and regulations promulgated by the Secretary of the Interior. Such determinations shall be made in consultation with the Contractor. F. QUALITY OF WATER The operation and maintenance of project facilities shall be performed in such manner as is practicable to maintain the quality of raw water made available through such facilities at the highest level reasonably attainable, as determined by the Contracting Officer. The United States does not warrant the quality of water and is under no obligation to construct or furnish water treatment facilities to maintain or better the quality of water. G. WATER AND AIR POLLUTION CONTROL The Contractor, in carrying out this contract, shall comply with all applicable water and air pollution laws and regulations of the United States and the State of New Mexico, and shall obtain all required permits or licenses from the appropriate Federal, State, or local authorities. H. EQUAL OPPORTUNITY During the performance of this contract, the Contractor agrees as follows: (1) The Contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin. The Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, or national origin. Such action shall include, but not be limited to, the following: Employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. The Contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the Contracting Officer setting forth the provisions of this nondiscrimination clause. (2) The Contractor will, in all solicitations or advertisements for employees placed by or on behalf of the Contractor, state that all qualified applicants will receive consideration for employment without discrimination because of race, color, religion, sex, or national origin. (3) The Contractor will send to each labor union or representative of workers, with which it has a collective bargaining agreement or other contract or understanding, a notice, to be provided by the Contracting Officer, advising the said labor union or workers' representative of the Contractor's commitments under Section 202 of Executive Order 11246 of September 24, 1965, and shall post copies of the notice in conspicuous places available to employees and applicants for employment. (4) The Contractor will comply with all provisions of Executive Order No. 11246 of September 24, 1965, as amended, and of the rules, regulations, and relevant orders of the Secretary of Labor. (5) The Contractor will furnish all information and reports required by said amended Executive Order and by the rules, regulations, and orders of the Secretary of Labor, or pursuant thereto, and will permit access to its books, records, and accounts by the Contracting Officer and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations, and orders. (6) In the event of the Contractor's noncompliance with the nondiscrimination clauses of this contract or with any of the such rules, regulations, or orders, this contract may be canceled, terminated, or suspended, in whole or in part, and the Contractor may be declared ineligible for future Government contracts in accordance with procedures authorized in said amended Executive Order, and such other sanctions may be imposed and remedies invoked as provided in said Executive Order, or by rule, regulation, or order of the Secretary of Labor, or as otherwise provided by law. (7) The Contractor will include the provisions of paragraphs (1) through (7) in every subcontract or purchase order unless exempted by the rules, regulations, or orders of the Secretary of Labor issued pursuant to Section 204 of said amended Executive Order, so that such provisions will be binding upon each subcontractor or vendor. The Contractor will take such action with respect to any subcontract or purchase order as may be directed by the Secretary of Labor as a means of enforcing such provisions, including sanctions for noncompliance: PROVIDED, HOWEVER, That in the event the Contractor becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction, the Contractor may request the United States to enter into such litigation to protect the interests of the United States. I. COMPLIANCE WITH CIVIL RIGHTS LAWS AND REGULATIONS (1) The Contractor shall comply with Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d), Section 504 of the Rehabilitation Act of 1975 (Public Law 93-112, as amended), the Age Discrimination Act of 1975 (42 U.S.C.6101, et. seq.) and any other applicable civil rights laws, as well as with their respective implementing regulations and guidelines imposed by the U.S. Department of the Interior and/or Bureau of Reclamation. (2) These statutes require that no person in the United States shall, on the grounds of race, color, national origin, handicap, or age, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under any program or activity receiving financial assistance from the Bureau of Reclamation. By executing this contract, the Contractor agrees to immediately take any measures necessary to implement this obligation, including permitting officials of the United States to inspect premises, programs, and documents. (3) The Contractor makes this agreement in consideration of and for the purpose of obtaining any and all Federal grants, loans, contracts, property discounts or other Federal financial assistance extended after the date hereof to the Contractor by the Bureau of Reclamation, including installment payments after such date on account of arrangements for Federal financial assistance which were approved before such date. The Contractor recognizes and agrees that such Federal assistance will be extended in reliance on the representations and agreements made in this article, and that the United States reserves the right to seek judicial enforcement thereof. EX-2.2 3 First Amendment to Purchase and Sale Agreement between Bloomfield Refining Company and Gary-Williams Energy Corporation, as Sellers and Giant Industries Arizona, Inc. as Buyer This First Amendment (the "First Amendment") to the Purchase and Sale Agreement dated as of August 8, 1995, is entered into as of the 29th day of September 1995. RECITALS WHEREAS as of August 8, 1995, BLOOMFIELD REFINING COMPANY, a Delaware corporation ("BRC") with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80202, GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation ("GWEC"), with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80202 (BRC and GWEC are referred to collectively as "Sellers"), and GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("Buyer"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255, entered into a Purchase and Sale Agreement (the "Purchase and Sale Agreement"). WHEREAS, the Purchase and Sale Agreement specified in Section 9.01 the termination of the Purchase and Sale Agreement on or before October 1, 1995 in certain circumstances. WHEREAS Buyer and Sellers wish to amend the Purchase and Sale Agreement to extend that October 1, 1995 date through October 4, 1995. NOW, THEREFORE, for and in consideration of the premises and the mutual advantages accruing to each of the parties, it is mutually agreed as follows: AGREEMENTS 1. All references in Section 9.01 of the Purchase and Sale Agreement to October 1, 1995 are changed to October 4, 1995. 2. Except as noted otherwise in this First Amendment, all defined terms shall have the meaning attributed to them in the Purchase and Sale Agreement. 3. Except as noted otherwise in this First Amendment, all other terms and conditions of the Purchase and Sale Agreement are unchanged and remain in full force and effect. Executed as of the date first above mentioned. SELLERS: BLOOMFIELD REFINING COMPANY, a Delaware corporation By: /s/ DAVID J. YOUNGGREN ______________________________________ David J. Younggren, Senior Vice President GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation By: /s/ DAVID J. YOUNGGREN ______________________________________ David J. Younggren, Senior Vice President BUYER: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By: /s/ FREDRIC L. HOLLIGER ______________________________________ Fredric L. Holliger, Executive Vice President EX-2.3 4 Second Amendment to Purchase and Sale Agreement between Bloomfield Refining Company and Gary-Williams Energy Corporation, as Sellers and Giant Industries Arizona, Inc. as Buyer This Second Amendment (the "Second Amendment") to the Purchase and Sale Agreement dated as of August 8, 1995, is entered into as of the 2nd day of October, 1995. Recitals WHEREAS, as of August 8, 1995, Bloomfield Refining Company, a Delaware corporation ("BRC") with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80202, Gary-Williams Energy Corporation, a Delaware corporation ("GWEC"), with an address of 370 Seventeenth Street, Suite 5300, Denver, Colorado 80202 (BRC and GWEC are referred to collectively as "Sellers"), and Giant Industries Arizona, inc., an Arizona corporation ("Buyer"), with an address of 23733 North Scottsdale Road, Scottsdale, Arizona 85255, entered into a Purchase and Sale Agreement (the "Purchase and Sale Agreement"). WHEREAS, Section 1.01 of the Purchase and Sale Agreement defined the Effective Time as 7:00 AM on the Closing Date. WHEREAS, Buyer and Sellers wish to amend the Purchase and Sale Agreement to change the Effective Time from 7:00 AM to 12:01 AM as of the Closing Date. NOW, THEREFORE, for and in consideration of the premises and the mutual advantages accruing to each of the parties, it is mutually agreed as follows: Agreements 1. The definition of "Effective Time" in the Purchase and Sale Agreement is amended to read as follows: "Effective Time" shall mean 12:01 AM on the Closing Date, as such time is customarily observed in Bloomfield, New Mexico. 2. All other Sections of the Purchase and Sale Agreement referencing the "Effective Time" shall be modified as necessary to give effect to the time change referenced above. 3. Except as noted otherwise in this Second Amendment, all defined terms shall have the meaning attributed to them in the Purchase and Sale Agreement. 4. Except as noted otherwise in this Second Amendment, all other terms and conditions of the Purchase and Sale Agreement, as amended, are unchanged and remain in full force and effect. Executed as of the date first above mentioned. SELLERS: BLOOMFIELD REFINING COMPANY, a Delaware corporation By: /s/ DAVID J. YOUNGGREN ______________________________________ David J. Younggren, Senior Vice President GARY-WILLIAMS ENERGY CORPORATION, a Delaware corporation By: /s/ DAVID J. YOUNGGREN ______________________________________ David J. Younggren, Senior Vice President BUYER: GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation By: /s/ FREDRIC L. HOLLIGER ______________________________________ Fredric L. Holliger, Executive Vice President EX-4.1 5 CREDIT AGREEMENT Dated as of October 4, 1995 among GIANT INDUSTRIES, INC., as Borrower, GIANT INDUSTRIES ARIZONA, INC., CINIZA PRODUCTION COMPANY, SAN JUAN REFINING COMPANY, GIANT EXPLORATION & PRODUCTION COMPANY, and GIANT FOUR CORNERS, INC., as Guarantors BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent, BANK OF AMERICA ILLINOIS, as a Bank and as Letter of Credit Issuing Bank and THE OTHER FINANCIAL INSTITUTIONS PARTIES HERETO - - - - - - - - - - - - Arranged by BA SECURITIES, INC. TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS 1.01 Certain Defined Terms 1.02 Other Interpretive Provisions 1.03 Accounting Principles ARTICLE II THE CREDITS 2.01 Amounts and Terms of Commitments 2.02 Certain Pricing Terms 2.03 Procedure for Borrowing 2.04 Conversion and Continuation Elections 2.05 Voluntary Termination or Reduction of Commitments 2.06 Optional Prepayments 2.07 Borrowing Base Determinations, Mandatory Prepayments of Loans 2.08 Repayment 2.09 Fees 2.10 Computation of Fees and Interest 2.11 Payments by the Company 2.12 Payments by the Banks to the Agent 2.13 Sharing of Payments, Etc. ARTICLE III THE LETTERS OF CREDIT 3.01 The Letter of Credit Facility. 3.02 Issuance, Amendment and Renewal of Letters of Credit 3.03 Existing Bank of America Letters of Credit, Risk Participations, Drawings and Reimbursements 3.04 Repayment of Participations 3.05 Role of the Issuing Bank 3.06 Obligations Absolute 3.07 Cash Collateral Pledge 3.08 Letter of Credit Fees 3.10 Uniform Customs and Practice ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY 4.01 Taxes. 4.02 Illegality 4.03 Increased Costs and Reduction of Return 4.04 Funding Losses 4.05 Inability to Determine Rates 4.06 Certificates of Banks 4.07 Substitution of Banks 4.08 Survival ARTICLE V CONDITIONS PRECEDENT 5.01 Conditions of Initial Credit Extensions 5.02 Conditions to All Credit Extensions ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.01 Corporate Existence and Power 6.02 Corporate Authorization; No Contravention 6.03 Governmental Authorization 6.04 Binding Effect 6.05 Litigation 6.06 No Default 6.07 ERISA Compliance 6.08 Use of Proceeds; Margin Regulations 6.09 Title to Properties 6.10 Taxes 6.11 Financial Condition 6.12 Environmental Matters 6.13 Regulated Entities 6.14 No Burdensome Restrictions 6.15 Copyrights, Patents, Trademarks and Licenses, etc. 6.16 Subsidiaries 6.17 Insurance 6.18 Full Disclosure 6.20 Bloomfield Acquisition ARTICLE VII AFFIRMATIVE COVENANTS 7.01 Financial Statements 7.02 Certificates; Other Information 7.03 Notices 7.04 Preservation of Corporate Existence, Etc 7.05 Maintenance of Property 7.06 Insurance 7.07 Payment of Obligations 7.08 Compliance with Laws 7.09 Compliance with ERISA 7.10 Inspection of Property and Books and Records 7.11 Environmental Laws 7.12 New Subsidiary Guarantors 7.13 Use of Proceeds ARTICLE VIII NEGATIVE COVENANTS 8.01 Limitation on Liens 8.02 Disposition of Assets 8.03 Consolidations and Mergers 8.04 Loans and Investments 8.05 Limitation on Subsidiary Indebtedness 8.06 Transactions with Affiliates 8.07 Use of Proceeds 8.08 Contingent Obligations 8.09 Restricted Payments 8.10 Subsidiary Dividends 8.11 Senior Subordinated Notes 8.12 Minimum Consolidated Net Worth 8.13 Fixed Charge Coverage Ratio 8.14 Capitalization Ratio 8.15 ERISA 8.16 Change in Business 8.17 Accounting Changes ARTICLE IX EVENTS OF DEFAULT 9.01 Event of Default 9.02 Remedies 9.03 Rights Not Exclusive ARTICLE X THE AGENT 10.01 Appointment and Authorization 10.02 Delegation of Duties 10.03 Liability of Agent 10.04 Reliance by Agent 10.05 Notice of Default 10.06 Credit Decision 10.07 Indemnification 10.08 Agent in Individual Capacity 10.09 Successor Agent 10.10 Withholding Tax ARTICLE XI MISCELLANEOUS 11.01 Amendments and Waivers 11.02 Notices 11.03 No Waiver; Cumulative Remedies 11.04 Costs and Expenses 11.05 Indemnity 11.06 Payments Set Aside 11.07 Successors and Assigns 11.08 Assignments, Participations, etc. 11.09 Set-off 11.10 Interest 11.11 Indemnity and Subrogation 11.12 Automatic Debits of Fees 11.13 Notification of Addresses, Lending Offices, Etc. 11.14 Counterparts 11.15 Severability 11.16 No Third Parties Benefitted 11.17 Governing Law 11.18 Waiver of Jury Trial 11.19 Entire Agreement SCHEDULES Schedule 1.01 Preferred Eligible Account Obligors Schedule 2.01 Commitments Schedule 2.02 Applicable Margin and Commitment Fee Schedule 3.03 Existing Bank of America Letters of Credit Schedule 6.05 Litigation Schedule 6.07 ERISA Schedule 6.11 Permitted Liabilities Schedule 6.12 Environmental Matters Schedule 6.16 Subsidiaries and Minority Interests Schedule 6.17 Insurance Matters Schedule 8.01 Permitted Liens Schedule 8.05 Permitted Indebtedness Schedule 8.08 Contingent Obligations Schedule 11.02 Lending Offices; Addresses for Notices EXHIBITS Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C Form of Compliance Certificate Exhibit D Form of Legal Opinion of Company's Counsel Exhibit E Form of Assignment and Acceptance Exhibit F-1 Form of Facility A Note Exhibit F-2 Form of Facility B Note Exhibit G Form of Guaranty Agreement Exhibit H Borrowing Base Report CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of October 4, 1995, among GIANT INDUSTRIES, INC., a Delaware corporation (the "Company"), GIANT INDUSTRIES ARIZONA, INC., an Arizona corporation ("Arizona"), GIANT EXPLORATION & PRODUCTION COMPANY, a Texas corporation ("Exploration"), SAN JUAN REFINING COMPANY, a New Mexico corporation ("San Juan"), GIANT FOUR CORNERS, INC., an Arizona corporation ("Corners"), and CINIZA PRODUCTION COMPANY, a New Mexico corporation ("Ciniza") (Arizona, Exploration, San Juan, Corners and Ciniza are individually referred to herein as a "Guarantor" and collectively as the "Guarantors"), the several financial institutions from time to time parties to this Agreement (collectively, the "Banks"; individually, a "Bank"), BANK OF AMERICA ILLINOIS, as letter of credit issuing bank and a Bank, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks. WHEREAS, the Banks have agreed to make available to the Company and the Company has agreed to borrow under, a Thirty Million Dollar ($30,000,000.00) credit facility and a Forty Million Dollar ($40,000,000.00) working capital and letter of credit facility upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.01 Certain Defined Terms. The following terms have the following meanings: "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock of a corporation (or similar entity), which stock has ordinary voting power for the election of the members of the acquiree's board of directors or persons exercising similar functions (other than stock having such power only by reason of the happening of a contingency), or the acquisition of in excess of 50% of the partnership interests or equity of any Person not a corporation which acquisition gives the acquirer the power to direct or cause the direction of the management and policies of the acquiree, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Company or a Subsidiary of the Company is the surviving entity. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise. "Agent" means Bank of America National Trust and Savings Association in its capacity as agent for the Banks hereunder, and any successor agent arising under Section 10.09. "Agent-Related Persons" means Bank of America Illinois and any successor agent arising under Section 10.09 and any successor letter of credit issuing bank hereunder, together with their respective Affiliates (including, in the case of Bank of America Illinois, the Arranger and the Issuing Bank), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agent's Payment Office" means the address for payments set forth on Schedule 11.02 hereto in relation to the Agent, or such other address as the Agent may from time to time specify. "Agreement" means this Credit Agreement. "Applicable Margin" means with respect to Base Rate Loans and Offshore Rate Loans, the specified percent per annum set forth in Section 2.02 of this Agreement. "Arranger" means BA Securities, Inc., a Delaware corporation. "Assignee" has the meaning specified in Subsection 11.08(a). "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "Bank" has the meaning specified in the introductory clause hereto. References to the "Banks" shall include Bank of America Illinois, including in its capacity as Issuing Bank; for purposes of clarification only, to the extent that Bank of America Illinois may have any rights or obligations in addition to those of the Banks due to its status as Issuing Bank, its status as such will be specifically referenced. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. '101, et seq.). "Base Rate" means, for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." (The "reference rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Revolving Loan, or an L/C Advance, that bears interest based on the Base Rate. "Bloomfield Acquisition" means the acquisition of assets by San Juan from Bloomfield Refining Company and Gary-Williams Energy Corporation pursuant to the Purchase Agreement. "Bloomfield Refinery" shall mean the refinery acquired by San Juan under the Bloomfield Acquisition. "BofA" means Bank of America National Trust and Savings Association, a national banking association. "Borrower" shall mean the Company. "Borrowing" means a borrowing hereunder consisting of Revolving Loans of the same Interest Rate Type made to the Company on the same day by the Banks under Article II, and, other than in the case of Base Rate Loans, having the same Interest Period. "Borrowing Base" means the amount calculated monthly pursuant to Section 2.07(a) based upon information contained in the Borrowing Base Report. "Borrowing Base Report" means that report delivered monthly by the Company to the Agent in form of Exhibit "H" hereto. "Borrowing Date" means any date on which a Borrowing occurs under Article II. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois; Scottsdale, Arizona; or San Francisco, California are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Capital Expenditures" shall mean, for any period, expenditures (including, without limitation, the aggregate amount of Capital Lease Obligations incurred during such period) made by the Company or any of its Consolidated Subsidiaries to acquire or construct fixed assets, plant and equipment (including renewals, improvements and replacements) during such period computed in accordance with GAAP. "Capital Lease Obligations" shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board), and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13). "Capitalization Ratio" means, at any time, the ratio of Consolidated Funded Indebtedness to Consolidated Total Capitalization. "Cash Collateralize" means to pledge and deposit with or deliver to the Agent, for the benefit of the Agent, the Issuing Bank and the Banks, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Agent and the Issuing Bank (which documents are hereby consented to by the Banks). Derivatives of such term shall have corresponding meanings. "Cash Equivalents" means: (a) securities issued or fully guaranteed or insured by the United States Government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than twelve (12) months from the date of acquisition; (b) certificates of deposit, time deposits, Eurodollar time deposits, or bankers' acceptances having in each case a tenor of not more than twelve (12) months from the date of acquisition issued by any U.S. commercial bank or any branch or agency of a non-U.S. commercial bank licensed to conduct business in the U.S. having combined capital and surplus of not less than Five Hundred Million Dollars ($500,000,000) whose long term securities are rated at least A (or then equivalent grade) by S&P and A2 (or then equivalent grade) by Moody's at the time of acquisition; (c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody's at the time of acquisition, and in either case having a tenor of not more than twelve (12) months; (d) debt securities which are registered under the Securities Act of 1933, as amended (the "Securities Act") (and not "restricted securities" in the Company's hands as defined in Rule 144 under the Securities Act), or adjustable rate preferred stock traded on a national securities exchange and issued by a corporation duly incorporated under the laws of a state of the United States, or issued by any state, county or municipality located in the United States of America, provided, however, that such debt securities are rated A2 by Moody's and A or better by S&P at the time of acquisition, and such debt securities have a maturity not in excess of twelve (12) months from the date of creation thereof; (e) repurchase agreements with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above; and (f) money market mutual or similar funds having assets in excess of $100,000,000. "Change of Control" means (a) a purchase or acquisition, directly or indirectly, by any "person" or "group" within the meaning of Section 13(d)(3) and 14(d)(2) of the Securities and Exchange Act of 1934 (a "Group"), of "beneficial ownership" (as such term is defined in Rule 13d-3 under the Exchange Act) of securities of the Company which, together with any securities owned beneficially by any "affiliates" or "associates" of such Group (as such terms are defined in Rule 12b-2 under the Exchange Act), shall represent more than fifty percent (50%) of the combined voting power of the Company's securities which are entitled to vote generally in the election of directors and which are outstanding on the date immediately prior to the date of such purchase or acquisition; or (b) a sale of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person or Group; or (c) the liquidation or dissolution of the Company; or (d) the first day on which a majority of the Board of Directors of the Company are not Continuing Directors (as herein defined). As herein defined, "Continuing Directors" means any member of the Board of Directors of the Company who (x) is a member of such Board of Directors as of the date of this Agreement or (y) was nominated for election or elected to such Board of Directors with the affirmative vote of two-thirds of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election. "Ciniza Refinery" shall mean the refinery owned on the date hereof by the Company or one of its Subsidiaries located near Gallup, New Mexico. "Closing Date" means the date on which all conditions precedent set forth in Section 5.01 and 5.02 are satisfied or waived by all Banks (or, in the case of Subsection 5.01(g), waived by the Person entitled to receive such payment). "Code" means the Internal Revenue Code of 1986, and regulations promulgated thereunder. "Commitment" as to each Bank means the aggregate of such Bank's Facility A Commitment and Facility B Commitment. "Commitment Fee" has the meaning set forth in Subsection 2.09(b). "Compliance Certificate" means a certificate substantially in the form of Exhibit "C". "Consolidated EBITDA" means, for the relevant period, the sum of: (a) the Consolidated Net Income for such period, (b) Consolidated Interest Expense, (c) all taxes measured by income to the extent included in the determination of such Consolidated Net Income, (d) all amounts treated as expenses for depreciation and the amortization of intangibles of any kind for such period to the extent included in the determination of such Consolidated Net Income for the relevant period, plus (e) any interest income. "Consolidated Funded Indebtedness" means, for the Company and its Consolidated Subsidiaries, at any time, without duplication, the sum of: (a) liability for borrowed money or for the deferred purchase price of property or services and (b) obligations under leases which in accordance with GAAP should be recorded as Capital Leases. "Consolidated Interest Expense" means, for the relevant period, for the Company and its Consolidated Subsidiaries, without duplication, the sum of: (a) all interest in respect of Indebtedness accrued or capitalized during such period (whether or not actually paid during such period and including fees payable in respect of letters of credit and bankers' acceptances), (b) the net amount payable (or minus the net amount receivable) under all Swap Contracts during such period (whether or not actually paid or received during such period), and (c) all dividends paid, declared or otherwise accrued in respect of preferred stock. "Consolidated Net Income" means, for any period, the net income (or net loss) of the Company and its Consolidated Subsidiaries for such period determined in accordance with GAAP. "Consolidated Net Worth" means, at any date, an amount equal to the consolidated stockholders' equity of the Company and its Consolidated Subsidiaries determined in accordance with GAAP determined as of such date. "Consolidated Subsidiaries" means, at any date, any Subsidiary the accounts of which, in accordance with GAAP, would be consolidated with those of the Company in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Total Capitalization" means, at any time, the sum of (a) Consolidated Funded Indebtedness and (b) Consolidated Net Worth for such period. "Contingent Obligation" means, as to any Person without duplication, any direct or indirect liability of that Person with or without recourse, (a) with respect to any Indebtedness, lease, dividend, letter of credit or other similar obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety Instrument (other than any Letter of Credit) issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered, or (d) in respect of any Swap Contract. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the maximum stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof, and in the case of other Contingent Obligations, shall be equal to the maximum reasonably anticipated liability in respect thereof. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Conversion/Continuation Date" means any date on which, under Section 2.04, the Company (a) converts Loans of one Interest Rate Type to another Interest Rate Type, or (b) continues as Loans of the same Interest Rate Type, but with a new Interest Period, Loans having Interest Periods expiring on such date. "Credit Extension" means and includes (a) the making of any Revolving Loans hereunder, and (b) the Issuance of any Letters of Credit hereunder. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Default Rate" has the meaning set forth in Subsection 2.08(c)(iii). "Dollars", "dollars" and "$" each mean lawful money of the United States. "Effective Amount" means (i) with respect to any Revolving Loans under Facility A or Facility B on any date, the aggregate outstanding principal amount thereof after giving effect to any Borrowings and prepayments or repayments of Revolving Loans occurring on such date under such facility; and (ii) with respect to any outstanding L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any Issuances of Letters of Credit occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date. "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; and (iii) a Person with a combined capital and surplus of at least $100,000,000 that is primarily engaged in the business of commercial banking and that is (A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a Person of which a Bank is a Subsidiary. "Eligible Account Obligor" shall mean, on any date, any Person obligated to pay a Receivable (i) that is not the Company, a Subsidiary or Affiliate of the Company; (ii) that has not filed for, and is not currently the object of, a proceeding relating to its bankruptcy, insolvency, reorganization, winding-up or composition or reorganization of debts; (iii) that is in good standing with the Company and its Subsidiaries and satisfies all applicable credit standards of the Company and its Subsidiaries; and (iv) for which not more than 50% of the aggregate value of the Receivables of such Account Obligor have not been paid by the date 30 days after the respective due dates therefor. "Eligible Accounts Receivables" shall mean, on any date, all Receivables denominated in Dollars payable by Eligible Account Obligors except: (i) billed Receivables that have not been paid by the date 30 days after the respective due dates therefor; (ii) any Receivable subject to any asserted defense, dispute, claim, offset or counterclaim, provided that, if any such defense, dispute, claim, offset or counterclaim is asserted with respect to such Receivable in an amount equal to a sum certain, then such Receivable shall be an Eligible Receivable to the extent the face amount thereof exceeds such sum certain; (iii) all such Receivables subject to any repurchase or return arrangement; (iv) Receivables of each Eligible Account Obligor to the extent that the Receivables of such Eligible Account Obligor exceed 10% of all Receivables; and (v) all Receivables that are payable by their terms more than 30 days from the respective invoice dates therefor. "Eligible Refinery Hydrocarbon Inventory" means, at any date, the aggregate value therefor on a FIFO basis calculated in accordance with GAAP of all readily marketable, saleable and useful Feedstocks, Intermediate Products and Refined Products, owned by the Company and its Subsidiaries in field production tanks, storage tanks and lines (including line fills but excluding basic sediment and water and slop oil) stored on or required for the Bloomfield Refinery, the Ciniza Refinery, the Portales Refinery, the Company's or its Subsidiaries' service stations and travel centers or the Albuquerque Terminal and other Refined Products terminals owned by the Company or its Subsidiaries which service the Company's and its Subsidiaries' refineries, service stations and travel centers. "Environmental Claims" means all material claims by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. "Environmental Laws" means all material federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all material administrative orders, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, and safety matters. "ERISA" means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate (other than pursuant to Section 4041(b) of ERISA), the treatment of a Plan amendment as a termination under Section 4041(c) or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate. "Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate". "Event of Default" means any of the events or circumstances specified in Section 9.01. "Exchange Act" means the Securities and Exchange Act of 1934, and regulations promulgated thereunder. "Existing Bank of America Letters of Credit" means the letters of credit described in Schedule 3.03. "Exploration and Production Assets" shall mean all real and personal property used for the exploration, production and gathering of oil, gas and other hydrocarbons similar to such real and personal property now owned by Exploration and Ciniza, provided such term shall not include any assets downstream of such field gathering systems. "Facility A Commitment", and "Facility B Commitment", as to each Bank, have the meaning specified in Section 2.01. "Facility A Revolving Loan", and "Facility B Revolving Loan", have the meaning specified in Section 2.01. "Facility A Note" and "Facility B Note" means the promissory notes specified in Section 2.01(a) in 2.01(b) substantially in the same form as Exhibits "F-1" and "F-2", including any amendment, modification, renewal or replacement of such promissory notes. "Facility A Termination Date" and "Facility B Termination Date" means the earlier of (a) three years from the Closing Date or (b) the date on which such Facility's Commitment terminates in accordance with the provisions of this Agreement. "FDIC" means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions. "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York, New York time) on that day by each of three leading brokers of Federal funds transactions in New York, New York selected by the Agent. "Fee Letter" has the meaning specified in Subsection 2.09(a). "Feedstocks" means all crude oil, natural gas liquids, other hydrocarbons valued at the lower of cost or market crude oil prices and ethanol valued at the lower of cost or market, in so far as such Feedstocks are used or useful as fuel or in the manufacture, processing, refining, or blending of Intermediate Products and Refined Products at the Bloomfield, Ciniza or Portales Refineries. "FRB" means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. "Fronting Fee" has the meaning set forth in Section 3.08(b). "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guarantor" means as of the date of Closing each of Arizona, Exploration, San Juan, Four Corners, and Ciniza and any other Subsidiary of the Company which is required to execute a Guaranty under Section 7.12. "Guaranty" means collectively each of the Guarantees substantially in the form of Exhibit "G" hereto executed by each of the Guarantors in favor of the Agent and the Banks, as they may be amended, supplemented or otherwise modified from time to time. "Guaranty Obligation" has the meaning specified in the definition of "Contingent Obligation." "Highest Lawful Rate" means, as of a particular date, the maximum nonusurious interest rate that may under applicable federal and Texas law then be contracted for, charged or received by the Banks in connection with the Advances. "Honor Date" has the meaning specified in Subsection 3.03(c). "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms); (c) all non-contingent reimbursement or payment obligations with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations with respect to Capital Leases; (g) all net obligations with respect to Swap Contracts; (h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (i) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above. "Indemnified Liabilities" has the meaning specified in Section 11.05. "Indemnified Person" has the meaning specified in Section 11.05. "Independent Auditor" has the meaning specified in Subsection 7.01(a). "Index Debt Rating" means the rating applicable to the Company's senior, unsecured, non-credit enhanced long term indebtedness for borrowed money ("Index Debt") or if the Company has no such rating, the implied rating established by Moody's or S&P based upon the rating implied from the Company's Senior Subordinated Debt as if the Company had Index Debt. "Insolvency Proceeding" means (a) any case, action or proceeding relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Interest Payment Date" means, as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar quarter and each date such Loan is converted into another Interest Rate Type of Loan, provided, however, that if any Interest Period for an Offshore Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period, and the date that falls three months after each Interest Payment Date thereafter for such Interest Period, is also an Interest Payment Date. "Interest Period" means, (a) as to any Offshore Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as Offshore Rate Loan, and ending on the date one, two, three or six months thereafter as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period for any Revolving Loan under either Facility A or Facility B shall extend beyond the Revolving Termination Date for such facility. "Interest Rate Type" means either the Base Rate of interest or the Offshore Rate of interest charged against any Loan or Loans hereunder. "Intermediate Products" means all Feedstocks that have been partially processed or refined as isomerate, cat feed, gasoline components or naphtha and valued at the lower of cost or market crude oil prices. "IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. "Issuance Date" has the meaning specified in Subsection 3.01(a). "Issue" means, with respect to any Letter of Credit, to issue or to extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding meanings. "Issuing Bank" means Bank of America Illinois in its capacity as issuer of one or more Letters of Credit hereunder, together with any successor replacement letter of credit issuer pursuant to Section 10.09, and with respect to the Existing Bank of America Letters of Credit which have been issued by BofA, "Issuing Bank" means BofA. "L/C Advance" means each Bank's participation in any L/C Borrowing in accordance with its Pro Rata Share. "L/C Application" and "L/C Amendment Application" means an application form for Issuance of, and for amendment of Letters of Credit as shall at any time be in use at the Issuing Bank. "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed on the date when made in accordance with Subsection 3.03(b) nor converted into a Borrowing of Facility B Revolving Loans under Subsection 3.03(c). "L/C Obligations" means at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit then outstanding, plus (b) the amount of all unreimbursed drawings under all Letters of Credit, including all outstanding L/C Borrowings. "L/C-Related Documents" means the Letters of Credit, the L/C Applications, the L/C Amendment Applications and any other document relating to any Letter of Credit, including any of the Issuing Bank's standard form documents for letter of credit issuances. "Lending Office" means, as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on Schedule 11.02, or such other office or offices as such Bank may from time to time notify the Company and the Agent. "Letter of Credit Fee" means the fee payable pursuant to Section 3.08 of this Agreement, calculated as set forth in Section 2.02 of this Agreement. "Letters of Credit" means the Existing Bank of America Letters of Credit and any standby letters of credit Issued by the Issuing Bank pursuant to Article III. "Lien" means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an Operating Lease. "Loan" means an extension of credit by a Bank to the Company under Article II or Article III in the form of a Revolving Loan under the Facility A Loan or the Facility B Loan or L/C Advance. "Loan Documents" means this Agreement, any Notes, the Guaranties, the Fee Letter, the L/C-Related Documents, and all other documents delivered to the Agent or any Bank in connection herewith. "Majority Banks" means at any time Banks then holding at least 66-2/3% of the then aggregate unpaid principal amount of the Loans, or, if no such principal amount is then outstanding, Banks then having at least 66-2/3% of the Commitments. "Margin Stock" means "margin stock" as such term is defined in Regulation G, T, U or X of the FRB. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or financial condition of the Company and its Subsidiaries taken as a whole, or as to the Company or any Significant Subsidiary; (b) a material impairment of the ability of the Company or any Significant Subsidiary to perform under any Loan Document and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company or any Significant Subsidiary of any Loan Document. "Material Subsidiary" means, at any time, a Subsidiary with total assets with a book value of $2,000,000 or more. "Moody's" means Moody's Investor Service, Inc. "Multiemployer Plan" means a "multiemployer plan", within the meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. "NBD Indenture" means that certain Indenture dated November 23, 1993, between the Company, as Issuer, NBD Bank, National Association, as Trustee, and others evidenced by the NBD Subordinated Notes. "NBD Subordinated Notes" means the $100,000,000 9-3/4% Senior Subordinated Notes due 2003 issued by the Company under the NBD Indenture. "Non-Discretionary Capital Expenditures" shall mean all Capital Expenditures (a) required to be made to permit the Company and its Subsidiaries to comply with any applicable law (including any Environmental Law), rule, regulation or order of any governmental or regulatory authority or (b) necessary to permit the Company and its Subsidiaries to maintain the plant and equipment used in their businesses in good working order and condition. "Note" means a Revolving Note executed by the Company in favor of a Bank pursuant to Subsection 2.01(a) and (b). "Notice of Borrowing" means a notice in substantially the form of Exhibit "A". "Notice of Conversion/Continuation" means a notice in substantially the form of Exhibit "B". "Obligations" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Company to any Bank, the Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising. "Offshore Rate" means, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/16th of 1%) determined by the Agent as follows: Offshore Rate = LIBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and "LIBOR" means the rate of interest per annum determined by the Agent to be the arithmetic mean (rounded upward to the next 1/16th of 1%) of the rates of interest per annum notified to the Agent by each Reference Bank as the rate of interest at which dollar deposits in the approximate amount of the amount of the Loan to be made or continued as, or converted into, an Offshore Rate Loan by such Reference Bank and having a maturity comparable to such Interest Period would be offered to major banks in the London interbank market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Rate Loan" means a Loan that bears interest based on the Offshore Rate. "Operating Lease" means an operating lease determined in accordance with GAAP. "Organization Documents" means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation. "Other Taxes" means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Participant" has the meaning specified in Subsection 11.08(d). "PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA, other than a Multiemployer Plan, which the Company or any of its Subsidiaries sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years. "Permitted Liens" has the meaning set forth in Section 8.01. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to ERISA, other than a Multiemployer Plan, and which the Company or any Subsidiary of the Company sponsors or maintains or to which the Company or any Subsidiary of the Company makes, is making, or is obligated to make contributions and includes any Pension Plan. "Preferred Eligible Account Obligor" means Eligible Accounts Receivables that are either (i) fully supported by a standby letter of credit issued by a commercial bank organized under the laws of the United States having an "A2/A" rating or better by Moody and S&P respectively or (ii) the account debtor is a major international oil or other company rated "A2/A" or better by Moody and S&P, respectively, or a Wholly Owned Subsidiary of such company whose obligations are guaranteed by such company as identified by the Company on Schedule 1.01 hereof as may be amended from time to time with the approval of the Majority Banks. "Principal Business" means (i) the business of the exploration for, and development, acquisition, production, processing, marketing, refining, storage and transportation of, hydrocarbons, (ii) any related energy and natural resource business, (iii) any business currently engaged in by the Company or its Subsidiaries, (iv) convenience stores, retail service stations, truck stops and other public accommodations in connection therewith and (v) any activity or business that is a reasonable extension, development or expansion of any of the foregoing. "Pro Rata Share" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank's Commitment divided by the combined Commitments of all Banks. "Prudential Note Agreement" and "Prudential Notes" means that certain Amended and Restated Note Agreement dated September 30, 1993, as amended by Letter Amendment No. 1 dated December 31, 1994 and Letter Amendment No. 2 dated May 9, 1995, (as so amended the "Prudential Note Agreement") by and between Arizona and the Company and The Prudential Insurance Company of America ("Prudential") and Pruco Life Insurance Company ("Pruco") regarding the 10.91% Senior Notes due March 31, 1999, and the Notes issued by Arizona to Prudential and Pruco pursuant thereto. "Purchase Agreement" means the Purchase and Sale Agreement dated as of August 8, 1995 among Bloomfield Refining Company and Gary-Williams Energy Corporation, as Sellers, and Giant Industries Arizona, Inc., as Buyer, as same may be amended, provided that if amended in any material respect, the written consent of the Majority Banks shall be required. "Receivables" shall mean, as to the Company or any of its Subsidiaries, all accounts receivable, whether billed or unbilled, arising out of the sale of inventory in the ordinary course of business. "Reference Bank" means BofA. "Refined Products" means all gasoline, diesel, aviation fuel, fuel oil, propane, ethanol, transmix and other products processed, refined or blended from Feedstocks and Intermediate Products valued at the lower of cost or market prices. "Regulation U" and "Regulation X" means Regulation U and Regulation X, respectively, of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulations or official interpretations of said Board of Governors relating to the subject matter addressed therein. "Reportable Event" means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Revolving Loan" means a Facility A Loan and/or a Facility B Loan. "Revolving Notes" means the Facility A Note and the Facility B Note. "Responsible Officer" means the chief financial officer or the treasurer of the Company. "S&P" means Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc., a New York corporation. "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. "Senior Subordinated Debt" means the subordinated debt of the Company evidenced by the Subordinated Notes pursuant to the NBD Indenture. "Significant Subsidiary" means (a) Arizona, (b) San Juan, (c) any other Material Subsidiary which becomes a Subsidiary after execution of this Agreement and is designated by the Majority Banks as a Significant Subsidiary, or (d) any other Subsidiary in existence as of the execution of this Agreement whose asset size materially increases above its asset size as of the date of execution of this Agreement, if such Subsidiary is designated as a Significant Subsidiary by the Majority Banks. "Solvent" means, as to any Person at any time, that (a) the fair value of all of the property of such Person is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) the present fair saleable value of all of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital. "Subordinated Notes" means the NBD Subordinated Notes issued under the NBD Indenture. "Subsidiary" of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Company. "Surety Instruments" means all letters of credit (including standby), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Swap Contract" means any agreement (including any master agreement and any agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, commodity forward contracts, equity or equity index swap or option, bond option, interest rate option, forward foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swap option, currency option or any other, similar agreement (including any option to enter into any of the foregoing). "Taxes" means any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Bank's net income by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank or the Agent, as the case may be, is organized or maintains a lending office. "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "United States" and "U.S." each means the United States of America. "Wholly-Owned Subsidiary" means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power at the time as of which any determination is being made, is owned, beneficially and of record, by the Company, or by one or more of the other Wholly-Owned Subsidiaries, or both. 1.02 Other Interpretive Provisions. The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Unless otherwise specified or the context clearly requires otherwise, the words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement. The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. The term "including" is not limiting and means "including without limitation." In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Company and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in their preparation. 1.03 Accounting Principles. (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. References to "consolidated", when it precedes any accounting term, means such term as it would apply to the Company and its Subsidiaries on a consolidated basis, determined in accordance with GAAP. (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. ARTICLE II THE CREDITS 2.01 Amounts and Terms of Commitments. (a) The Facility A Revolving Credit. Each Bank severally agrees, on the terms and conditions set forth herein, to make Loans to the Company (each such loan, a "Facility A Revolving Loan") from time to time on any Business Day during the period from the Closing Date to the Facility A Termination Date, in an aggregate amount not to exceed at any time outstanding, the amount set forth on Schedule 2.01(a) (such amount, as the same may be reduced under Section 2.05 or as a result of one or more assignments under Section 11.08, the Bank's "Facility A Commitment"). Within the limits of each Bank's Facility A Commitment, and subject to the other terms and conditions of this Agreement, the Company may borrow under this Subsection 2.01(a), prepay under Section 2.06 and reborrow under this Subsection 2.01(a). (b) The Facility B Revolving Credit. Each Bank severally agrees, on the terms and conditions set forth herein, to make Loans to the Company (each such loan, a "Facility B Revolving Loan") from time to time on any Business Day during the period from the Closing Date to the Facility B Termination Date, in an aggregate amount not to exceed at any time outstanding, the lesser of the following (such amount, as the same may be reduced under Section 2.05 or as a result of one or more assignments under Section 11.08, the Bank's "Facility B Commitment"): (i) the Bank's Pro Rata Share of the current Borrowing Base and (ii) the amount set forth on Schedule 2.01(b); provided, however, that the Effective Amount of all Facility B Revolving Loans, and the Effective Amount of all L/C Obligations, shall not at any time exceed the combined Facility B Commitments. Within the limits of each Bank's Facility B Commitment, and subject to the other terms and conditions of this Agreement, the Company may borrow under this Subsection 2.01(b), prepay under Section 2.06 and reborrow under this Subsection 2.01(b). 2.02 Certain Pricing Terms. The Applicable Margin and the Commitment Fee shall be equal to the specified percent per annum set forth in Schedule 2.02. 2.03 Procedure for Borrowing. (a) Each Borrowing of Revolving Loans shall be made upon the Company's irrevocable written notice delivered to the Agent in the form of a Notice of Borrowing (which notice must be received by the Agent prior to 9:00 a.m. (San Francisco, California time) (i) three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans; and (ii) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans, specifying: (A) the amount of the Borrowing, which shall be in an aggregate minimum amount of $2,000,000 or any multiple of $1,000,000 in excess thereof; (B) the requested Borrowing Date, which shall be a Business Day; (C) the Interest Rate Type of Loans comprising the Borrowing; and (D) the duration of the Interest Period applicable to such Loans included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Borrowing comprised of Offshore Rate Loans, such Interest Period shall be three months. (b) The Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that Borrowing. (c) Each Bank will make the amount of its Pro Rata Share of each Borrowing available to the Agent for the account of the Company at the Agent's Payment Office by 11:00 a.m. (San Francisco, California time) on the Borrowing Date requested by the Company in funds immediately available to the Agent. The proceeds of all such Loans will then be made available to the Company by the Agent by wire transfer in accordance with written instructions provided to the Agent by the Company of like funds as received by the Agent. (d) After giving effect to any Borrowing, there may not be more than seven (7) different Interest Periods in effect. 2.04 Conversion and Continuation Elections. (a) The Company may, upon irrevocable written notice to the Agent in accordance with Subsection 2.04(b): (i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Loans (or any part thereof in an amount not less than $2,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Loans of any other Interest Rate Type; or (ii) elect as of the last day of the applicable Interest Period, to continue any Revolving Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than $2,000,000, or that is in an integral multiple of $1,000,000 in excess thereof); provided, that if at any time the aggregate amount of Offshore Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $2,000,000, such Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of the Company to continue such Loans as, and convert such Loans into, Offshore Rate Loans shall terminate. (b) The Company shall deliver a Notice of Conversion/ Continuation to be received by the Agent not later than 9:00 a.m. (San Francisco, California time) at least (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) one Business Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion/ Continuation Date; (B) the aggregate amount of Loans to be converted or renewed; (C) the Interest Rate Type of Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Loans, the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to Offshore Rate Loans, the Company has failed to select timely a new Interest Period to be applicable to Offshore Rate Loans, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period. (d) The Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank. (e) Unless the Majority Banks otherwise agree, during the existence of a Default or Event of Default, the Company may not elect to have a Loan converted into or continued as an Offshore Rate Loan. (f) After giving effect to any conversion or continuation of Loans, there may not be more than seven (7) different Interest Periods in effect. 2.05 Voluntary Termination or Reduction of Commitments. The Company may, upon not less than five Business Days' prior notice to the Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate minimum amount of $2,000,000 or any multiple of $1,000,000 in excess thereof; unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, (a) the Effective Amount of all Facility A Revolving Loans exceed the amount of the combined Facility A Revolving Commitment, then in effect, or (b) the Effective Amount of all Facility B Revolving Loans and L/C Obligations together would exceed the amount of the combined Facility B Revolving Commitments then in effect. Once reduced in accordance with this Section, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Bank according to its Pro Rata Share. All accrued commitment, letter of credit and fronting fees to, but not including, the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination. 2.06 Optional Prepayments. Subject to Section 4.04, the Company may, at any time or from time to time, upon irrevocable notice to the Agent, not less than three (3) Business Days, for Offshore Rate Loans and one (1) Business Day for Base Rate Loans, ratably as to each Bank, prepay Loans in whole or in part, in minimum amounts of $2,000,000 or any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall specify the date and amount of such prepayment and the Interest Rate Type(s) of Loans to be prepaid. The Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share of such prepayment. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 4.04. 2.07 Borrowing Base Determinations, Mandatory Prepayments of Loans. (a) The Borrowing Base shall be determined monthly on the last day of each month until the Facility B Termination Date and shall be equal to the sum of (i) eighty percent (80%) of Eligible Refinery Hydrocarbon Inventory (except for Refined Products at the Company's and its Subsidiaries' service stations and travel centers), plus (ii) fifty percent (50%) of Eligible Refinery Hydrocarbon Inventory as Refined Products at the Company's and its Subsidiaries' service stations and travel centers, plus (iii) ninety percent (90%) of Eligible Accounts Receivable from Preferred Account Obligors plus (iv) eighty-five percent (85%) of Eligible Accounts Receivable from Account Obligors other than Preferred Eligible Account Obligors. (b) If on any date the Effective Amount of all Facility B Revolving Loans and the Effective Amount of all L/C Obligations exceed the combined Facility B Commitments, the Company shall, and without notice or demand, prepay the outstanding principal amount of the Facility B Revolving Loans by an amount equal to the applicable excess ("Mandatory Prepayment"). Subject to Section 4.04, if on any date after giving effect to any Mandatory Prepayment made on such date pursuant to the preceding sentence the Effective Amount of all Facility B Revolving Loans then outstanding plus the Effective Amount of all L/C Obligations exceeds the combined Facility B Commitments, the Company shall immediately Cash Collateralize on such date the outstanding Letters of Credit in an amount equal to the excess of the maximum amount that the L/C Obligations exceed the Facility B Commitment. 2.08 Repayment. (a) The Facility A Revolving Credit. The Company shall repay to the Banks the aggregate principal amount of Facility A Loans on the Facility A Termination Date. (b) The Facility B Revolving Credit. The Company shall repay to the Banks the aggregate principal amount of Facility B Loans outstanding on the Facility B Termination Date. (c) Interest. (i) Each Revolving Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the lesser of (a) Offshore Rate or the Base Rate, as the case may be (and subject to the Company's right to convert to other Interest Rate Types of Loans under Section 2.04), plus the Applicable Margin, or (b) the maximum rate permitted by applicable usury laws now or hereafter enacted. (ii) Interest on each Revolving Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 2.06 or 2.07 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Agent at the request or with the consent of the Majority Banks. (iii) Notwithstanding subsection (a) of this Section, while any Event of Default exists or after acceleration, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Loans, at a rate per annum equal to the lesser of (x) the Highest Lawful Rate and (y) the Base Rate plus two percent (2%). 2.09 Fees. In addition to certain fees described in Section 3.08: (a) Arrangement, Agency Fees. The Company shall pay an arrangement fee to the Arranger for the Arranger's own account, and shall pay an agency fee to the Agent for the Agent's own account, as required by the letter agreement ("Fee Letter") between the Company and the Arranger and Agent dated September 11, 1995. (b) Commitment Fees. The Company shall pay to the Agent for the account of each Bank a commitment fee on the average daily unused portion of such Bank's Commitment, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon the daily utilization for that quarter as calculated by the Agent, equal to the percent per annum set forth in Schedule 2.02. For purposes of calculating utilization under this subsection, the Commitments shall be deemed used to the extent of the Effective Amount of Revolving Loans then outstanding, plus the Effective Amount of L/C Obligations then outstanding. Such commitment fee shall accrue from the Closing Date to the Revolving Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each quarter commencing on December 31, 1995 through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date; provided that, in connection with any reduction or termination of Commitments under Section 2.05 or Section 2.07, the accrued commitment fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to such quarterly payment date. The commitment fees provided in this subsection shall accrue at all times after the above-mentioned commencement date, including at any time during which one or more conditions in Article V are not met. 2.10 Computation of Fees and Interest. (a) All computations of interest for Base Rate Loans when the Base Rate is determined by BofA's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) Each determination of an interest rate by the Agent shall be conclusive and binding on the Company and the Banks in the absence of manifest error. 2.11 Payments by the Company. (a) All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Banks at the Agent's Payment Office, and shall be made in dollars and in immediately available funds, no later than 11:00 a.m. (San Francisco, California time) on the date specified herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 11:00 a.m. (San Francisco, California time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Banks that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Company has not made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid. 2.12 Payments by the Banks to the Agent. (a) Unless the Agent receives notice from a Bank on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one Business Day prior to the date of such Borrowing, that such Bank will not make available as and when required hereunder to the Agent for the account of the Company the amount of that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. (b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any Borrowing Date. 2.13 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share, such Bank shall immediately (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's ratable share (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 11.09) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Banks following any such purchases or repayments. ARTICLE III THE LETTERS OF CREDIT 3.01 The Letter of Credit Facility. (a) On the terms and conditions set forth herein (i) the Issuing Bank agrees, (A) from time to time on any Business Day during the period from the Closing Date to the Facility B Termination Date to issue Letters of Credit for the account of the Company, and to amend or renew Letters of Credit previously issued by it, in accordance with Subsections 3.02(c) and 3.02(e), and (B) to honor drafts under the Letters of Credit; and (ii) the Banks severally agree to participate in Letters of Credit Issued for the account of the Company; provided, that the Issuing Bank shall not be obligated to Issue, and no Bank shall be obligated to participate in, any Letter of Credit if as of the date of Issuance of such Letter of Credit (the "Issuance Date") the Effective Amount of all L/C Obligations plus the Effective Amount of all Facility B Revolving Loans exceeds the combined Facility B Commitments. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company's ability to obtain Letters of Credit shall be fully revolving, and, accordingly, the Company may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit which have expired or which have been drawn upon and reimbursed. (b) The Issuing Bank is under no obligation to Issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from Issuing such Letter of Credit, or any Requirement of Law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it; (ii) the Issuing Bank has received written notice from any Bank, the Agent or the Company, on or prior to the Business Day prior to the requested date of Issuance of such Letter of Credit, that one or more of the applicable conditions contained in Article V is not then satisfied; (iii) the expiry date of any requested Letter of Credit is (A) more than 360 days after the date of Issuance, unless the Issuing Bank and the Majority Banks have approved such expiry date in writing, or (B) after the Facility B Termination Date, unless all of the Banks have approved such expiry date in writing; (iv) the expiry date of any requested Letter of Credit is prior to the maturity date of any financial obligation to be supported by the requested Letter of Credit; (v) any requested Letter of Credit does not provide for drafts, or is not otherwise in form and substance acceptable to the Issuing Bank, or the Issuance of a Letter of Credit shall violate any applicable policies of the Issuing Bank; (vi) any Letter of Credit is for the purpose of supporting the issuance of any letter of credit by any other Person; or (vii) if such Letter of Credit is issued to support workmen's compensation liabilities and the face amount is more than $1,000,000. 3.02 Issuance, Amendment and Renewal of Letters of Credit. (a) Each Letter of Credit shall be issued two (2) Business Days after receipt by the Issuing Bank (if received by the Issuing Bank no later than 10:00 a.m. Chicago time) of an irrevocable written request from the Company (with a copy sent by the Company to the Agent) or such shorter time as the Issuing Bank may agree in a particular instance in its sole discretion. Each such request for issuance of a Letter of Credit shall be by facsimile, confirmed immediately in an original writing, in the form of an L/C Application, and shall specify in form and detail satisfactory to the Issuing Bank such matters as the Issuing Bank may require. (b) At least two Business Days prior to the Issuance of any Letter of Credit, the Issuing Bank will confirm with the Agent (by telephone or in writing) that the Agent has received a copy of the L/C Application or L/C Amendment Application from the Company and, if the Agent has not received such copy, the Issuing Bank will provide the Agent with a copy thereof. Unless the Issuing Bank has received notice on or before the Business Day immediately preceding the date the Issuing Bank is to issue a requested Letter of Credit from the Agent (A) directing the Issuing Bank not to issue such Letter of Credit because such issuance is not then permitted under Subsection 3.01(b); or (B) that one or more conditions specified in Article V are not then satisfied; then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the Company in accordance with the Issuing Bank's usual and customary business practices. (c) From time to time while a Letter of Credit is outstanding and prior to the Facility B Termination Date, the Issuing Bank will, upon the written request of the Company received by the Issuing Bank (with a copy sent by the Company to the Agent) at or before 10:00 a.m. Chicago Time at least two (2) Business Days (or such shorter time as the Issuing Bank may agree in a particular instance in its sole discretion), amend any Letter of Credit issued by it. Each such request for amendment of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, and made in such form as the Issuing Bank may require. The Issuing Bank shall be under no obligation to amend any Letter of Credit if: (A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit does not accept the proposed amendment to the Letter of Credit. (d) Upon receipt of notice from the Issuing Bank, the Agent will promptly notify the Banks of the Issuance of a Letter of Credit and any amendment thereto. (e) If any outstanding Letter of Credit shall provide that it shall be automatically renewed unless the beneficiary thereof receives notice from the Issuing Bank that such Letter of Credit shall not be renewed, the Issuing Bank shall be permitted to allow such Letter of Credit to renew, and the Company and the Banks hereby authorize such renewal. The Issuing Bank shall not be obligated to allow such Letter of Credit to renew if the Issuing Bank would have no obligation at such time to issue or amend such Letter of Credit under the terms of this Agreement. (f) The Issuing Bank may, at its election (or as required by the Agent at the direction of the Majority Banks), deliver any notices of termination or other communications to any Letter of Credit beneficiary, and take any other action as necessary or appropriate, at any time and from time to time, in order to cause the expiry date of such Letter of Credit to be a date not later than the Facility B Termination Date. (g) This Agreement shall control in the event of any conflict with any L/C-Related Document (other than any Letter of Credit). (h) The Issuing Bank will also deliver to the Agent, concurrently or promptly following its delivery of a Letter of Credit, or amendment to or renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and complete copy of each such Letter of Credit or amendment to or renewal of a Letter of Credit. 3.03 Existing Bank of America Letters of Credit, Risk Participations, Drawings and Reimbursements. (a) On and after the Closing Date, the Existing BofA Letters of Credit shall be deemed for all purposes, including for purposes of the fees to be collected pursuant to Subsections 3.08(a) and 3.08(c), and reimbursement of costs and expenses to the extent provided herein, Letters of Credit outstanding under this Agreement and entitled to the benefits of this Agreement and the other Loan Documents, and shall be governed by the applications and agreements pertaining thereto and by this Agreement. Each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank on the Closing Date a participation in each such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) such Bank's Pro Rata Share times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. For purposes of Subsection 2.01(b) and Subsection 2.09(b), the Existing BofA Letters of Credit shall be deemed to utilize pro rata the Facility B Commitment of each Bank. (b) Immediately upon the Issuance of each Letter of Credit, each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank a participation in such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) the Pro Rata Share of such Bank, times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. For purposes of Subsection 2.01(b), each Issuance of a Letter of Credit shall be deemed to utilize the Facility B Commitment of each Bank by an amount equal to the amount of such participation. (c) In the event of any request for a drawing under a Letter of Credit by the beneficiary thereof, the Issuing Bank will promptly notify the Company. The Company shall reimburse the Issuing Bank prior to 10:00 a.m. (Chicago, Illinois time), on each date that any amount is paid by the Issuing Bank under any Letter of Credit (each such date, an "Honor Date"), in an amount equal to the amount so paid by the Issuing Bank. In the event the Company fails to reimburse the Issuing Bank for the full amount of any drawing under any Letter of Credit by 10:00 a.m. (Chicago, Illinois time) on the Honor Date, the Issuing Bank will promptly notify the Agent and the Agent will promptly notify each Bank thereof, and the Company shall be deemed to have requested that Facility B Base Rate Loans be made by the Banks to be disbursed on the Honor Date under such Letter of Credit, subject to the amount of the unutilized portion of the Facility B Commitment and subject to the conditions set forth in Section 5.02. Any notice given by the Issuing Bank or the Agent pursuant to this Subsection 3.03(c) may be oral if immediately confirmed in writing (including by facsimile); provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. (d) Each Bank shall upon any notice pursuant to Subsection 3.03(c) make available to the Agent for the account of the relevant Issuing Bank an amount in Dollars and in immediately available funds equal to its Pro Rata Share of the amount of the drawing, whereupon the participating Banks shall (subject to Subsection 3.03(e)) each be deemed to have made a Facility B Revolving Loan consisting of a Base Rate Loan to the Company in that amount. If any Bank so notified fails to make available to the Agent for the account of the Issuing Bank the amount of such Bank's Pro Rata Share of the amount of the drawing by no later than 12:00 noon (San Francisco, California time) on the Honor Date, then interest shall accrue on such Bank's obligation to make such payment, from the Honor Date to the date such Bank makes such payment, at a rate per annum equal to the Federal Funds Rate in effect from time to time during such period. The Agent will promptly give notice to each Bank of the occurrence of the Honor Date, but failure of the Agent to give any such notice on the Honor Date or in sufficient time to enable any Bank to effect such payment on such date shall not relieve such Bank from its obligations under this Section 3.03. (e) With respect to any unreimbursed drawing that is not converted into Facility B Revolving Loans consisting of Base Rate Loans to the Company in whole or in part, because of the Company's failure to satisfy the conditions set forth in Section 5.02 or for any other reason, the Company shall be deemed to have incurred from the Issuing Bank an L/C Borrowing in the amount of such drawing, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at a rate per annum equal to the Base Rate plus 2% per annum, and each Bank's payment to the Issuing Bank pursuant to Subsection 3.03(d) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Bank in satisfaction of its participation obligation under this Section 3.03. (f) Each Bank's obligation in accordance with this Agreement to make the Facility B Revolving Loans or L/C Advances, as contemplated by this Section 3.03, as a result of a drawing under a Letter of Credit, shall be absolute and unconditional and without recourse to the Issuing Bank and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Issuing Bank, the Company or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, an Event of Default or a Material Adverse Effect; or (iii) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided, however, that each Bank's obligation to make Facility B Revolving Loans under this Section 3.03 is subject to the conditions set forth in Section 5.02. 3.04 Repayment of Participations. (a) When the Agent receives (and only if the Agent receives), for the account of the Issuing Bank, immediately available funds from the Company (i) in reimbursement of any payment made by the Issuing Bank under the Letter of Credit with respect to which any Bank has paid the Agent for the account of the Issuing Bank for such Bank's participation in the Letter of Credit pursuant to Section 3.03 or (ii) in payment of interest thereon, the Agent will pay to each Bank, in the same funds as those received by the Agent for the account of the Issuing Bank, the amount of such Bank's Pro Rata Share of such funds, and the Issuing Bank shall receive the amount of the Pro Rata Share of such funds of any Bank that did not so pay the Agent for the account of the Issuing Bank. (b) If the Agent or the Issuing Bank is required at any time to return to the Company, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of the payments made by the Company to the Agent for the account of the Issuing Bank pursuant to subsection 3.04(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Bank shall, on demand of the Agent, forthwith return to the Agent or the Issuing Bank the amount of its Pro Rata Share of any amounts so returned by the Agent or the Issuing Bank plus interest thereon from the date such demand is made to the date such amounts are returned by such Bank to the Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds Rate in effect from time to time. 3.05 Role of the Issuing Bank. (a) Each Bank and the Company agree that, in paying any drawing under a Letter of Credit, the Issuing Bank shall not have any responsibility to obtain any document (other than any sight draft, certificates and other documents, if any, expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. (b) No Agent-Related Person nor any of the respective correspondents, participants or assignees of the Issuing Bank shall be liable to any Bank for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Banks (including the Majority Banks, as applicable); (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any L/C-Related Document. (c) The Company hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Company's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. No Agent-Related Person, nor any of the respective correspondents, participants or assignees of the Issuing Bank, shall be liable or responsible for any of the matters described in clauses (i) through (vii) of Section 3.06; provided, however, anything in such clauses to the contrary notwithstanding, that the Company may have a claim against the Issuing Bank, and the Issuing Bank may be liable to the Company, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Company which the Company proves were caused by the Issuing Bank's willful misconduct or gross negligence in failing to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft, certificate(s) and other documents, if any, strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing: (i) the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; and (ii) the Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. 3.06 Obligations Absolute. The obligations of the Company under this Agreement and any L/C-Related Document to reimburse the Issuing Bank for a drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing under a Letter of Credit converted into Facility B Revolving Loans, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other L/C-Related Document under all circumstances, including the following: (i) any lack of validity or enforceability of this Agreement or any L/C-Related Document; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Company in respect of any Letter of Credit or any other amendment or waiver of or any consent to departure from all or any of the L/C-Related Documents; (iii) the existence of any claim, set-off, defense or other right that the Company may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Issuing Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the L/C-Related Documents or any unrelated transaction; (iv) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit; (v) any payment by the Issuing Bank under any Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of any Letter of Credit; or any payment made by the Issuing Bank under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any Insolvency Proceeding; (vi) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the obligations of the Company in respect of any Letter of Credit; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or a guarantor. 3.07 Cash Collateral Pledge. Upon (i) the request of the Agent, (A) if the Issuing Bank has honored any full or partial drawing request on any Letter of Credit and such drawing has resulted in an L/C Borrowing hereunder, or (B) if, as of the Facility B Termination Date, any Letters of Credit may for any reason remain outstanding and partially or wholly undrawn, or (ii) the occurrence of the circumstances described in Subsection 2.07(b) requiring the Company to Cash Collateralize Letters of Credit, then, the Company shall immediately Cash Collateralize the L/C Obligations in an amount equal to the L/C Obligations. 3.08 Letter of Credit Fees. (a) The Company shall pay to the Agent for the account of each of the Banks a letter of credit fee with respect to the Letters of Credit equal to the per annum fee specified in Schedule 2.02 multiplied by the average daily maximum amount available to be drawn of the outstanding Letters of Credit, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon Letters of Credit outstanding for that quarter as calculated by the Agent. Such letter of credit fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter during which Letters of Credit are outstanding, commencing on the first such quarterly date to occur after the Closing Date, through the Facility B Termination Date (or such later date upon which the outstanding Letters of Credit shall expire), with the final payment to be made on the Facility B Termination Date (or such later expiration date). (b) The Company shall pay to the Agent for the account of the Issuing Bank a letter of credit fronting fee (the "Fronting Fee") for each Letter of Credit Issued by the Issuing Bank equal to .125% per annum of the average daily maximum amount available to be drawn on the outstanding Letters of Credit, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon Letters of Credit outstanding for that quarter. (c) The Company shall pay to the Issuing Bank from time to time on demand the normal issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the Issuing Bank relating to letters of credit as from time to time in effect. 3.09 Cash Collateralization. (a) If any Event of Default shall occur and be continuing, the Company agrees that it shall on the Business Day it receives notice from the Agent, acting upon instructions of the Majority Banks, deposit in an account (the "Cash Collateral Account") held by the Agent, for the benefit of the Banks, an amount in cash equal to the Letter of Credit Obligations as of such date. Such deposit shall be held by the Agent as collateral for the payment and performance of the Obligations. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Cash collateral shall be held in a blocked, non-interest bearing account held by the Agent or any Affiliate of the Agent upon such terms and in such type of account as customary at that depository institution. The Company shall pay any fees charged by such depository institution which fees are of the type customarily charged by such institution with respect to such accounts. Moneys in such account shall (i) be applied by the Agent to the payment of Letter of Credit Borrowings and interest thereon, (ii) be held for the satisfaction of the reimbursement obligations of the Company in respect of Letters of Credit, and (iii) if the maturity of the Loans has been accelerated, with the consent of the Majority Banks, be applied to satisfy the Obligations. (b) As security for the payment of all Obligations, the Company hereby grants, conveys, assigns, pledges, sets over and transfers to the Agent, and creates in the Agent's favor a Lien on, and security interest, in all money, instruments and securities at any time held in or acquired in connection with the Cash Collateral Account, together with all proceeds thereof. At any time and from time to time, upon the Agent's request, the Company promptly shall execute and deliver any and all such further instruments and documents as may be necessary, appropriate or desirable in the Agent's judgment to obtain the full benefits (including perfection and priority) of the security interest created or intended to be created by this Subsection 3.09(b) and of the rights and powers herein granted. 3.10 Uniform Customs and Practice. The Uniform Customs and Practice for Documentary Credits as published by the International Chamber of Commerce ("UCP") most recently at the time of issuance of any Letter of Credit shall (unless otherwise expressly provided in the Letters of Credit) apply to the Letters of Credit. ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY 4.01 Taxes. (a) Any and all payments by the Company to each Bank or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes. In addition, the Company shall pay all Other Taxes. (b) The Company agrees to indemnify and hold harmless each Bank and the Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Bank or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Bank or the Agent makes written demand therefor. (c) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then: (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Bank or the Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) the Company shall make such deductions and withholdings; (iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) the Company shall also pay to each Bank or the Agent for the account of such Bank, at the time interest is paid, all additional amounts which the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes or Other Taxes had not been imposed. (d) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent. (e) If the Company is required to pay additional amounts to any Bank or the Agent pursuant to subsection (c) of this Section, then upon written request of the Company such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue, if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. 4.02 Illegality. (a) If any Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank to the Company through the Agent, any obligation of that Bank to make Offshore Rate Loans shall be suspended until the Bank notifies the Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If a Bank determines that it is unlawful to maintain any Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Agent), prepay in full such Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 4.04, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loan. If the Company is required to so prepay any Offshore Rate Loan, then concurrently with such prepayment, the Company shall borrow from the affected Bank, in the amount of such repayment, a Base Rate Loan. (c) If the obligation of any Bank to make or maintain Offshore Rate Loans has been so terminated or suspended, all Loans which would otherwise be made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans. (d) Before giving any notice to the Agent under this Section, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank. 4.03 Increased Costs and Reduction of Return. (a) If any Bank determines that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the Offshore Rate) in or in the interpretation of any law or regulation or (ii) the compliance by that Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Loans or participating in Letters of Credit, or, in the case of the Issuing Bank, any increase in the cost to the Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit or of agreeing to make or making, funding or maintaining any unpaid drawing under any Letter of Credit, then the Company shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs. (b) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitments, loans, credits or obligations under this Agreement, then, upon demand of such Bank to the Company through the Agent, the Company shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase. 4.04 Funding Losses. The Company shall reimburse each Bank and hold each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: (a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Loan; (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/ Continuation (including by reason of the failure to satisfy any condition precedent thereto); (c) the failure of the Company to make any prepayment in accordance with any notice delivered under Section 2.06; (d) the prepayment (including pursuant to Section 2.07 or 2.08) or other payment (including after acceleration thereof) of an Offshore Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under Section 2.04 of any Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Company to the Banks under this Section and under Subsection 4.03(a), each Offshore Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR used in determining the Offshore Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded. 4.05 Inability to Determine Rates. If the Reference Bank determines that for any reason adequate and reasonable means do not exist for determining the Offshore Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan, or that the Offshore Rate applicable pursuant to Subsection 2.10(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to the Bank of funding such Loan, the Agent will promptly so notify the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall be suspended until the Agent upon the instruction of the Majority Banks revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Banks shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of Offshore Rate Loans. 4.06 Certificates of Banks. Any Bank claiming reimbursement or compensation under this Article IV shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to the Bank hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. 4.07 Substitution of Banks. Upon the receipt by the Company from any Bank (an "Affected Bank") of a claim for compensation under Section 4.03, the Company may: (i) request the Affected Bank to use its best efforts to obtain a replacement bank or financial institution satisfactory to the Agent to acquire and assume all or a ratable part of all of such Affected Bank's Loans and Commitment (a "Replacement Bank"); (ii) request one more of the other Banks to acquire and assume all or part of such Affected Bank's Loans and Commitment but none of the Banks shall have any obligation to do so; or (iii) designate a Replacement Bank satisfactory to Agent. Any such designation of a Replacement Bank under clause (i) or (iii) shall be subject to the prior written consent of the Agent which consent shall not be unreasonably withheld. 4.08 Survival. The agreements and obligations of the Company in this Article IV shall survive the payment of all other Obligations. ARTICLE V CONDITIONS PRECEDENT 5.01 Conditions of Initial Credit Extensions. The obligation of each Bank to make its initial Credit Extension and the obligation of the Issuing Bank to issue the first Letter of Credit, hereunder is subject to the condition set forth in Section 5.01A and the condition that the Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Agent and each Bank, and in sufficient copies for each Bank: (a) Credit Agreement and Notes. This Agreement, the Notes, the Guaranties executed by each party thereto, and the initial Borrowing Base Report; (b) Regarding the Bloomfield Refinery. (i) A certificate signed by a Responsible Officer of the Company, in form and substance reasonably satisfactory to the Agent and each Bank representing and warranting that (A) under the Acquisition Agreement, each of the Sellers and San Juan have satisfied each of their respective Closing Obligations for the Acquisition or such conditions have been waived, save only for San Juan's obligation to deliver to Sellers the Preliminary Amount (as defined in the Purchase Agreement), (B) that San Juan has delivered by wire transfer to an account held by Company at BofA sufficient funds to pay the difference between the Preliminary Amount and the amount requested by the Company under the Notice of Borrowing for the Facility A Revolving Loan, and (C) wire instructions indicating where to send the full Preliminary Amount for the account of the Sellers; and (ii) verbal confirmation from the Sellers that the Sellers are ready, willing and able to consummate the Bloomfield Acquisition upon receipt of the Preliminary Amount; (c) Certificate Regarding Existing Indebtedness. A certificate signed by a Responsible Officer of the Company, certifying that attached thereto is a true and correct copy of the Prudential Note Agreement and the Indenture; (d) Resolutions; Incumbency Organization Documents. (i) Resolutions of the board of directors of the Company and each Guarantor authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of such Person; (ii) Certificates of the Secretary or Assistant Secretary of the Company and each Guarantor certifying the names and true signatures of the officers or such Person authorized to execute, deliver and perform, as applicable, this Agreement, the Guaranty, and all other Loan Documents to be delivered by it hereunder; and (iii) Articles or certificates of incorporation and the bylaws of the Company and each Guarantor as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the such Person as of the Closing Date; (e) Good Standing. A good standing certificate for the Company and each Guarantor from the state of incorporation and Arizona and New Mexico, evidencing qualification to do business as a foreign corporation as of a recent date; (f) Legal Opinions. Copies of (i) An opinion of Morgan Gust, counsel to the Company and addressed to the Agent and the Banks, substantially in the form of Exhibit "D"; and (ii) a favorable opinion of Butler & Binion, L.L.P., special counsel to the Agent; (g) Payment of Fees. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses owed pursuant to this Agreement and the Fee Letter to the extent then due and payable on the Closing Date, together with Attorney Costs of the Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute the Agent's estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and the Agent); including any such costs, fees and expenses arising under or referenced in Sections 2.09 and 11.04; (h) Certificate (Representations and Warranties, Etc.). A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that (i) the representations and warranties contained in Article VI are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the Credit Extension being made on the Closing Date; (iii) no litigation is pending or threatened against the Company or any Subsidiary in which there is a reasonable probability of an adverse decision which would result in a Material Adverse Effect; and (iv) there has occurred since June 30, 1995, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; (i) Intercreditor Agreement. The Intercreditor Agreement in the form required by Exhibit "E" to the Prudential Note Agreement, duly executed by all parties thereto; and (j) Other Documents. Such other approvals, opinions, documents or materials as the Agent or any Bank may request. 5.01A Closing Date. It is a further condition to the initial Credit Extension that the Closing Date occur no later than October 16, 1995. 5.02 Conditions to All Credit Extensions. The obligation of each Bank to make any Revolving Loan to be made by it (including its initial Revolving Loan) or to continue or convert any Revolving Loan under Section 2.04 and the obligation of the Issuing Bank to Issue any Letter of Credit (including the initial Letter of Credit) is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date, Conversion/Continuation Date or Issuance Date: (a) Notice, Application. The Agent shall have received (with, in the case of the initial Revolving Loan only, a copy for each Bank) a Notice of Borrowing or a Notice of Conversion/Continuation, as applicable or in the case of any Issuance of any Letter of Credit, the Issuing Bank and the Agent shall have received an L/C Application or L/C Amendment Application, as required under Section 3.02; (b) Continuation of Representations and Warranties. The representations and warranties in Article VI shall be true and correct on and as of such Borrowing Date or Conversion/Continuation Date with the same effect as if made on and as of such Borrowing Date or Conversion/Continuation Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); and (c) No Existing Default. No Default or Event of Default shall exist or shall result from such Borrowing or continuation or conversion. Each Notice of Borrowing, Notice of Conversion/Continuation and L/C Application or L/C Amendment Application submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice and as of each Borrowing Date, Conversion/Continuation Date, or Issuance Date, as applicable, that the conditions in Section 5.02 are satisfied. ARTICLE VI REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 6.01 Corporate Existence and Power. The Company and each of its Material Subsidiaries: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has the power and authority and all material governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents; (c) is duly qualified as a foreign corporation and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and (d) is in compliance in all material respects with all Requirements of Law; except, in each case referred to in clause (d), to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect. 6.02 Corporate Authorization; No Contravention. The execution, delivery and performance by the Company and its Subsidiaries of this Agreement and each other Loan Document to which such Person is a party, have been duly authorized by all necessary corporate action, and do not and will not: (a) contravene the terms of any of that Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject; or (c) violate any Requirement of Law. 6.03 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company or any of its Subsidiaries of this Agreement or any other Loan Document to which it is a party. 6.04 Binding Effect. This Agreement and each other Loan Document to which the Company or any of its Subsidiaries is a party constitute the legal, valid and binding obligations of the Company and any of its Subsidiaries to the extent it is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 6.05 Litigation. Except as specifically disclosed in Schedule 6.05, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, or its Subsidiaries or any of their respective properties which: (i) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (ii) if determined adversely to the Company or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the Acquisition, execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 6.06 No Default. No Default or Event of Default exists or would be reasonably expected to result from the incurring of any Obligations by the Company. As of the Closing Date, neither the Company nor any Material Subsidiary is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, would reasonably be expected to have a Material Adverse Effect, or that would, if such default had occurred after the Closing Date, create an Event of Default under Subsection 9.01(e). 6.07 ERISA Compliance. Except as specifically disclosed in Schedule 6.07: (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of the Company, nothing has occurred which would cause the loss of such qualification. The Company and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or would reasonably be expected to result in a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) or ERISA. 6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans shall be used solely for the purposes set forth in and permitted by Section 7.13 and Section 8.07. Neither the Company nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. 6.09 Title to Properties. The Company and each Subsidiary have good record and marketable title in fee simple to, or valid leasehold interests in, or other sufficient title to all real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. As of the Closing Date, the property of the Company and its Subsidiaries is subject to no Liens, other than Permitted Liens. 6.10 Taxes. The Company and its Subsidiaries have filed all Federal tax returns and reports required to be filed, and have paid all Federal taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. The Company and its Subsidiaries have filed all material state and other material non-Federal tax returns and reports required to be filed, and have paid all material state and other material non-Federal taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP, except where failure to do so would not reasonably be expected to have a Material Adverse Effect. To the Company's knowledge, there is no proposed tax assessment against the Company or any Subsidiary that would, if made, reasonably be expected to have a Material Adverse Effect. 6.11 Financial Condition. The unaudited consolidated financial statements of the Company and its Subsidiaries dated June 30, 1995, and the related consolidated statements of income or operations, shareholders' equity and cash flows for the fiscal quarter ended on that date: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and results of operations for the period covered thereby (subject to ordinary, good faith year-end adjustments); and (iii) except as specifically disclosed in Schedule 6.11, show all material indebtedness and other liabilities, direct or contingent, of the Company and its consolidated Subsidiaries as of the date thereof which are required to be disclosed pursuant to GAAP, including liabilities for taxes, material commitments and Contingent Obligations. Since June 30, 1995, through the Closing Date, there has been no Material Adverse Effect. 6.12 Environmental Matters. The Company conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof the Company has reasonably concluded that, except as specifically disclosed in Schedule 6.12, such Environmental Laws and Environmental Claims would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.13 Regulated Entities. None of the Company, any Person controlling the Company, or any Subsidiary, is an "Investment Company" within the meaning of the Investment Company Act of 1940. The Company is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. 6.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which would reasonably be expected to have a Material Adverse Effect. 6.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or its Subsidiaries own or are licensed or otherwise have the right to use all of the material patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of the Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any Subsidiary infringes upon any rights held by any other Person. Except as specifically disclosed in Schedule 6.05, no claim or litigation regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Company, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 6.16 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 6.16 hereto and has no material equity investments in any other corporation or entity other than those specifically disclosed in part (b) of Schedule 6.16. 6.17 Insurance. Except as specifically disclosed in Schedule 6.17, the properties of the Company and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Company, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Company or such Subsidiary operates. 6.18 Full Disclosure. None of the representations or warranties made by the Company or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, written statement or certificate furnished by or on behalf of the Company or any Subsidiary in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Company to the Banks prior to the Closing Date), taken as whole, contains any untrue statement of a material fact known to the Company or omits any material fact known to the Company required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. 6.19 Solvency. At the Closing Date, the Company and its Subsidiaries, taken as a whole, and the Company, individually, and each of the Guarantors individually, is Solvent. 6.20 Bloomfield Acquisition. As of the Closing Date, all shareholder approvals required for consummation of the Bloomfield Acquisition have been obtained, all lien releases and all third party approvals required for consummation of the Bloomfield Acquisition have been obtained, and all necessary material consents and approvals of and filings and registration with, and all other material actions in respect of, all Governmental Authorities required for consummation of the Bloomfield Acquisition have been obtained, given, filed or taken and are in full effect and all waiting periods relating thereto have expired without, in any such case, any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Bloomfield Acquisition pursuant to the Purchase Agreement. The Purchase Agreement has not been amended in any material respect, except as consented to by the Banks, as of the Closing Date. Upon the making of the initial Credit Extension hereunder, the Bloomfield Acquisition will have been consummated in accordance with the Purchase Agreement. ARTICLE VII AFFIRMATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, unless the Majority Banks waive compliance in writing: 7.01 Financial Statements. The Company shall maintain for itself and each Subsidiary, a system of accounting established and administered in accordance with GAAP and deliver to the Agent, with sufficient copies for each Bank: (a) As soon as available, but not later than 90 days after the end of each fiscal year a copy of the annual audited consolidated financial statement of the Company as at the end of such year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and the Company's financial statement shall be accompanied by the opinion of a nationally recognized independent public accounting firm (the "Independent Auditor"), which report shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years; and (b) As soon as available, but not later than 45 days after the close of each of the first three quarterly periods each fiscal year, a copy of the unaudited consolidated balance sheet of the Company as of the end of such quarter and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position and the results of operations of the Company. 7.02 Certificates; Other Information. The Company shall furnish to the Agent, with sufficient copies for each Bank: (a) As soon as available, but not later than 20 days after the close of each month until Facility B Termination Date, a Borrowing Base Report in the form of Exhibit "H" hereto, certified by a Responsible Officer as fairly presenting the Eligible Refinery Hydrocarbon Inventory and Eligible Accounts Receivable as of the last day of the immediately preceding month; (b) concurrently with the delivery of the financial statements referred to in subsections 7.01(a) and (b), a Compliance Certificate executed by a Responsible Officer; (c) promptly, copies of all financial statements and reports that the Company sends to its shareholders, and, promptly after the filing thereof, copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file with, the SEC; (d) promptly, copies of all annual Earnout Payment reports delivered by San Juan to the Sellers and any written objections thereto furnished by Sellers to San Juan under the Purchase Agreement; and (e) promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary as the Agent, at the request of any Bank, may from time to time reasonably request. 7.03 Notices. The Company shall promptly notify the Agent: (a) of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that would reasonably be expected to become a Default or Event of Default; (b) of any matter that has resulted or may reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Company or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Company or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Subsidiary; including pursuant to any applicable Environmental Laws; (c) of the occurrence of any of the following events affecting the Company or any ERISA Affiliate (but in no event more than 10 days after such event), and deliver to the Agent and each Bank a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Company or any ERISA Affiliate with respect to such event: (i) an ERISA Event; (ii) a material increase in the Unfunded Pension Liability of any Pension Plan; (iii) the adoption of, or the commencement of contributions to, any Plan subject to Section 412 of the Code by the Company or any ERISA Affiliate; or (iv) the adoption of any amendment to a Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability; (d) of any material change in accounting policies or financial reporting practices by the Company or any of its consolidated Subsidiaries; and (e) of the formation or acquisition of any Material Subsidiary. Each notice under this Section shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Company or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under subsection 7.03(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or violated. 7.04 Preservation of Corporate Existence, Etc. The Company and each Material Subsidiary shall: (a) preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction of incorporation except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; (b) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; (c) use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; and (d) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect. 7.05 Maintenance of Property. The Company and each Material Subsidiary shall maintain and preserve all its property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and to use the standard of care typical in the industry in the operation and maintenance of its facilities except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. 7.06 Insurance. The Company and each Guarantor shall, and shall cause each of their Subsidiaries to, maintain, with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. 7.07 Payment of Obligations. The Company and each Material Subsidiary shall pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company, such Guarantor or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness; except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. 7.08 Compliance with Laws. The Company and each Guarantor shall, and shall cause each of their Subsidiaries to, comply in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), except (x) such as may be contested in good faith or as to which a bona fide dispute may exist or (y) where the failure to do so would not reasonably be expected to have a Material Adverse Effect. 7.09 Compliance with ERISA. The Company shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 7.10 Inspection of Property and Books and Records. The Company and each Guarantor shall, and shall cause each of their Subsidiaries to, maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Guarantor. The Company and each Guarantor shall, and shall cause each of their Subsidiaries to, permit, representatives and independent contractors of the Agent or any Bank to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, all at the expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, when an Event of Default exists the Agent or any Bank may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice. 7.11 Environmental Laws. The Company and each Guarantor shall, and shall cause each of their Subsidiaries to, conduct its operations and keep and maintain its property in compliance with all Environmental Laws except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. 7.12 New Subsidiary Guarantors. If, at any time after the date of this Agreement, there exists any Subsidiary incorporated under the laws of any state in the United States of America with total assets with a book value of $2,000,000 or more, then the Company shall cause each such Subsidiary to do the following: (i) execute and deliver a Guaranty to the Agent substantially in the form of Exhibit "D" hereto and (ii) furnish the Agent with a written opinion of counsel for each such Subsidiary Guarantor in substantially the form set forth in Exhibit "G"; in each case with such revisions as may be reasonably requested by the Agent or the Banks. 7.13 Use of Proceeds. The Company shall use the proceeds of the Facility A Revolving Loan to (a) make a capital contribution or loan to San Juan to be used to finance the purchase of assets pursuant to the Bloomfield Acquisition, and (b) to make capital contributions and loans to the Guarantors for general corporate purposes, provided, however, that the Facility A Revolving Loan shall not be used for working capital expenditures unless all Banks consent. The Company shall use the proceeds of the Facility B Revolving Loan to make capital contributions and loans to the Guarantors for working capital expenditures, and for issuance of standby letters of credit pursuant to Article III hereof in the ordinary course of business. ARTICLE VIII NEGATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, unless the Majority Banks waive compliance in writing: 8.01 Limitation on Liens. Each of the Company and each Guarantor agrees that it shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("Permitted Liens"): (a) any Lien existing on property of the Company or any Subsidiary on the Closing Date and set forth in Schedule 8.01 securing Indebtedness outstanding on such date; (b) any Lien created under any Loan Document; (c) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 7.07; (d) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto; (e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation; (f) Liens on the property of the Company, the Guarantor or any Subsidiary of such Person securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the ordinary course of business; (g) easements, rights-of-way, restrictions, defects or other exceptions to title and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of the Company and its Subsidiaries; (h) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company, (ii) the Company (or applicable Subsidiary) maintains (subject to such right of set off) dominium and control over such account(s), and (iii) such deposit account is not intended by the Company, any Guarantor or any Subsidiary to provide cash collateral to the depository institution; (i) Liens on any property acquired or held by the Company or its Subsidiaries in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property after the date hereof; provided that (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property, and (iv) the principal amount of the Indebtedness secured by any and all such purchase money security interests, together with all other Indebtedness securing Liens permitted under Subsection 8.01(j) below, shall not exceed $5,000,000 in the aggregate at any time outstanding; and (j) Any Liens not otherwise described in Subsection 8.01(a) through (h) above, provided that the Indebtedness and other obligations secured by such Liens, together with all other Indebtedness securing Liens permitted under Subsection 8.01(i), shall not at any time exceed $5,000,000 in the aggregate at any time outstanding. 8.02 Disposition of Assets. The Company and the Guarantors shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) (collectively, "Dispositions") any property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except: (a) Dispositions of inventory, or used, worn-out or surplus equipment, all in the ordinary course of business; (b) The sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; (c) Dispositions of assets by the Company or any Subsidiary to the Company or any Subsidiary; (d) Dispositions permitted pursuant to Section 8.03; (e) Dispositions of Exploration and Production Assets by the Company or any Subsidiary, which are made for fair market value; provided, that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition, (ii) the aggregate sales price from such disposition shall be paid principally in cash, and (iii) to the extent net proceeds from such Dispositions exceed $2 million in the aggregate in any fiscal year, such net proceeds must be used either (x) by the Company or a Subsidiary within six (6) months from the date of such Disposition to acquire assets used in a Permitted Business or (y) by the Company to repay the Loans or the Loan and the Prudential Notes pro rata in proportion to the principal amount of the Loans and the Prudential Notes then outstanding; and such prepayment of the Loans shall result in a corresponding permanent reduction in the Commitments first to reduce the Facility A Commitment and the remainder, if any, to reduce the Facility B Commitment as provided in Section 2.05 and Section 2.07(b); and (f) Dispositions of assets (other than Dispositions of Exploration and Production Assets, the net proceeds of which were used for the purposes specified in Subsection 8.02(e)(iii)) not otherwise permitted hereunder which are made for fair market value, provided, that (i) at the time of any such Disposition, no Event of Default shall exist or shall result from such Disposition, (ii) with respect to Dispositions of such assets by the Company and its Subsidiaries in any fiscal year, the aggregate book value of such assets shall not exceed in any fiscal year the aggregate amount of $5,000,000. 8.03 Consolidations and Mergers. The Company and the Material Subsidiaries shall not merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except: (a) The Company may merge with any Person not otherwise permitted under Subsection 8.03(b) below, provided that there is no Change in Control as a result of the merger and the surviving Person continues to meet all financial covenants herein for the Company and agrees to be bound by the terms of the Agreement and assumes in writing all Obligations; (b) any Subsidiary may merge with the Company, provided that the Company shall be the continuing or surviving corporation, or with any one or more Subsidiaries, provided that if any transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or surviving corporation; and (c) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to the Company or a Wholly-Owned Subsidiary. 8.04 Loans and Investments. The Company and each of the Guarantors agrees that it shall not purchase or acquire, or permit any of their respective Subsidiaries to purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, or make or commit to make any Acquisitions, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate of the Company, except for: (a) investments in Cash Equivalents; (b) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business; (c) extensions of credit by the Company to any of its Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries to the Company or another of its Wholly-Owned Subsidiaries; (d) investments incurred in order to consummate Acquisitions, provided that (i) such Acquisitions are undertaken in accordance with all applicable Requirements of Law; (ii) the prior, effective written consent or approval to such Acquisition of the board of directors or equivalent governing body of the acquiree is obtained; and (iii) no Default or Event of Default shall have occurred either prior to or subsequent to such Acquisition; and (e) investments by the Company and its Subsidiaries not otherwise permitted in Subsections 8.04(a) through (d), which do not exceed $2.5 million in the aggregate at any time outstanding. 8.05 Limitation on Subsidiary Indebtedness. Neither the Guarantors nor any other Subsidiary of the Company or any Guarantor shall create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement; (b) Indebtedness consisting of Contingent Obligations permitted pursuant to Section 8.08; and (c) Indebtedness existing on the Closing Date and set forth in Schedule 8.05. 8.06 Transactions with Affiliates. The Company and each of the Guarantors agrees that it shall not, and shall not permit any of their respective Subsidiaries to, enter into any transaction with or make any payment or transfer to any Affiliate of the Company, except in the ordinary course of business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Company or such Subsidiary. 8.07 Use of Proceeds. (a) The Company shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds or any Letter of Credit, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. (b) The Company shall not, directly or indirectly, use any portion of the Loan proceeds or any Letter of Credit (i) knowingly to purchase Ineligible Securities from the Arranger during any period in which the Arranger makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by the Arranger, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by the Arranger and issued by or for the benefit of the Company or any Affiliate of the Company. The Arranger is a registered broker-dealer and permitted to underwrite and deal in certain Ineligible Securities; and "Ineligible Securities" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. ' 24, Seventh), as amended. 8.08 Contingent Obligations. Each of the Company and each Guarantor agrees that it shall not, and shall not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist any Contingent Obligations except: (a) endorsements for collection or deposit in the ordinary course of business; (b) Swap Contracts entered into in the ordinary course of business; (c) guarantees by the Company or any Subsidiary guaranteeing obligations (other than obligations for money borrowed) of any Consolidated Subsidiary in the ordinary course of business and guarantees by any Guarantor guaranteeing obligations of the Company provided that such obligations are permitted under this Agreement; (d) obligations under the Earnout (as defined in the Purchase Agreement) and the Company's obligations pursuant to the Guarantee and Agreement executed by the Company pursuant to the Purchase Agreement; (e) Contingent Obligations of the Company and its Subsidiaries existing as of the Closing Date and listed in Schedule 8.08; (f) obligations under bid bonds, performance bonds and fidelity bonds issued for the account of the Company or its Subsidiaries, obligations to indemnify or make whole any surety and similar agreements incurred in the ordinary course of business; (g) this Agreement and the Guaranties. 8.09 Restricted Payments. Each of the Company and each Guarantor agrees that it shall not, and shall not permit any of their respective Subsidiaries to purchase, redeem or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding (collectively "Restricted Payments"); provided that immediately prior to and after giving effect to any of the following described payments, there exists no Default or Event of Default, the Company and any Subsidiary may: (a) any Subsidiary may declare and make Restricted Payments to the Company or any Wholly-Owned Subsidiary; (b) purchase, redeem or otherwise acquire shares of its common stock or warrants or options to acquire any such shares with the proceeds received from the substantially concurrent issue of new shares of its common stock; and (c) purchase, redeem or otherwise acquire shares of its capital stock or warrants, rights or options to acquire any such shares for cash solely out of net income of the Company and its Subsidiaries to the extent approved by resolution of its Board of Director's passed on or before July 31, 1995. 8.10 Subsidiary Dividends. Each of the Company and each Guarantor agrees that it will not, and it will not permit any of their Subsidiaries to, be a party to or enter into any agreement, instrument or other document which prohibits or restricts in any way, or to otherwise, directly or indirectly, create or cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary of the Company to (i) pay dividends or make any other distributions in respect of its capital stock or any other equity interest or participation in any Subsidiary or pay or repay any Indebtedness owed to the Company or any Subsidiary, (ii) make loans or advances to the Company or (iii) transfer any of its properties or assets to the Company or any Subsidiary (subject to the rights of any holder of a Lien on any such properties or assets which Lien is a Permitted Lien). 8.11 Senior Subordinated Notes. The Company shall not, and shall not permit any Subsidiary to: (i) amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms of the NBD Bank Indenture, the NBD Subordinated Notes or the Guarantees executed in connection therewith, other than (A) any such amendment or modification which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date of payment of interest thereon, (B) amendments pursuant to Section 9.01(1) and (2) of the NBD Indenture and (C) such other amendments and modifications acceptable to the Majority Banks; or (ii) make any payments to the holders of the Subordinated Notes or to any trustee acting under the Indentures which is prohibited by the Indentures or (iii) make any prepayment or redeem in whole or in part the Subordinated Notes. 8.12 Minimum Consolidated Net Worth. From and after the Closing Date, the Company will maintain at all times Consolidated Net Worth in an amount not less than the sum of (i) $95,000,000, plus (ii) 50% of Consolidated Net Income computed on a cumulative basis for the period beginning June 30, 1995 and ending on the date of determination (provided that no negative adjustment will be made in the event that Consolidated Net Income is a deficit figure for such period), plus (iii) 100% of the aggregate amount of the net assets (cash or otherwise) received by the Company from the issuance of any class of capital stock after June 30, 1995, less (iv) any allowance for non-cash write-downs, provided that such allowance on a cumulative basis shall not exceed $10,000,000. 8.13 Fixed Charge Coverage Ratio. The Company shall not permit (as of the end of any fiscal quarter) the ratio of (i) Consolidated EBITDA less Non-Discretionary Capital Expenditures to (ii) Consolidated Interest Expense for any period of four consecutive fiscal quarters to be less than 2.5 to 1.0. 8.14 Capitalization Ratio. From and after the Closing Date the Company shall not permit the Capitalization Ratio to be greater than 65% through June 30, 1997, and thereafter no greater than 62.5%. 8.15 ERISA. The Company shall not, and shall not suffer or permit any of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably expected to result in liability of the Company in an aggregate amount which could have a Material Adverse Effect; or (b) engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 8.16 Change in Business. The Company shall not, and shall not permit any Subsidiary to, engage in any business or activity other than the Principal Business. 8.17 Accounting Changes. The Company shall not, and shall not suffer or permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Company or of any Subsidiary. ARTICLE IX EVENTS OF DEFAULT 9.01 Event of Default. Any of the following shall constitute an "Event of Default": (a) Non-Payment. The Company fails to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within two (2) Business Days after the same becomes due, any L/C Obligation or any interest, fee or other amount payable hereunder or under any other Loan Document; or (b) Representation or Warranty. Any representation or warranty by the Company or any Subsidiary made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made; or (c) Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in any of Section 7.03(a) or in Article VIII except for such Liens under Section 8.01 other than arising by consensual action of the Company or any of its Subsidiaries; or (d) Other Defaults. The Company or any Subsidiary fails to perform or observe any other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date upon which a Responsible Officer knew or reasonably should have known of such default or (ii) the date upon which written notice thereof is given to the Company by the Agent or any Bank; or (e) Cross-Default. The Company or any Subsidiary (i) fails to make any payment in respect of any Indebtedness or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $3,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (iii) any Indebtedness or Contingent Obligations of the Company or any Subsidiary in excess of $3,000,000 shall be declared due and payable prior to its stated maturity or cash collateral is demanded in respect of such Contingent Obligations; or (f) Insolvency; Voluntary Proceedings. The Company or any Subsidiary (i) generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) commences any Insolvency Proceeding with respect to itself; or (iii) takes any action to effectuate or authorize any of the foregoing; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company or any Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against all or a substantial part of the Company's or any Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company or any Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or (h) ERISA. (i) An ERISA Event shall occur with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Company or a Subsidiary under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $3,000,000 and such amount is not paid when due; or (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans is in an aggregate amount which would reasonably be expected to cause a Material Adverse Effect; or (i) Monetary Judgments. One or more non-interlocutory judgments, non-interlocutory orders, decrees or arbitration awards is entered against the Company or any Subsidiary involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $3,000,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of 30 days after the entry thereof; or (j) Change of Control. There occurs any Change of Control; or (k) Loss of Permit. Any Governmental Authority revokes or fails to renew any material license, permit or franchise of the Company or any Material Subsidiary, or the Company or any Material Subsidiary for any reason loses any material license, permit or franchise, or the Company or any Material Subsidiary suffers the imposition of any restraining order, escrow, suspension or impound of funds in connection with any proceeding (judicial or administrative) with respect to any material license, permit or franchise; or (l) Adverse Change. There occurs a Material Adverse Effect; or (m) Guaranty Default. A Guaranty is for any reason partially (including with respect to future advances) or wholly revoked or invalidated, or otherwise ceases to be in full force and effect, or such Guarantor or any other Person contests in any manner the validity or enforceability thereof or denies that it has any further liability or obligation thereunder; or any event described at subsections (f) or (g) of this Section occurs with respect to such Guarantor; or (n) Invalidity of Subordination Provisions. The subordination provisions of the Indenture or Subordinated Notes or any agreement or instrument governing the Senior Subordinated Debt is for any reason revoked or invalidated, or otherwise cease to be in full force and effect, NBD Bank, National Association, as Trustee any successor trustee thereto or any other Person contests in any manner the validity or enforceability thereof or denies that it has any further liability or obligation thereunder, or the Indebtedness hereunder is for any reason subordinated or does not have the priority contemplated by this Agreement or the Indenture or such subordination provisions; or (o) Prepayment of Subordinated Notes. If the Company or any Subsidiary is required for any reason to prepay, redeem or purchase in whole or in part any of the Subordinated Notes during the term of this Agreement. 9.02 Remedies. If any Event of Default occurs and is continuing, the Agent shall, at the request of, or may, with the consent of, the Majority Banks, (a) declare the commitment of each Bank to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit to be terminated, whereupon such Commitments shall be terminated; (b) declare an amount equal to the maximum aggregate amount that is or at any time thereafter may become available for drawing under any outstanding Letters of Credit (whether or not any beneficiary shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letters of Credit) to be immediately due and payable, and declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest, notice of intention to accelerate, notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by the Company; (c) require cash collateral as set forth in Section 3.09; and (d) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in subsection (f) or (g) of Section 8.01 (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable and (y) cash collateral as set forth in Section 3.09 shall automatically be due and payable, in each case without further act of the Agent, the Issuing Bank or any Bank and without presentment, demand, protest, notice of intention to accelerate, notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by the Company. 9.03 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE X THE AGENT 10.01 Appointment and Authorization. (a) Each Bank hereby irrevocably (subject to Section 10.09) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. (b) The Issuing Bank shall act on behalf of the Banks with respect to any Letters of Credit Issued by it and the documents associated therewith until such time and except for so long as the Agent may agree at the request of the Majority Banks to act for such Issuing Bank with respect thereto; provided, however, that the Issuing Bank shall have all of the benefits and immunities (i) provided to the Agent in this Article X with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit Issued by it or proposed to be Issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Agent", as used in this Article X, included the Issuing Bank with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to the Issuing Bank. 10.02 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 10.03 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness (other than such Agent-Related Person's own due execution and delivery), genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates. 10.04 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Section 5.01, each Bank that has made available to the Agent its Pro Rata Share of the initial Credit Extension or subsequent Credit Extension, as the case may be, shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank as a condition precedent to such initial Credit Extension or subsequent Credit Extension, as applicable. 10.05 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Agent will notify the Banks of its receipt of any such notice. Subject to Subsection 10.04(a), the Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Banks in accordance with Article IX; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 10.06 Credit Decision. Each Bank acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by any Agent-Related Person hereafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Agent-Related Persons. 10.07 Indemnification. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, each Agent-Related Person from and against any and all Indemnified Liabilities INCLUDING SUCH INDEMNIFIED LIABILITIES AS MAY ARISE OR BE CAUSED BY THE NEGLIGENCE, SOLE, JOINT, CONCURRENT, COMPARATIVE OR OTHERWISE OF SUCH AGENT-RELATED PERSONS; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities to the extent the same arise from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 10.08 Agent in Individual Capacity. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though BofA were not the Agent or the Issuing Bank hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that the Agent-Related Persons shall be under no obligation to provide such information to them. With respect to its Loans, BofA shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent. 10.09 Successor Agent. The Agent may, and at the request of the Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above. Notwithstanding the foregoing, however, for so long as Bank of America Illinois or BofA (referred to interchangeably as "Bank of America" in this sentence) is the Issuing Bank, then Bank of America may not be removed as the Agent at the request of the Majority Banks unless Bank of America shall also simultaneously be replaced as "Issuing Bank" hereunder pursuant to documentation in form and substance reasonably satisfactory to Bank of America. 10.10 Withholding Tax. (a) If any Bank is a "foreign corporation, partnership or trust" within the meaning of the Code and such Bank claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver to the Agent: (i) if such Bank claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8 before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement; (ii) if such Bank claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Bank, two properly completed and executed copies of IRS Form 4224 before the payment of any interest is due in the first taxable year of such Bank and in each succeeding taxable year of such Bank during which interest may be paid under this Agreement, and IRS Form W-9; and (iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Such Bank agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Bank claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form 1001 and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Bank, such Bank agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company to such Bank. To the extent of such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid. (c) If any Bank claiming exemption from United States withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (d) If any Bank is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Bank an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax. (e) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent. ARTICLE XI MISCELLANEOUS 11.01 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Agent at the written request of the Majority Banks) and the Company and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks and the Company and acknowledged by the Agent, do any of the following: (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 9.02; (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (iii) below) any fees or other amounts payable hereunder or under any other Loan Document; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or (e) amend this Section, or Section 2.13 or any provision herein providing for consent or other action by all Banks; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Issuing Bank in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Issuing Bank under this Agreement or any L/C-Related Document relating to any Letter of Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document, and (iii) the Fee Letters may be amended, or rights or privileges thereunder waived, only in a writing executed by the parties thereto. 11.02 Notices. (a) All notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 11.02, and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 11.02; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II, III or X shall not be effective until actually received by the Agent, and notices pursuant to Article III to the Issuing Bank shall not be effective until actually received by the Issuing Bank at the address specified for the "Issuing Bank" on the applicable signature page hereof. (c) Any agreement of the Agent and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Banks shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans and L/C Obligations shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 11.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 11.04 Costs and Expenses. The Company shall: (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse the Agent, and the Issuing Bank within five Business Days after demand (subject to subsection 5.01(g)) for all reasonable costs and expenses incurred by the Agent and the Issuing Bank in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including Attorney Costs incurred by the Agent and the Issuing Bank with respect thereto; and (b) pay or reimburse the Agent, the Arranger and each Bank within five Business Days after demand (subject to subsection 5.01(g)) for all costs and expenses (including Attorney Costs) incurred by each of them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). 11.05 Indemnity. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold the Agent-Related Persons, and each Bank and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans, the termination of the Letters of Credit and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or Letters of Credit or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities") WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE OUT OF OR AS A RESULT OF ANY INDEMNIFIED PARTIES NEGLIGENCE IN WHOLE OR IN PART, INCLUDING, WITHOUT LIMITATION, THOSE CLAIMS WHICH RESULT FROM THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE INDEMNIFIED PARTY, OR ANY ONE OR MORE OF THEM; provided, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities to the extent same arise from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations. 11.06 Payments Set Aside. To the extent that the Company makes a payment to the Agent or the Banks, or the Agent or the Banks exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent. 11.07 Successors and Assigns. Except for all provisions in Section 11.08, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank. 11.08 Assignments, Participations, etc. (a) Any Bank (including the Issuing Bank) may, with the prior written consent of the Company (at all times other than during the existence of an Event of Default) which consent of the Company shall not be unreasonably withheld and written consent of the Agent, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Company or the Agent shall be required in connection with any assignment and delegation by the Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitments, the L/C Obligations and the other rights and obligations of such Bank hereunder, in a minimum amount of $5,000,000; provided, however, that the Company and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance in the form of Exhibit "E" ("Assignment and Acceptance") together with any Note or Notes subject to such assignment and (iii) the assignor Bank or Assignee has paid to the Agent a processing fee in the amount of $3,500.00. (b) From and after the date that the Agent notifies the assignor Bank that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. (c) Within five Business Days after its receipt of notice by the Agent that it has received an executed Assignment and Acceptance and payment of the processing fee, (and provided that it consents to such assignment in accordance with Subsection 11.08(a)) the Company shall execute and deliver to the Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Bank pro tanto. (d) Any Bank may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "Participant") participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents; provided, however, that (i) the originating Bank's obligations under this Agreement shall remain unchanged, the originating Bank shall remain a Bank for all purposes hereof and the other Loan Documents to which such originating Bank is a party, and the Participant may not become a Bank for purposes hereof or for any other of the Loan Documents, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Company, the Issuing Bank and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as described in the first proviso to Section 11.01. In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents (the Participant's rights against the granting Bank in respect of such participation being those set forth in the agreement creating or evidencing such participation with such Bank), and all amounts payable by the Company hereunder shall be determined as if such Bank had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. (e) Each Bank agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Company and provided to it by the Company or any of its Subsidiaries, or by the Agent on such Company's or Subsidiary's behalf, under or in connection with this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by the Bank, or (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to the Bank; provided, however, that any Bank may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which the Agent, any Bank or their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Bank's independent auditors and other professional advisors; (G) to any Affiliate of such Bank, or to any Participant or Assignee, actual or potential, provided that such Affiliate, Participant or Assignee agrees to keep such information confidential to the same extent required of the Banks hereunder, and (H) as to any Bank, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company is party or is deemed party with such Bank. (f) Notwithstanding any other provision in this Agreement, any Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and the Notes held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR '203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 11.09 Set-off. In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists or the Loans have been accelerated, each Bank is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank to or for the credit or the account of the Company against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not the Agent or such Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Bank agrees promptly to notify the Company and the Agent after any such set-off and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 11.10 Interest. (a) It is the intention of the parties hereto to comply with applicable usury laws; accordingly, notwithstanding any provision to the contrary in this Agreement, the Notes or in any of the other Loan Documents securing the payment hereof or otherwise relating hereto, in no event shall this Agreement, the Notes or such other Loan Documents require the payment or permit the payment, taking, reserving, receiving, collection, or charging of any sums constituting interest under applicable laws, if any, which exceed the maximum amount permitted by such laws. If any such excess interest is called for, contracted for, charged, taken, reserved, or received in connection with the Loans evidenced by the Notes or in any of the Loan Documents securing the payment thereof or otherwise relating thereto, or in any communication by the Agents or the Banks or any other person to any Borrower or any other person, or in the event all or part of the principal or interest thereof shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, reserved, or received on the amount of principal actually outstanding from time to time under the Notes shall exceed the maximum amount of interest permitted by applicable usury laws, then in any such event it is agreed as follows: (i) the provisions of this paragraph shall govern and control, (ii) neither any Borrower nor any other person or entity now or hereafter liable for the payment of the Notes shall be obligated to pay the amount of such interest to the extent such interest is in excess of the maximum amount of interest permitted by applicable usury laws, (iii) any such excess which is or has been received notwithstanding this paragraph shall be credited against the then unpaid principal balance of the Notes or, if the Notes have been or would be paid in full, refunded to the applicable Borrower, and (iv) the provisions of this Agreement, the Notes and the other Loan Documents securing the payment hereof and otherwise relating hereto, and any communication to any Borrower, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the maximum lawful rate allowed under applicable laws as now or hereafter construed by courts having jurisdiction hereof or thereof. Without limiting the foregoing, all calculations of the rate of the interest contracted for, charged, taken, reserved, or received in connection with the Notes or this Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of the Loans, including all prior and subsequent renewals and extensions, all interest at any time contracted for, charged, taken, reserved, or received. The terms of this paragraph shall be deemed to be incorporated in every document and communication relating to the Notes, the Loans or any other Loan Document. (b) Tex. Rev. Civ. Stat. Ann art. 5069 Ch. 15 (which regulates certain revolving loan accounts and revolving tri-party accounts) shall not apply to any Loans. (c) To the extent that the interest rate laws of the State of Texas are applicable to the Loans, the applicable interest rate ceiling is the indicated (weekly) ceiling determined in accordance with Article 5069-1.04(a)(1) of the Texas Revised Civil Statutes, as amended. 11.11 Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law, the Company agrees that in the event a payment shall be made by any Guarantor under a Guaranty in respect of a Loan to the Company, the Company shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment subject to the provisions of the Guaranty executed by such Guarantor. Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under this Section 11.11 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full of the Obligations, and no payments may be made in respect of such rights of indemnity, contribution or subrogation until all the Obligations have been paid in full, all Commitments have expired and all Letters of Credit have expired. No failure on the part of a Borrower to make the payments required by this Section (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to any Guaranty, and each Guarantor shall remain liable for the full amount of the obligation of such Guarantor under each such Guaranty in accordance therewith. 11.12 Automatic Debits of Fees. With respect to any commitment fee, arrangement fee, letter of credit fee or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent, the Issuing Bank, BofA or the Arranger under the Loan Documents, the Company hereby irrevocably authorizes BofA, after giving reasonable prior notice to the Company, to debit any deposit account of the Company with BofA in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in BofA's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section shall be deemed a set-off. 11.13 Notification of Addresses, Lending Offices, Etc. Each Bank shall notify the Agent in writing of any changes in the address to which notices to the Bank should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 11.14 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 11.15 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 11.16 No Third Parties Benefitted. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. 11.17 Governing Law. (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW; AND THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) THE COMPANY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SCHEDULE 11.02. SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. 11.18 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 11.19 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Houston, Texas by their proper and duly authorized officers as of the day and year first above written. GIANT INDUSTRIES, INC., as Borrower By: /s/ A. WAYNE DAVENPORT ----------------------------------------- Name: A. Wayne Davenport --------------------------------------- Title: Vice President -------------------------------------- GIANT INDUSTRIES ARIZONA, INC., as Guarantor By: /s/ A. WAYNE DAVENPORT ----------------------------------------- Name: A. Wayne Davenport --------------------------------------- Title: Vice President -------------------------------------- GIANT EXPLORATION & PRODUCTION COMPANY, as Guarantor By: /s/ A. WAYNE DAVENPORT ----------------------------------------- Name: A. Wayne Davenport --------------------------------------- Title: Vice President -------------------------------------- GIANT FOUR CORNERS, INC., as Guarantor By: /s/ A. WAYNE DAVENPORT ----------------------------------------- Name: A. Wayne Davenport --------------------------------------- Title: Vice President -------------------------------------- SAN JUAN REFINING COMPANY, as Guarantor By: /s/ A. WAYNE DAVENPORT ----------------------------------------- Name: A. Wayne Davenport --------------------------------------- Title: Vice President -------------------------------------- CINIZA PRODUCTION COMPANY, as Guarantor By: /s/ A. WAYNE DAVENPORT ----------------------------------------- Name: A. Wayne Davenport --------------------------------------- Title: Vice President -------------------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ FRANK H. WOO ----------------------------------------- Name: Frank H. Woo --------------------------------------- Title: Vice President -------------------------------------- BANK OF AMERICA ILLINOIS, as a Bank and as Issuing Bank By: /s/ C. PAIGE DIMAGGIO _________________________________________ C. Paige DiMaggio Vice President SCHEDULE 1.01 PREFERRED ACCOUNT OBLIGORS Amoco Corporation BP Oil Company Chevron USA Inc. Conoco Inc. Exxon Company USA Koch Industries Inc. Mobil Oil Corporation Shell Oil Company Texaco Trading & Transportation Inc. Texaco USA Inc. SCHEDULE 2.01 COMMITMENTS AND PRO RATA SHARES Pro Rata Bank Commitment Share - ------------------------ -------------------------------- Bank of America Illinois Facility A: $30,000,000 100% Facility B: $40,000,000 100% TOTAL $70,000,000 100% SCHEDULE 2.02 Pricing Chart (Expressed in basis points per annum) Pricing Level Level I Level II Level III - ------------- ------- -------- --------- Offshore Rate Margin 75.0 112.5 137.5 Base Rate Margin 0 0 0 Letter of Credit Fee 62.5 100.0 125.0 Commitment Fee 27.5 32.5 42.5 Level I shall apply if the Company's Index Debt Rating is BBB- or better by S & P or Baa3 or better by Moody's. Level II shall apply if the Company's Index Debt Rating is BB- or better (but less than BBB-) by S & P or Ba3 or better (but less than Baa3) by Moody's. Level III shall apply if the Company's Index Debt Rating is lower than BB- by S & P and lower than Ba3 by Moody's. Each adjustment of the Applicable Margin, the Letter of Credit Fees and Commitment Fee shall be made by the Agent and shall be effective as of the date the changed rating is effective (the "Adjustment Date"). The Agent shall not be deemed to have notice of any change in the Index Debt Rating unless it receives notice from the Company or a Bank of such rating. Such adjusted rate shall be effective as of the Adjustment Date, except that with respect to all Loans made prior to the Adjustment Date, the adjusted Applicable Margin shall apply as of the first day of the Interest Period next following the Adjustment Date. SCHEDULE 3.03 EXISTING BANK OF AMERICA LETTERS OF CREDIT Letters of Credit Issued by Bank of America National Trust and Savings Association Outstanding L/C No. Amount ------- ----------- 1. 0221968 $ 216,900.00 2. 0221969 6,000.00 3. 0221970 48,500.00 4. 0221971 250,000.00 5. 0221973 140,000.00 6. 0222419 28,000.00 7. 0222564 400,000.00 8. LASB #225605 85,000.00 ------------- Total: $1,174,400.00 ============= Letter of Credit Issued by Bank of America Illinois. Outstanding L/C No. Amount ------- ----------- 1. C7262813 $15,300,000.00 SCHEDULE 6.05 This Schedule 6.05 hereby incorporates by reference all actions, suits, proceedings, claims or disputes pending, threatened or contemplated against the Company, or any subsidiary, or any of their respective properties, contained in any Forms 10-K for the year ended December 31, 1994 or Forms 10-Q for the quarters ended March 30, 1995 and June 30, 1995 filed by the Company with the Securities and Exchange Commission. SCHEDULE 6.07 ERISA COMPLIANCE AS OF SEPTEMBER 30, 1995 Exceptions - None SCHEDULE 6.11 MATERIAL INDEBTEDNESS AND OTHER LIABILITIES DIRECT OR CONTINGENT NOT SPECIFICALLY DISCLOSED IN ANNUAL 10K None SCHEDULE 6.12 1. Environmental matters identified in Giant's Form 10-K for the year ended December 31, 1994 and Form 10-Q for the quarters ended March 30, 1995 and June 30, 1995 filings with the United States Securities and Exchange Commission. 2. As has been disclosed to the Bank, contamination is present in the soil and groundwater at the Bloomfield Refinery (as used herein, the term "Bloomfield Refinery" includes property related to refinery operations that is owned by Bloomfield Refining Company ("BRC") and/or by Gary-Williams Energy Corporation ("GWEC")). Contamination originating at the refinery goes past the boundaries of the refinery. Bloomfield Refining Company ("BRC") is in the process of requesting approval from the United States Environmental Protection Agency ("EPA") to implement a corrective measures program to address certain refinery contamination in accordance with a 1992 agreement between EPA and BRC. Giant (as used herein, the term "Giant" means Giant Industries, Inc. and any company affiliated with Giant, both individually and collectively) will assume part or all of BRC's obligations under this agreement. Additionally, private parties, EPA, and other governmental entities may assert claims against Giant after the purchase of the refinery for property damage, personal injury, and other damages allegedly arising out of contamination that originated at the refinery. 3. BRC and GWEC have identified environmental matters relating to assets to be purchased by Giant in a writing, dated August 8, 1995, captioned "Environmental Disclosure." This document was provided to Giant in connection with the Purchase and Sale Agreement between BRC, GWEC and Giant. SCHEDULE 6.16(a) GIANT INDUSTRIES, INC. & AFFILIATES CORPORATE STRUCTURE Giant Industries, Inc. (a Delaware corporation) Giant Exploration & Production Company (formerly Hixon Development Company) (a Texas corporation) Giant Industries Arizona, Inc. (formerly Giant Industries, Inc.) (an Arizona corporation) Ciniza Production Company (a New Mexico corporation) Giant Stop-N-Go of New Mexico, Inc. (a New Mexico corporation) Giant Four Corners, Inc. (an Arizona corporation) Giant Mid-Continent, Inc. (an Arizona corporation) San Juan Refining Company (a New Mexico corporation) SCHEDULE 6.16(b) The Company and its Subsidiaries invest in several minor oil and gas partnerships, drilling ventures and similar arrangements in the ordinary course of business. SCHEDULE 6.17 UNINSURED PROPERTIES OF THE COMPANY AND ITS SUBSIDIARIES None SCHEDULE 8.01 LIENS REMAINING AS OF SEPTEMBER 30, 1995 Metlife Capital Corporation - Seven Service Stations Metlife Capital Corporation - Corporate Airplane Prudential Insurance Company of America and Pruco Life Insurance Company - Covenant to secure note equally Miscellaneous Liens, including capitalized leases on trucks and trailers with an aggregate value not exceeding $1,500,000 - Various SCHEDULE 8.05 SCHEDULE OF EXISTING INDEBTEDNESS AS OF SEPTEMBER 30, 1995 Prudential 8,750,000 Met Life 3,768,927 Sandia 1,945,053 C. Acridge 1,299,433 Miscellaneous 500,000 (estimate) ----------- TOTAL $16,263,413 =========== SCHEDULE 8.08 This Schedule hereby incorporates by reference all Contingent Obligations pending, threatened or contemplated against the Company, or any subsidiary, or any of their respective properties, contained in Forms 10-K for the year ended December 31, 1994 or Forms 10-Q for the quarters ended March 30, 1995 and June 30, 1995 filed by the Company with the Securities and Exchange Commission. In addition to those items disclosed above, the following is a list of certain Contingent Obligations. Giant Industries, Inc., as Issuer, and all Subsidiaries, as Guarantors, of the $100,000,000 9.75% Senior Subordinated Notes Due 2003, Indenture dated as of November 29, 1993. Giant Industries Arizona, Inc. as Borrower, Giant Industries, Inc. and Subsidiaries as Guarantors of the $20,000,000, 10.91% Senior Notes Due March 31, 1999, Note Agreement dated as of September 30, 1993, with The Prudential Insurance Company of America and Pruco Life Insurance Company. Giant Industries Arizona, Inc. as Buyer and New Bank of New England N.A., Den Norske Bank, Kansallis-Osake-Pankki, and Portales Energy Company, Inc. as sellers of the Portales Ethanol Facility pursuant to the Purchase and Sale Agreement Dated May 7, 1991. Within 90 days following the end of each twelve-month period (an "Operating Year") commencing with the Closing Date and ending with the Operating Year ending five years from the Closing Date, the Sellers shall be entitled to receive a payment ("Contingent Payment") equal to the EBIT Percentage for such Operating Year, provided that in no event shall the Contingent Payment exceed the sum of $900,000 per Operating Year. SCHEDULE 11.02 OFFSHORE AND DOMESTIC LENDING OFFICES, ADDRESSES FOR NOTICES GIANT INDUSTRIES, INC. Giant Industries, Inc. 23733 North Scottsdale Road Scottsdale, Arizona 85255-3465 Attention: President Telephone: (602) 585-8888 Facsimile: (602) 585-8893 GUARANTORS Giant Industries Arizona, Inc. Giant Four Corners, Inc. Ciniza Production Company San Juan Refining Company Giant Exploration & Production Company c/o Giant Industries, Inc. 23733 North Scottsdale Road Scottsdale, Arizona 85255-3465 Attention: President Telephone: (602) 585-8888 Facsimile: (602) 585-8893 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent Agent's Payment office: Bank of America-San Francisco F/O: Agency Mgmt. Svcs. 5596 ABA No.: 1210-0035-8 Acct. No.: 12334-14782 Ref: Giant Industries, Inc. Bank of America National Trust and Savings Association Global Agency #5596 1455 Market Street, 12th Floor San Francisco, California 94103 Attention: Frank H. Woo Telephone: (415) 622-6614 Facsimile: (415) 622-4894 BANK OF AMERICA ILLINOIS, as a Bank Address of Lending Offices: Domestic and Eurodollar Lending Office: Bank of America Illinois 231 South LaSalle Street Chicago, Illinois 60697 Attention: Ida Rubens Telephone: (312) 828-5239 Facsimile: (312) 987-5614 Address for Notices (other than Borrowing Notices and Notices of Conversion/ Continuation): Bank of America Illinois 231 South LaSalle Street Chicago, Illinois 60697 Attention: Ida Rubens Telephone: (312) 828-5239 Facsimile: (312) 987-5614 With a copy to: Paula Mitchell Bank of America Three Allen Center 333 Clay Street, Suite 4550 Houston, Texas 77002-4103 Telephone: (713) 651-4880 Facsimile: (713) 651-4841 BANK OF AMERICA ILLINOIS, as Issuing Bank Address for Notices: 231 South LaSalle Street Chicago, Illinois 60697 Attention: Ida Rubens Telephone: (312) 828-5239 Facsimile: (312) 987-5614 With a copy to: Paula Mitchell Bank of America Three Allen Center 333 Clay Street, Suite 4550 Houston, Texas 77002-4103 Telephone: (713) 651-4880 Facsimile: (713) 651-4841 EXHIBIT "A" FORM OF NOTICE OF BORROWING Date:__________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent") for the Banks (as herein defined) from time to time party to the Credit Agreement, dated as of October 4, 1995 (as the same may be amended, modified or restated from time to time, the "Credit Agreement"), among GIANT INDUSTRIES, INC., a Delaware corporation ("Company"), the Guarantors (as defined in the Credit Agreement) party thereto, the several financial institutions from time to time party thereto (the "Banks"), the Agent and BANK OF AMERICA ILLINOIS, as letter of credit issuing bank and a Bank. Ladies and Gentlemen: The undersigned GIANT INDUSTRIES, INC. (the "Company") hereby refers to the Credit Agreement and hereby gives you notice irrevocably, pursuant to Section 2,03 of the Credit Agreement, of the Borrowing(s) specified below: A. FACILITY A REVOLVING LOAN: 1. Aggregate Total Amount: $__________ 2. Revolving Loan advance date: _________, 199_. 3. Requested Loan Type and applicable Dollar amount: RATE SELECTION (a) Base Rate Loan for $__________. (b) Offshore Rate Loan with Interest Period of: (i) one month for $__________ (ii) two months for $__________ (iii) three months for $__________ (iv) six months for $__________ B. FACILITY B REVOLVING LOAN: 1. Aggregate Total Amount: $__________ 2. Revolving Loan advance date: _________, 199_. 3. Requested Loan Type and applicable Dollar amount: RATE SELECTION (a) Base Rate Loan for $__________. (b) Offshore Rate Loan with Interest Period of: (i) one month for $__________ (ii) two months for $__________ (iii) three months for $__________ (iv) six months for $__________ C. The Borrowing(s) herein requested are to be received in immediately available funds on _________, ____________, 199_, in the following account: Bank Name:________________________ ABA Number:_______________________ Account Title:____________________ Account Number:___________________ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing(s), before and after giving effect thereto and to the application of the proceeds therefrom: (a) the representations and warranties of the undersigned contained in Article VI of the Credit Agreement are true and correct in all material respects as though made on and as of the date hereof and the date of the proposed Borrowing(s) (except such representations and warranties which expressly refer to an earlier date, which are true and correct in all material respects as of such earlier date); and (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing(s); and (c) the aggregate outstanding principal amount of all Loans does not exceed the Commitments; and (d) the aggregate outstanding principal amount of all Facility A Revolving Loans does not exceed the Facility A Commitment; and (e) the aggregate outstanding principal amount of all Facility B Revolving Loans does not exceed the Facility B Commitment. The Company agrees that if prior to the time of the making of the Loans requested hereby any matter certified to by it will not be true and correct at such time as if then made, it will immediately so notify the Agent. CLOSING DATE ONLY: The proceeds of the Revolving Loan(s) which are the subject of this Notice of Borrowing will be used for _______________________________________]. Capitalized terms used herein without definition have the meanings assigned to them in the Credit Agreement. GIANT INDUSTRIES, INC. By:_______________________ Name: Title: EXHIBIT "B" FORM OF NOTICE OF CONVERSION/CONTINUATION Date:_______________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent") for the Banks (as herein defined) from time to time party to the Credit Agreement, dated as of October 4, 1995 (as the same may be amended, modified or restated from time to time, the "Credit Agreement"), among GIANT INDUSTRIES, INC., a Delaware corporation ("Company"), the Guarantors (as defined in the Credit Agreement) party thereto, the several financial institutions from time to time party thereto (the "Banks"), the Agent and BANK OF AMERICA ILLINOIS, as letter of credit issuing bank and a Bank. Ladies and Gentlemen: The undersigned GIANT INDUSTRIES, INC. (the "Company") hereby refers to the Credit Agreement and hereby gives you notice irrevocably, pursuant to Section 2.04 of the Credit Agreement, of the conversion or continuation of the Loan specified below: A. FACILITY A REVOLVING LOAN: 1. Loan to be converted or continued: (1) Amount: $__________ (2) Loan Date: __________, 199__ (3) Existing Loan Type: CHECK APPLICABLE BLANK (a) Base Rate _______ (b) Offshore Rate with an Interest Period of: (i) one month _______ (ii) two months _______ (iii) three months _______ (iv) six months _______ (4) Date Loan matures: ___________, 199__ 2. Proposed conversion or continuation date: __________, 199__ (the "Continuation/Conversion Date"). 3. Loan described in (A) above is to be converted or continued as follows: (1) Amount: $__________ (2) Loan Date: __________, 199__ (3) Requested Loan Type and applicable Dollar amount: (a) Base Rate for $____________ (b) Offshore Rate with an Interest Period of: (i) one month _______ (ii) two months _______ (iii) three months _______ (iv) six months _______ (B) FACILITY B REVOLVING LOAN: 1. Loan to be converted or continued: (1) Amount: $__________ (2) Loan Date:____________, 199__ (3) Existing Loan Type: CHECK APPLICABLE BLANK (a) Base Rate _______ (b) Offshore Rate with an Interest Period of: (i) one month _______ (ii) two months _______ (iii) three months _______ (iv) six months _______ (4) Date Loan matures: ___________, 199__ 2. Proposed conversion or continuation date: _________, 199___ (the "Continuation/Conversion Date"). 3. Loan described in (A) above is to be converted or continued as follows: (a) Base Rate for $____________ (b) Offshore Rate with an Interest Period of: (i) one month _______ (ii) two months _______ (iii) three months _______ (iv) six months _______ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the Conversion/Continuation Date, before and after giving effect to the Conversion/Continuation Date of the Loans as herein specified: (a) the representations and warranties of the undersigned contained in Article VI of the Credit Agreement are true and correct in all material respects as though made on and as of the date hereof and the Continuation/Conversion Date (except such representations and warranties which expressly refer to an earlier date, which are true and correct in all material respects as of such earlier date); and (b) no Default or Event of Default has occurred and is continuing, or would result from such Conversion/Continuation; and (c) the aggregate outstanding principal amount of all Loans does not exceed the Commitments; and (d) the aggregate outstanding principal amount of all Facility A Revolving Loans does not exceed the Facility A Commitment; and (e) the aggregate outstanding principal amount of all Facility B Revolving Loans does not exceed the Facility B Commitment. The Company agrees that if prior to the time of the conversion or continuation of the Loan requested hereby any matter certified to by it will not be true and correct at such time as if then made, it will immediately so notify the Agent. Capitalized terms used herein without definition have the meanings assigned to them in the Credit Agreement. GIANT INDUSTRIES, INC. By:_______________________ Name: Title: EXHIBIT "C" COMPLIANCE CERTIFICATE The undersigned authorized officer of GIANT INDUSTRIES, INC. ("Company"), delivers this Certificate pursuant to the Credit Agreement dated as of October 4, 1995 (as the same may be amended, modified or restated from time to time, the "Credit Agreement"), among Bank of America National Trust and Savings Association as Agent, (the "Agent") the several financial institutions from time to time party thereto (the "Banks"), the Company, and the Guarantors. The undersigned hereby certifies to the Agent and the Banks as follows: 1. A review of the activities of the Company and its Subsidiaries during the period from _________, 199__ to _________, 199__ the "Subject Period") has been made to obtain the information necessary to execute and deliver this Certificate. 2. To the best of the undersigned's knowledge, information and belief, except as described in Attachment 2 attached hereto: (a) as of the date heres& no Default or Event of Default exists under the Credit Agreement; and (b) as of the date hereof, the Company and its Subsidiaries are in compliance with the financial covenants contained in the Credit Agreement as set forth in Attachment 1 attached hereto. Capitalized terms used herein without definition have the meanings assigned to them in the Credit Agreement. EXECUTED AND DELIVERED as of _________, 199__. GIANT INDUSTRIES, INC. _____________________________ Authorized Officer ATTACHMENT 1 GIANT INDUSTRIES, INC. & SUBSIDIARIES CALCULATION OF FINANCIAL COVENANTS AND RATIOS AS OF _____________, 199__ (THE "DETERMINATION DATE") 1. MINIMUM NET WORTH (SECTION 8.12 of the Credit Agreement) (a) Net Income, calculated from the period beginning after June 30, 1995, and ending on the Determination Date (provided no negative adjustment will be made in the event Consolidated Net Income is a deficit for such period), is: $__________ $___________ (b) 50% of the amount in (a) is: $___________ (c) 100% Net Proceeds received from the issuance of any capital stock or other equity interest by the Company or any of its Consolidated Subsidiaries after June 30, 1995 is: $___________ (d) Plus $95,000,000 $95,000,000 (e) Subtotal (the sum of 2(b) plus 2(c) plus 2(d)) is: $___________ (f) Less Allowance for non-cash write-downs (not to exceed a cumulative amount of $10,000,000): $___________ (g) Minimum Net Worth (the balance of 2(e) minus 2(f)) $___________ Net Worth: $___________ 2. Fixed Charge Coverage Ratio (Section 8.13 of the Credit Agreement) (a) Consolidated EBITDA for the four fiscal quarters ending on the Determination Date: $___________ (b) Less Non-Discretionary Capital Expenditures: $___________ (c) Subtotal (the balance of 2(a) minus 2(b) is): $___________ (d) Consolidated Interest Expense for the four fiscal quarters ending on the Determination Date: $___________ (e) The ratio of 3(c) to 3(d) is: ___:1.00 Fixed Charge Coverage Ratio required by Section 8.13 of the Credit Agreement, is not less than 2.5 to 1.00. 3. Capitalization Ratio (Section 8.14 of the Credit Agreement) (a) Consolidated Funded Indebtedness is: $___________ (b) Consolidated Total Capitalization is: $___________ (c) The percentage of 1(a) to 1(b) is: ________% Capitalization Ratio required by Section 8.14 of the Credit Agreement is not more than 65% through June 30, 1997 or 62.5%, thereafter. 4. Borrowing Base Certificate: attached Capitalized terms used herein without definition have the meanings assigned to them in the Credit Agreement. EXECUTED AND DELIVERED as of __________, 199___. GIANT INDUSTRIES, INC. _____________________________ Authorized Officer ATTACHMENT 2 EXCEPTIONS TO COMPLIANCE CERTIFICATE EXHIBIT "D" OPINION OF COUNSEL SUBSTANTIVE ISSUES TO BE ADDRESSED IN OPINION(S) OF COUNSEL TO GIANT INDUSTRIES, INC. AND AFFILIATED ENTITIES 1. Each of the Company, the Guarantors and each of their Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of the respective jurisdiction of its incorporation and (b) is duly qualified and licensed to do business and in good standing in each of the other respective jurisdictions wherein the ownership, lease or operation of property or the conduct of business requires such qualification or licensing. 2. Each of the Company, the Guarantors and each other Subsidiary or Affiliate, if any, party to any of the Loan Documents has all requisite corporate, partnership or other power and authority, as applicable, to execute, deliver and perform its obligations under the Agreement and the other Loan Documents applicable to it. 3. The execution, delivery and performance by each of the Company, the Guarantors and each other Subsidiary or Affiliate, if any, party to any of the Loan Documents of the Agreement and each of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action, and each of the Agreement and the other Loan Documents has been duly executed and delivered by the Company, the Guarantors and each other Subsidiary party to any of the Loan Documents, as applicable. 4. The execution, delivery and performance by each of the Company, the Guarantors and each other Subsidiary party to any of the Loan Documents do not and will not (a) breach or constitute a default under (i) their respective charter, articles or certificate of incorporation or bylaws, (ii) any decree, injunction, order, writ or other action of any Governmental Authority applicable to them or their respective assets, or (iii) the Prudential Note Agreement or the notes or any other documents executed in connection therewith, the NBD Indenture or the notes or any other documents executed in connection therewith, or any other material Contractual Obligation to which any of them is a party or by which any of their respective properties may be bound, (b) result in or require the creation of any Lien upon or with respect to any of their respective assets, or (c) violate any Requirement of Law. 5. No consent, approval, exemption, waiver, license or authorization from, or action by or filing with, any Governmental Authority is or will be required in connection with the (a) due execution, delivery or performance by, or enforcement against, the Company, the Guarantors and each other Subsidiary party to any of the Loan Documents, of the Agreement or any of the other Loan Documents, and (b) the Bloomfield Acquisition, except such as have been obtained or completed. The Bloomfield Acquisition is in compliance with all applicable laws and regulations. 6. Each of the Agreement and the other Loan Documents to which the Company is a party is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other laws governing the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 7. Each of the Agreement and the other Loan Documents to which any of the Guarantors is a party is the legal, valid and binding obligation of each such Guarantor, enforceable against such Guarantor in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other laws governing the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 8. Each of the Agreement and the other Loan Documents to which any other Subsidiary is a party is the legal, valid and binding obligation of each such Subsidiary, enforceable against such Subsidiary in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other laws governing the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 9. There is no pending or, to our knowledge, threatened action, suit, claim, dispute or proceeding in arbitration or before any Governmental Authority against any of the Company, the Guarantors or any other Subsidiary thereof or any of their respective assets or with respect to any Plan (a) which purports to affect or pertain to the Agreement or any other Loan Document, or any of the transactions referenced therein or contemplated thereby, or (b) if determined adversely, could reasonably be expected to have a Material Adverse Effect. 10. There are no outstanding judgments against any one or more of the Company, the Guarantors or any other Subsidiary thereof, and, to our knowledge, no injunction, writ, temporary restraining order or order or restraint of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the consummation of the Bloomfield Acquisition, the execution, delivery or performance of the Agreement or any other Loan Document, or directing that the transactions referenced therein or contemplated thereby not be consummated as therein provided or contemplated. 11. Neither the consent of the shareholders of any of the Company, the Guarantors and each other Subsidiary party to any of the Loan Documents, nor the consent of any holder of any Indebtedness of any thereof is or will be required as a condition to the validity or enforceability of the Agreement or any of the other Loan Documents or the consummation of the Bloomfield Acquisition, except such as have been obtained. 12. The transaction contemplated by the Agreement and the other Loan Documents is not usurious under applicable law. 13. The consummation of the transactions contemplated by the Agreement and the other Loan Documents will not violate Regulation G, T, U or X of the FRB. 14. The choice of law provisions set forth in the Agreement and the other Loan Documents wherein the parties agree that the laws of the State of Texas shall govern and control the terms of the Agreement and the other Loan Documents (except as otherwise specifically provided therein) is a valid, effective and enforceable choice of law under the laws of the State of Arizona and would be upheld and enforced by the courts of the State of Arizona and by Federal courts sitting and applying the laws of the State of Arizona. 15. None of the Company or the Guarantors is a "holding company," a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. 16. None of the Company or the Guarantors is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 17. Neither the Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utility code, or any other Federal or state statute or regulation limiting, in any such case, its ability to incur Indebtedness. We acknowledge that the Agents and the Banks are relying on the opinions expressed herein in extending any credit under the Agreement and the other Loan Documents and hereby consent to reliance by the Agents and the Banks now or hereafter parties to the Agreement on the opinions expressed herein. EXHIBIT "E" ASSIGNMENT AND ACCEPTANCE AGREEMENT This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated as of ________, 199__, is made between __________________ (the "Assignor") and ___________________ (the "Assignee"). RECITALS WHEREAS, the Assignor is party to that certain Credit Agreement, dated as of October 4, 1995 (as the same may be amended, modified or restated from time to time, the "Credit Agreement"), among GIANT INDUSTRIES, INC., a Delaware corporation ("Company"), the Guarantors (as defined in the Credit Agreement) party thereto, the several financial institutions from time to time party thereto (the "Banks"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent") for the Banks from time to time party to the Credit Agreement, and BANK OF AMERICA ILLINOIS, as letter of credit issuing bank and a Bank (terms defined in the Credit Agreement are used herein with the same meaning); WHEREAS, as provided in the Credit Agreement, the Banks have committed to extend credit to the Company in an aggregate amount not to exceed SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00); and WHEREAS, the Assignor wishes to assign to the Assignee part of the rights and obligations of the Assignor under the Credit Agreement in respect of its Commitment, together with a corresponding portion of each of its outstanding Loans and its Pro Rata Share of the outstanding L/C Obligations, in a total amount equal to ____________________ Dollars (U.S.$_________) (the "Assigned Amount") on the terms listed on Annex I hereto and subject to the conditions set forth herein and in the Credit Agreement, and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: 1. Assignment and Assumption. (a) Before giving effect to this Agreement, Assignor's (a) Commitment is $_________, (b) aggregate principle amount of its outstanding Loans is $_________, (c) aggregate principal amount of its outstanding L/L Obligation is $__________ and (d) Pro Rata Share is ____%. With effect on and after the Effective Date (as defined in Section 4 hereof), the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, the Assigned Amount, which shall be equal to ____ percent (___%) (the "Assignee's Percentage Share") of all of the Assignor's rights and obligations under the Credit Agreement, including, without limitation, the Assignee's Percentage Share of the Assignor's (i) Commitment, and (ii) outstanding Loans and L/C Obligations. After giving effect to this Agreement on the Effective Date, the Commitment, outstanding Loans and L/C Obligations, and Pro Rata Share of Assignor and Assignee, respectively, are set forth as follows: Outstanding Outstanding L/C Pro Rata Loans Obligations Share Commitment ----------- ----------- -------- ---------- Assignor $__________ $__________ _______% $________ Assignee $__________ $__________ _______% $________ The assignment set forth in this Section l(a) shall be without recourse to, or representation or warranty (except as expressly provided in this Agreement) by, the Assignor. (b) With effect on and after the Effective Date, the Assignee shall be a party to the Credit Agreement, shall become a "Bank" for all purposes as therein defined and contemplated, and shall succeed to all of the rights and be obligated to perform all of the obligations of a Bank under the Credit Agreement with a Commitment in the amount and with the Pro Rata Share set forth above for the Assignee. The Assignee agrees that it is bound by the terms and conditions set forth in the Credit Agreement as if it were an original signatory thereto, and that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank. It is the intent of the parties hereto that (i) the Commitment of the Assignor shall, as of the Effective Date, be reduced by the Assignee's Percentage Share and (ii) the Assignor shall relinquish its rights and be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. 2. Payments. (a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to $____________ Dollars ($_______), representing the Assignee's Percentage Share of the principal amount of all Loans previously made, and currently owned, by the Assignor under the Credit Agreement and outstanding on the Effective Date. The difference between the Assigned Amount and the amount paid to Assignor under this Section 2(a) represents the amount of outstanding L/C Obligations assumed by Assignee pursuant to the terms hereof as of the Effective Date. (b) The Assignee further agrees to pay to the Agent a processing or transfer fee in the amount of $3,500.00. (c) To the extent payment to be made by the Assignee pursuant to Section 2(a) hereof is not made when due, the Assignor shall be entitled to recover such amount together with interest thereon at the Federal Funds Rate per annum accruing from the date such amounts were due. together with interest thereon at the Federal Funds Rate per annum accruing from the date such amounts were due. 3. Reallocation of Payments. Any interest, commissions, fees and other payments accrued to but excluding the Effective Date with respect to the Assignor's Commitment Percentage of the Loans and L/C Obligations, shall be for the account of the Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Amount shall be for the account of the Assignee. Each of the Assignor and the Assignee agree that it will hold in trust for the other party any interest, commissions, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt. The Assigner's and the Assignee's obligations to make the payments referred to in this Section 3 are non-assignable. 4. Effective Date. Notices; Notes. (a) The effective date for this Agreement shall be ______________ (the "Effective Date"); provided that the following conditions precedent have been satisfied on or before the Effective Date: (i) this Agreement shall be executed and delivered by the Assignor and the Assignee; (ii) the consent of the Company and the Agent shall have been duly obtained in the form set forth on Annex II hereof, and shall be in full force and effect as of the Effective Date; (iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Agreement; and (iv) the processing or transfer fee referred to in Section 2(b) shall have been paid to the Agent. (b) Promptly following the execution of this Agreement, the Assignor shall deliver to the Agent for acceptance by the Agent, the notices, agreements or other documents as may be required under the Credit Agreement. (c) Promptly following payment by the Assignee of the consideration as provided in Section 2 hereof, the Assignor shall deliver its promissory note(s) to the Agent and shall request that new notes be issued to the Assignor and the Assignee dated the Effective Date to properly reflect the respective amounts of the Loans and L/C Obligations held by each party. [5. Agent [INCLUDE ONLY IF ASSIGNOR IS AGENT]. (a) The Assignee hereby appoints and authorizes the Assignor to take such action as Agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the Banks pursuant to the terms of the Credit Agreement. (b) The Assignee shall assume no duties or obligations held by the Assignor in its capacity as Agent under the Credit Agreement-] 6. Representations and Warranties. (a) The Assigner represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any lien, security interest or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Agreement and any other documents required or permitted to be executed or delivered by it in connection with this Agreement and to fulfill its obligations hereunder, (iii) no notices to, or consents, authorizations or approvals of, any person are required (other than any already given or obtained) for its due execution, delivery and performance of this Agreement, and apart from any agreements or undertaking or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any person is required of it for such execution, delivery or performance; and (iv) this Agreement has been duly executed and delivered by it and constitutes the legal, valid and binding obligations of the Assignor, enforceable against the Assignor in accordance with the terms hereof, except subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (b) The Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto. The Assigner makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Company or any guarantor or the performance or observance by the Company or any guarantor of any of its respective obligations under the Credit Agreement or any other instrument or document furnished in connection therewith. (c) The Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Agreement and any other documents required or permitted to be executed or delivered by it in connection with this Agreement, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any person are required (other than any already given or obtained) for its due execution, delivery and performance of this Agreement; and apart from any agreements or undertaking or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any person is required of it for such execution, delivery or performance; (iii) this Agreement has been duly executed and delivered by it and constitutes the legal, valid and binding obligations of the Assignee, enforceable against the Assignee in accordance with the terms hereof, except subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; (iv) it is eligible under the Credit Agreement to be an assignee in accordance with the terms hereof; and (v) that it has received a copy of the Credit Agreement and the exhibits and schedules thereto, and has received (or waived the requirement that it receive) copies of each of the documents which were required to be delivered under the Credit Agreement as a condition to the making of the Loans thereunder. 7. Further Assurances. The Assigner and the Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Agreement, including, without limitation, the delivery of any notices or other documents or instruments to the Company, the Agent or any guarantor which may be required in connection with the assignment and assumption contemplated hereby. 8. Indemnity. The Assignee agrees to indemnity and hold harmless the Assignor against any and all losses, costs, expenses (including, without limitation, reasonable attorneys' fees and the allocated costs and expenses for in-house counsel) and liabilities incurred by the Assignor in connection with or arising in any manner from the nonperformance by the Assignee of any obligation assumed by the Assignee under this Agreement. 9. Miscellaneous. (a) Any amendment or waiver of any provision of this Agreement shall be in writing signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Agreement shall be without prejudice to any rights with respect to any other or further breach hereof (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) All communications among the parties or notices in connection herewith shall be in writing and mailed, hand-delivered or transmitted by facsimile as follows: (i) if to the Assigner or the Assignee, at their respective addresses or facsimile numbers set forth on the signature pages hereof and (ii) if to the Company, the Agent or any guarantor, at their respective addresses or facsimile numbers set forth in the Credit Agreement or to such other address or facsimile number as shall be designated in a written notice given in accordance with the Credit Agreement. All such communications and notices shall be effective upon receipt. The Assignee specifies as its Domestic and Offshore landing Office(s) the offices set forth beneath its name on the signature pages hereof (d) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement. (e) The representations and warranties made herein shall survive the consummation of the transactions contemplated hereby. (f) Subject to the terms of the Credit Agreement, this Agreement shall be binding upon and inure to the benefit of the Assignor and the Assignee and their respective successors and assigns; however that no party shall assign its rights hereunder without the prior written consent of the other party and the Company and any purported assignment, absent such consents, shall be void. The preceding sentence shall not limit or enhance the right of the Assignee to assign or participate all or part of the Assignee's Percentage Share and the Assigned Amount and any outstanding Loans and L/C Obligations attributable thereto in accordance with the Credit Agreement. (g) This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. (h) This Agreement shall be governed by and construed in accordance with the law of the State of Texas (without regard to principles of conflicts of law). The Assignor and the Assignee each irrevocably submits to the non-exclusive jurisdiction of any Texas State or Federal court sitting in the Southern District of Texas over any suit, action or proceeding arising out of or relating to this Agreement or the Credit Agreement and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Texas State or Federal court. Each party to this Agreement hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. (i) This Agreement and any agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto, and together with the Credit Agreement constitutes the entire agreement and understanding between the parties hereto and supersedes any and all prior agreements and understandings related to the subject matter hereof In the event of any conflict between the terms, conditions and provisions of this Agreement and the Credit Agreement, the terms, conditions and provisions of the Credit Agreement shall prevail. (j) In the event of any inconsistency between the provisions of this Agreement and Annex I hereto, this Agreement shall control. Headings are for reference only and are to be ignored in interpreting this Agreement. (k) The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. IN WITNESS WHEREOF, the Assigner and the Assignee have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ______________________________ By____________________________ Name: Title: Address for Notices: ______________________________ ______________________________ ______________________________ Facsimile No.:________________ - ASSIGNOR - By____________________________ Name: Title: Address for Notices: ______________________________ ______________________________ ______________________________ Facsimile No.:________________ Domestic Lending Office ______________________________ ______________________________ ______________________________ ______________________________ Offshore Lending Office ______________________________ ______________________________ ______________________________ ______________________________ ANNEX I TO ASSIGNMENT AND ASSUMPTION AGREEMENT 1. Company: 2. Date of Credit Agreement:__________, 1995 3. Assignor: 4. Assignee: 5. Date of Assignment Agreement: 6. Effective Date: 7. Fees paid by Assignee to Assignor: 8. Interest paid by Assignee to Assignor: (i) Base Rate Loan (ii) Offshore Rate Loan 9. Payment Instructions: Assignor: Assignee: 10. Assignee's Notice Instructions: 11. Other Information ANNEX II TO FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE _________, 199__ Bank of America National Trust and Savings Association, as Agent Agency Management Services #5506 1455 Market Street, Twelfth Floor San Francisco, California 94103 Giant Industries, Inc. ______________________ ______________________ Attention:____________ Dear Sirs: We refer to the Credit Agreement dated as of October 1995 (the "Credit Agreement") among GIANT INDUSTRIES, INC., a Delaware corporation ("Company"), the Guarantors (as defined in the Credit Agreement) parties thereto, the several financial institutions from time to time party thereto (the "Banks"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent") for the Banks (as herein defined) from time to time party to the Credit Agreement, and BANK OF AMERICA ILLINOIS, as letter of credit issuing bank and a Bank. Terms defined in the Credit Agreement are used herein as therein defined. 1. We hereby give you notice of, and request the consent of the Company to, the assignment by ___________ (the "Assignor") to _____________________________ (the "Assignee") of __% of the right, title and interest of the Assignor in and to the Credit Agreement (including without limitation the right, title and interest of the Assignor in and to the Commitment of the Assignor and all outstanding Loans made by and L/C Obligations of the Assignor). Before giving effect to such assignment the Assigner's (a) Commitment is $________, (b) Commitment Percentage is ______%, (c) aggregate principal amount of its outstanding Loans is $_________, and (d) the aggregate principal amount of its outstanding L/C Obligations is $____________. After giving effect to such assignment, the Assignor's and Assignee's respective Loans, L/C Obligations, Commitment and Commitment Percentage are as follows: Outstanding Outstanding L/C Commitment Loans Obligations Percentage Commitment ----------- ----------- ---------- ---------- Assignor $__________ $__________ _______% $________ Assignee $__________ $__________ _______% $________ 2. The Assignee agrees that upon receiving the consent of the Company and the Agent to such assignment and from and after the effective date of the Assignment, the Assignee will be bound by the terms of the Credit Agreement, with respect to the interest in the Credit Agreement assigned to it as specified above, as fully and to the same extent as if the Assignee were the Bank originally holding such interest in the Credit Agreement. 3. The following administrative details apply to the Assignee: (A) Offshore Lending Office: Assignee:________________________ Address:_________________________ _________________________ _________________________ Attention:_______________________ Telephone:(___)__________________ Facsimile:(___)__________________ (B) Domestic Lending Office: Assignee:________________________ Address:_________________________ _________________________ _________________________ Attention:_______________________ Telephone:(___)__________________ Facsimile:(___)__________________ (C) Notice Address: Assignee:________________________ Address:_________________________ _________________________ _________________________ Attention:_______________________ Telephone:(___)__________________ Facsimile:(___)__________________ (D) Payment Instructions: Account No.:_____________________ At:_____________________ _____________________ _____________________ Reference:_______________________ Attention:_______________________ 4. Without limiting the generality of Paragraph 2 hereinabove, the tax forms to be delivered by the Assignee pursuant to Section 4.01 of the Credit Agreement, if any, will be promptly provided in compliance therewith. IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [Name of Assignor] By_____________________ Name: Title: [Name of Assignee] By_____________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent, hereby grants its consent to the foregoing instrument: By______________________________ Name: Title: GIANT INDUSTRIES, INC. hereby grants its consent to the foregoing assignment: By______________________________ Name: Title: EXHIBIT "F-1" BANK OF AMERICA ILLINOIS FACILITY A REVOLVING NOTE $30,000,000 October 4, 1995 FOR VALUE RECEIVED, the undersigned, GIANT INDUSTRIES, INC., a Delaware corporation (the "Borrower"), promises to pay to the order of BANK OF AMERICA ILLINOIS (the "Bank"), for the account of its Lending Office, the principal amount of THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00) or the aggregate unpaid principal amount of all Facility A Revolving Loans made by the Bank to the Borrower pursuant to Section 2.01(a) of the Credit Agreement hereinafter referred to, whichever is less, in immediately available funds at BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AGENCY MANAGEMENT SERVICES, #5596, 1455 Market Street, Twelfth Floor, San Francisco, California 94103, at the times and in the amounts as set forth in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal balance of the Facility A Revolving Loans, from time to time outstanding, at the rates and on the dates set forth in the Credit Agreement. The aggregate unpaid principal amount of all Facility A Revolving Loans shall be due and payable on the Facility A Termination Date. This note is one of the notes issued pursuant to and entitled to the benefits of that certain Credit Agreement, dated as of October 4, 1995 (as the same may be amended, modified or restated from time to time, the "Credit Agreement"), among Borrower, the Guarantors (as defined in the Credit Agreement) party thereto, the several financial institutions from time to time party thereto (the "Banks'), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Agent for the Banks, and BANK OF AMERICA ILLINOIS as letter of credit issuing bank and a Bank. All captioned terms used but not defined herein shall have the meaning assigned to them in the Credit Agreement. Reference is made to the Credit Agreement for, inter alia, provisions for the prepayment hereof the acceleration of the maturity hereof and to the effect that no provision of the Credit Agreement or this Facility A Revolving Note shall require the payment or permit the charging or collection of interest in an amount in excess of the highest non-usurious amount permitted by applicable law. It is contemplated that by reason of prepayments hereon prior to the Facility A Termination Date, there may be times when no indebtedness is owing hereunder prior to such date, but notwithstanding such occurrence this note shall be in full force and effect as to the Facility A Revolving Loans made pursuant to the Credit Agreement subsequent to each such occurrence. All Facility A Revolving Loans made by the Bank pursuant to the Credit Agreement and all payments of the principal thereof shall be endorsed by the holder of this Facility A Revolving Note on the schedule annexed hereto (including any additional pages such holder may add to such schedule), which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of the holder of this Facility A Revolving Note to insert any date or amount or other information on such schedule shall not in any manner affect the obligation of the Borrower to repay any Facility A Revolving Loans in accordance with the terms of the Credit Agreement. The Borrower and any and all sureties, guarantors and endorsers of this Facility A Revolving Note and all other parties now or hereafter liable hereon, severally waive, except as otherwise provided in the Credit Agreement, grace, demand, presentment for payment, protest, notice of any kind (including, but not limited to, notice of dishonor, notice of protest, notice of intention to accelerate and notice of acceleration) and diligence in collecting and bringing suit against any party hereto, and agree (i) to all extensions and partial payments, with or without notice, before or after maturity, (ii) to any substitution, exchange or release of any security now or hereafter given for this Facility A Revolving Note, (iii) to the release of any party primarily or secondarily liable hereon, and (iv) that it will not be necessary for the Bank, in order to enforce payment of this Facility A Revolving Note, to first institute or exhaust the Bank's remedies against the Borrower or any other party liable therefor or against any security for this Facility A Revolving Note. This Facility A Revolving Note may not be changed, modified or terminated orally, but only by an agreement in writing signed by the party charged. If any term or provision of this Facility A Revolving Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions herein shall in no way be affected thereby. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS FACILITY A REVOLVING NOTE, THE BORROWER WAIVES THE RIGHT TO A TRIAL BY JURY AND THE DEFENSES OF FORUM NON CONVENIENCE AND IMPROPER VENUE. THIS FACILITY A REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF THE BORROWER AND INURE TO THE BENEFIT OF THE BANK AND ITS SUCCESSORS AND ASSIGNS (INCLUDING PARTICIPANT'S) IN ACCORDANCE WITH THE TERMS OF THE CREDIT AGREEMENT. IN WITNESS WHEREOF, the Borrower has executed and delivered this Facility A Revolving Note on the date first above written. GIANT INDUSTRIES, INC. By______________________ Name: Title: GRID SCHEDULE Attached to and made part of the Facility A Revolving Note, dated October 4, 1995, issued pursuant to that certain Credit Agreement, dated as of October 4, 1995, among GIANT INDUSTRIES, INC., a Delaware corporation, the Guarantors party thereto, the several financial institutions from time to time party thereto (the "Banks"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Agent for the Banks from time to time to the Credit Agreement, and BANK OF AMERICA ILLINOIS as letter of credit issuing bank and a Bank. Date of Loan: Principal Amount of Loan: Type of Loan(1): Interest Rate: Interest Paid Maturity Date: Amount of Principal Paid or Prepaid or Converted: Unpaid Principal Balance (Balance continued): Name of Person Making Notation: (1) The type of loan may be represented by either "B" for Base Rate Loans or "O" for Offshore Rate Loans. EXHIBIT "F-2" BANK OF AMERICA ILLINOIS FACILITY B REVOLVING NOTE $40,000,000 October 4, 1995 FOR VALUE RECEIVED, the undersigned, GIANT INDUSTRIES, INC., a Delaware corporation (the "Borrower), promises to pay to the order of BANK OF AMERICA ILLINOIS (the "Bank"), for the account of its Lending Office, the principal amount of FORTY MILLION AND No/100 DOLLARS ($40,000,000.00) or the aggregate unpaid principal amount of all Facility B Revolving Loans made by the Bank to the Borrower pursuant to Section 2,01(b) of the Credit Agreement hereinafter referred to, whichever is less, in immediately available funds at BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AGENCY MANAGEMENT SERVICES, #5596, 1455 Market Street, Twelfth Floor, San Francisco, California 94103, at the times and in the amounts as set forth in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal balance of the Facility B Revolving Loans, from time to time outstanding, at the rates and on the dates set forth in the Credit Agreement. The aggregate unpaid principal amount of all Facility B Revolving Loans shall be due and payable on the Facility B Termination Date. This note is one of the notes issued pursuant to and entitled to the benefits of that certain Credit Agreement, dated as of October 4, 1995 (as the same may be amended, modified or restated from time to time, the "Credit Agreement"), among Borrower, the Guarantors (as defined in the Credit Agreement) party thereto, the several financial institutions from time to time party thereto (the 'Banks'), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Agent for the Banks, and BANK OF AMERICA ILLINOIS as letter of credit issuing bank and a Bank. AU capitalized terms used but not defined herein shall have the meaning assigned to them in the Credit Agreement. Reference is made to the Credit Agreement for, inter alia, provisions for the prepayment hereof the acceleration of the maturity heres& and to the effect that no provision of the Credit Agreement or this Facility B Revolving Note shall require the payment or permit the charging or collection of interest in an amount in excess of the highest non-usurious amount permitted by applicable law. It is contemplated that by reason of prepayments hereon prior to the Facility B Termination Date, there may be times when no indebtedness is owing hereunder prior to such date, but notwithstanding such occurrence this note shall be in full force and effect as to the Facility B Revolving Loans made pursuant to the Credit Agreement subsequent to each such occurrence. All Facility B Revolving Loans made by the Bank pursuant to the Credit Agreement and all payments of the principal thereof shall be endorsed by the holder of this Facility B Revolving Note on the schedule annexed hereto (including any additional pages such holder may add to such schedule), which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of the holder of this Facility B Revolving Note to insert any date or amount or other information on such schedule shall not in any manner affect the obligation of the Borrower to repay any Facility B Revolving Loans in accordance with the terms of the Credit Agreement. The Borrower and any and all sureties, guarantors and endorsers of this Facility B Revolving Note and all other parties now or hereafter liable hereon, severally waive, except as otherwise provided in the Credit Agreement, grace, demand, presentment for payment, protest, notice of any kind (including, but not limited to, notice of dishonor, notice of protest, notice of intention to accelerate and notice of acceleration) and diligence in collecting and bringing suit against any party hereto, and agree (i) to all extensions and partial payments, with or without notice, before or after maturity, (ii) to any substitution, exchange or release of any security now or hereafter given for this Facility B Revolving Note, (iii) to the release of any party primarily or secondarily liable hereon, and (iv) that it will not be necessary for the Bank, in order to enforce payment of this Facility B Revolving Note, to first institute or exhaust the Bank's remedies against the Borrower or any other party Liable therefor or against any security for this Facility B Revolving Note. This Facility B Revolving Note may not be changed, modified or terminated orally, but only by an agreement in writing signed by the party charged. If any term or provision of this Facility B Revolving Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions herein shall in no way be affected thereby. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS FACILITY B REVOLVING NOTE, THE BORROWER WAIVES THE RIGHT TO A TRIAL BY JURY AND THE DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE. THIS FACILITY B REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF THE BORROWER AND INURE TO THE BENEFIT OF THE BANK AND ITS SUCCESSORS AND ASSIGNS (INCLUDING PARTICIPANTS) IN ACCORDANCE WITH THE TERMS OF THE CREDIT AGREEMENT. IN WITNESS WHEREOF, the Borrower has executed and delivered this Facility B Revolving Note on the date first above written. GIANT INDUSTRIES, INC. By______________________ Name: Title: GRID SCHEDULE Attached to and made part of the Facility B Revolving Note, dated October 4, 1995, issued pursuant to that certain Credit Agreement, dated as of October 4, 1995, among GIANT INDUSTRIES, INC., a Delaware corporation, the Guarantors party thereto, the several financial institutions from time to time party thereto (the "Banks"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Agent for the Banks from time to time to the Credit Agreement, and BANK OF AMERICA ILLINOIS as letter of credit issuing bank and a Bank. Date of Loan: Principal Amount of Loan: Type of Loan(1): Interest Rate: Interest Paid Maturity Date: Amount of Principal Paid or Prepaid or Converted: Unpaid Principal Balance (Balance continued): Name of Person Making Notation: (1) The type of loan may be represented by either "B" for Base Rate Loans or "O" for Offshore Rate Loans. EXHIBIT "G" GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (this "Guaranty") by _______, a __________ corporation (the "Guarantor"), is effective as of October 4, 1995, and is in favor of each of the Banks (herein defined) from time to time parties to the Credit Agreement(herein defined) and in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (together with its successors and assigns herein called the "Agent"), as the Agent for and on behalf of the financial institutions (the "Banks") now or hereafter party to that certain Credit Agreement (as the same may be amended, modified or restated from time to time and at any time, the "Credit Agreement") among GIANT INDUSTRIES, INC., a Delaware corporation (the "Company"), the Guarantors (as defined in the Credit Agreement) party thereto, the Banks, the Agent and BANK OF AMERICA ILLINOIS as letter of credit issuing bank and a Bank. All capitalized terms used but not defined herein shall have the meaning assigned to them in the Credit Agreement. WITNESSETH: WHEREAS, pursuant to the terms of the Credit Agreement, the Banks have agreed to make certain Loans to the Company; WHEREAS, the obligation of the Banks to make the Loans is conditioned upon, among other things, the execution and delivery by the Guarantor of this Guaranty; WHEREAS, the Guarantor is a wholly-owned subsidiary of the Company and the Guarantor and the Company are engaged in related businesses and the Guarantor shall derive substantial direct and indirect economic benefit from the Loans; NOW, THEREFORE, (i) in consideration of the premises and to induce the Banks to enter into the Credit Agreement and to make the Loans, (ii) at the special insistence and request of the Agent and the Banks, and (iii) for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor, for the benefit of the Agent and the Banks, hereby agrees as follows: Section 1. Defined Terms, Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. Section 2. Guaranty. The Guarantor hereby, unconditionally and irrevocably, guarantees the prompt performance and payment in full in Dollars by the Company when due (whether at stated maturity, by acceleration or otherwise) of the Obligations of the Company, and the Guarantor further agrees to pay all costs, fees and expenses (including, without limitation, counsel fees, and the allocated cost of in-house counsel) incurred by the Agent or any Bank in enforcing any rights under this Guaranty. Section 3. Guaranty Absolute. (a) The obligations of the Guarantor hereunder are those of a primary obligor, and not merely a surety, and are independent of the Obligations. A separate action or actions may be brought against the Guarantor whether or not an action is brought against the Company, any other guarantor or other obligor in respect of the Obligations or whether the Company, any other guarantor or any other obligor in respect of the Obligations are joined in any such action or actions. (b) The Guarantor guarantees that the Obligations will be paid and performed strictly in accordance with the terms of the Credit Agreement and the other Loan Documents regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or the Banks with respect thereto. Guarantor agrees that its guarantee constitutes a guarantee of payment when due and not of collection. The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of: (i) any lack of genuineness, validity, legality or enforceability of the Credit Agreement, any other Loan Document or any other document, agreement or instrument relating thereto or any assignment or transfer of any thereof; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations (including, without limitation, the possible extension of the Facility A Termination Date, Facility B Termination Date and increase of the amount of the Commitments all on the terms and conditions set forth in the Credit Agreement), or any waiver, indulgence, compromise, renewal, extension, amendment, modification of, or addition, consent, supplement to, or consent to departure from, or any other action or inaction under or in respect of, the Credit Agreement or any other Loan Document or any document, instrument or agreement relating to the Obligations or any other instrument or agreement referred to therein or any assignment or transfer of any thereof; (iii) any release or partial release of any other guarantor or other obligor in respect of the Obligations; (iv) any exchange, release or non-perfection of any collateral for all or any of the Obligations, or any release, or amendment or waiver of, or consent to departure from, any guaranty or security, for all or any of the Obligations; (v) any furnishing of any additional security for any of the Obligations; (vi) the liquidation, bankruptcy, insolvency or reorganization of the Company, any other guarantor or other obligor in respect of the Obligations or any action taken with respect to this Guaranty by any trustee or receiver, or by any court, in any such proceeding; (vii) any modification or termination of any Intercreditor or subordination agreement pursuant to which the claims of other creditors of the Company or the Guarantor are subordinated to those of the Banks; or (viii) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Company or the Guarantor. (c) This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Obligations, or any part thereof, is, upon the insolvency, bankruptcy or reorganization of the Company or the Guarantor or otherwise pursuant to applicable law, rescinded or reduced in amount or must otherwise be restored or returned by the Agent or any Bank, all as though such payment or performance had not been made. (d) If an event permitting the acceleration of any of the Obligations shall at any time have occurred and be continuing and such acceleration shall at such time be prevented by reason of the pendency against the Company of a case or proceeding under any bankruptcy or insolvency law, the Guarantor agrees that, for purposes of this Guaranty and its obligations hereunder, the Obligations shall be deemed to have been accelerated and the Guarantor shall forthwith pay such Obligations (including, without limitation, interest which but for the filing of a petition in bankruptcy with respect to the Company, would accrue on such Obligations), and the other obligations hereunder, without any further notice or demand. Section 4. Waivers. To the extent permitted by applicable law, the Guarantor hereby waives promptness, diligence, notice of intention to accelerate, notice of acceleration, notice of acceptance and any and all other notices with respect to any of the Obligations and this Guaranty and any requirement that the Agent or any Bank protect, secure, perfect or insure any security interest in or any Lien on any property subject thereto or exhaust any right or take any action against the Company, any other guarantor or any other Person or any collateral or security or to any balance of any deposit accounts or credit on the books of any Bank in favor of the Company or the Guarantor. Guarantor expressly waives each and every right to which it may be entitled by virtue of the suretyship law of the State of Texas including without limitation any rights it may have pursuant to Rule 31, Texas Rules of Civil Procedure, Section 17.001, Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code. Section 5. Subrogation. (a) The Guarantor will not exercise any rights of subrogation, reimbursement and contribution, contractual statutory or otherwise, which it may acquire by way of subrogation under this Guaranty, by any payment hereunder or otherwise, until all of the Obligations of the Company have been paid, all Commitments have terminated and all Letters of Credit have expired. (b) If, in the exercise of any of its rights and remedies, the Agent or any Bank shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against the Company or any other Person, whether because of any applicable laws pertaining to "election of remedies" or the like, the Guarantor hereby consents to such action by the Agent or such Bank and waives any claim based upon such action, even if such action by the Agent or such Bank shall result in a full or partial loss of any rights of subrogation which the Guarantor might otherwise have had but for such action by the Agent or such Bank. Any election of remedies which results in the denial or impairment of the right of the Agent or such Bank to seek a deficiency judgment against the Company shall not impair the Guarantor's obligation to pay the full amount of the Obligations. In the event the Agent or any Bank shall bid at any foreclosure or trustee's sale or at any private sale permitted by law or under the Loan Documents, the Agent or such Bank may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by the Agent or such Bank but shall be credited against the Obligations. The amount of the successful bid at any such sale, whether the Agent or such Bank or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Guaranty, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which the Agent or any Bank might otherwise be entitled but for such bidding at any such sale. Section 6. Representations and Warranties. (a) General. The Guarantor represents and warrants to the Agent and the Banks as of the date hereof that all of the representations and warranties contained in Article VI of the Credit Agreement are true and correct with respect to the Guarantor to the extent such representations and warranties refer to (a) Subsidiaries of the Company, and such representations and warranties are hereby incorporated by reference. (b) Full Disclosure, The Guarantor represents and warrants that none of the representations or warranties made by the Guarantor or any of its Subsidiaries in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, written statement or certificate furnished by or on behalf of the Guarantor or any of its Subsidiaries in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Guarantor to the Banks prior to the Closing Date), taken as a whole, contains any untrue statement of a material fact known to the Guarantor or omits any material fact known to the Guarantor required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. (c) Benefit to Guarantor. The Guarantor represents and warrants that the Guarantor has determined that its liability and obligation under this Guaranty will substantially benefit it directly, and its board of directors has made that determination. The Company, the Guarantor and the other Subsidiaries of the Company are mutually dependent on each other in the conduct of their respective businesses and do business together as an integrated business enterprise. The maintenance and improvement of the Company's financial condition is vital to sustaining the Guarantor's business and the transactions contemplated in the Credit Agreement produce distinct and identifiable financial and economic direct and indirect benefits to the Guarantor. The representations and warranties set forth in this Section 6 shall survive the execution and delivery of this Guaranty. Section 7. Further Assurances. (a) As long as any of the Obligations remain outstanding and the Commitments have not expired, the Guarantor shall, unless the Majority Banks waive compliance in writing, comply with all the covenants related to the Guarantor contained in the Credit Agreement. (b) The Guarantor agrees that at any time and from time to time, at the expense of the Guarantor, the Guarantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Agent may reasonably request, to enable the Agent to protect and to exercise and enforce its rights and remedies hereunder. Section 8. Application of Payments. Any payment received by the Agent from the Guarantor (or from any Bank pursuant to Section 13 below), shall be applied by the Agent as follows: First, to the payment of costs and expenses of collection and all expenses (including, without limitation, any legal fees and disbursements and the allocated cost of in-house counsel), liabilities and advances made or incurred by the Agent in connection therewith; Next, to the Banks pro rata based on the then outstanding amount of the Obligations owed to each in payment in full of the Obligations; and Finally, after payment in full of all Obligations and the termination of the Commitments, the payment to the Guarantor, or its successors and assigns, or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. Section 9. Decisions Relating to Exercise of Remedies. Notwithstanding anything in this Guaranty to the contrary, the Agent may exercise, and at the request of the Majority Banks shall exercise or refrain from exercising, all rights and remedies provided for herein and provided by law. Section 10. No Waiver. No failure on the part of the Agent or any Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 11. Amendments, Etc, No amendment or waiver of any provision of this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in any event be effective unless the same shall be in writing and signed, in the case of amendments, by the Guarantor and by the Agent and, in the case of consent or waivers, by the Agent and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which made or given. Section 12. Notices. All notices, requests and other communications provided for hereunder shall be in writing and given to Agent as provided in Section 11,02 of the Credit Agreement. All communications and notices hereunder to Guarantor shall be given to or, at such other address as shall be designated by Guarantor in a written notice to the Agent. Section 13. Right to Set-off. (a) Upon the occurrence and during the continuance of any Event of Default under the Credit Agreement, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank to or for the credit or the account of the Guarantor against any and all of the Obligations, irrespective of whether or not such Bank shall have made any demand under this Guaranty and although such Obligations may be contingent and unmatured. Each Bank which sets-off pursuant to this Section 13(a) shall give prompt notice to the Guarantor following the occurrence thereof; provided that the failure to give such notice shall not affect the validity of the set-off. (b) Any payment obtained pursuant to Section 13(a) above (or in any other manner directly from the Guarantor) by any Bank shall be remitted to the Agent and distributed among the Banks in accordance with the provisions of Section 8 above. Section 14. Continuing Guaranty. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until payment in full (after the termination of the Commitments) of the Obligations and all other amounts payable under this Guaranty; (b) be binding upon the Guarantor, its successors and assigns; and (c) inure to the benefit of the Agent, the Banks and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Bank may assign or otherwise transfer its rights and obligations under the Credit Agreement to any other Person or entity, and such other Person or entity shall thereupon become vested with all the benefits in respect thereof granted to the Bank herein or otherwise, au as provided in, and to the extent set forth in, Sections 11,07 and 11.08 of the Credit Agreement. Section 15. Subordination of the Credit Parties' Obligations to the Guarantor. The Guarantor hereby expressly covenants and agrees for the benefit of the Agent and the Banks that all obligations and liabilities of the Company, the Other Guarantors (as defined in Section 17 of this Guaranty) and each of their respective Subsidiaries to the Guarantor of whatsoever description (including, without limitation, all intercompany receivables of the Guarantor from the Company, other Guarantors and Subsidiaries) shall be subordinated and junior in right of payment to the Obligations. Following the occurrence of an Event of Default, any indebtedness of the Company, Other Guarantors and their Subsidiaries to the Guarantor shall, if the Agent shall so request, be collected and received by the Guarantor as trustee for the Agent and the Banks and paid over to the Agent and the Banks on account of the Obligations but without reducing or affecting in any manner the liability of the Guarantor under this Guaranty. Section 16. Financial Reporting. Guarantor shall furnish to the Agent all such financial statements and other information relating to the financial condition, properties and affairs of Guarantor as any Bank, acting through the Agent, may from time to time reasonably request. Section 17. Other Guarantors. Guarantor acknowledges that other Subsidiaries of the Company (collectively, the "Other Guarantors") have guaranteed the payment and performance of the Obligations pursuant to other guaranty agreements executed in connection with the Credit Agreement (the "Other Guaranty Agreements"), and to the extent Guarantor is required to satisfy all or any part of the Obligations pursuant to the terms of this Guaranty, Guarantor shall have and be entitled to rights of contribution against the Other Guarantors. The Guarantor agrees that in the event a payment shall be made by any Other Guarantor under any Other Guaranty Agreement, the Other Guarantor (the "Claiming Guarantor") shall have and be entitled to rights of contribution against the Guarantor pursuant to and in accordance with applicable law. In the event the Guarantor makes any such payment to a Claiming Guarantor, the Guarantor shall be subrogated to the rights of such Claiming Guarantor to the extent of such payment. Notwithstanding any provision of this Guaranty to the contrary, all rights of the Other Guarantors under this Section and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full of the Obligations, and no payment may be made in respect of such rights of indemnity, contribution or subrogation until all of the Obligations have been paid in full, all Commitments have expired and all Letters of Credit have expired. No failure on the part of the Guarantor or any Other Guarantor to make the payments required by this Section (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of the Guarantor or any Other Guarantor with respect to any Guaranty, and the Guarantor and each Other Guarantor shall remain liable for the frill amount of the obligations under the guaranty agreement executed by it. This Section 12 is intended only to confirm the relative rights of the Guarantor and all Other Guarantors, and nothing set forth in this sentence is intended to or shall impair the obligations of the Guarantor and Other Guarantors, jointly and severally, to pay to the Agent and the Banks, or any one or more of them, as the case may be, the Obligations as and when the same shall become due and payable in accordance with the terms of this Guaranty. Section 18. Severability. If for any reason any provision or provisions hereof are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Guaranty which are valid. Section 19. Taxes. (a) Any and all payments by the Guarantor to each Bank or the Agent under this Guaranty and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, the Guarantor shall pay all Other Taxes. (b) The Guarantor agrees to indemnity and hold harmless each Bank and the Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Bank or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Bank or the Agent makes written demand therefor. (c) If the Guarantor shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then: (i) the sum payable shall be increased as necessary so that after remaining all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Bank or the Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) the Guarantor shall make such deductions and withholdings; (iii) the Guarantor shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) the Guarantor shall also pay to each Bank or the Agent for the account of such Bank, at the time interest is paid, all additional reasonable amounts which the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes or Other Taxes had not been imposed. (d) Within 30 days after the date of any payment by the Guarantor of Taxes or Other Taxes, the Guarantor shall furnish the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the SECTION 20. GOVERNING LAW AND JURISDICTION. (a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF ]LAWS); PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF TEXAS, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MARING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL POSTAGE PREPAID, TO ALL AT ITS ADDRESS SET FORTH IN SCHEDULE 11,02 OF THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR IN ANY OTHER JURISDICTION. THE GUARANTOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY TEXAS LAW. (c) THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY AC-NON OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. SECTION 21. WAIVER OF JURY TRIAL. THE GUARANTOR WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF AC-NON BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER with RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE GUARANTOR FURTHER AGREES THAT ITS RIGHT TO A BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABLE OF THIS GUARANTY OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY AND THE OTHER LOAN DOCUMENTS. SECTION 22. ENTIRE AGREEMENT. THIS WRITTEN GUARANTY AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. ___________________________ By:________________________ Name: Title: EXHIBIT "H" FORM OF BORROWING BASE REPORT DELIVERED PURSUANT TO SECTION 7.01(c) OF THE CREDIT AGREEMENT BORROWING BASE REPORT Calendar Month Ended ________, 199__ The undersigned authorized officer of GIANT INDUSTRIES, INC., a Delaware corporation (the "Company"), delivers this Certificate pursuant to Section 7.01(c) of the Credit Agreement dated as of October 4, 1995 (the "Credit Agreement"), among Bank of America National Trust and Savings Association, as Agent (the "Agent"), Bank of America Illinois as a Bank and as a Letter of Credit Issuing Bank, the several financial institutions from time to time party thereto (the "Banks"), the Company and the Guarantors named therein. Capitalized terms used herein without definition have the meanings assigned to them in the Credit Agreement. The undersigned hereby certifies to the Agent and the Banks as follows: 1. The undersigned hereby certifies that, to the best of his knowledge (a) Annex I hereto is a true and accurate calculation of the Borrowing Base as at the end of the calendar month ended ___________, 199___, determined in accordance with the requirements of the Credit Agreement, and (b) Annex 2 hereto is a correct description of the aging of all Eligible Account Receivables as at the end of the calendar month ended ____________, 199__. 2. All Eligible Refinery Hydrocarbon Inventory covered by this Certificate has been produced in compliance with all applicable laws, including, without limitation, the minimum wage and overtime requirement of the Fair Labor Standards Act of 1938, as amended. EXECUTED AND DELIVERED as of October __, 1995. GIANT INDUSTRIES, INC. Authorized Officer ANNEX I GIANT INDUSTRIES, INC. BORROWING BASE CERTIFICATE CALENDAR MONTH ENDED ___________, 1995 Borrowing Base Calculation: A. Eligible Accounts Receivables (Annex 1a) $______ B. Eligible Refinery Hydrocarbon Inventory $______ [Annex 1b] C. Borrowing Base (Sum of A&B) $______ Lesser of Borrowing Base or $45,000,000 $______ Less Outstanding at Month End: Aggregate Facility B Loans $______ Aggregate L/C Obligations $______ Total $______ Net Availability at Month End: $______ ANNEX 1(a) GIANT INDUSTRIES, INC. DETAIL OF ELIGIBLE ACCOUNTS RECEIVABLE, FIFO BASIS ______________, 199___ A B Preferred Account Other Account Obligors Obligors 1. Service Stations: A. Trade _______ _______ B. Other _______ _______ C. Giant Travel Center _______ _______ 1. Trade _______ _______ 2. Other _______ _______ D. Total ______ _____ 2. Refinery; A. Trade _______ _______ B. Raw Material Supply _______ _______ C. Product Supply _______ _______ D. Portales Plant _______ _______ E. Total ______ _____ 3. Eligible Accounts Receivable A. Total Accounts $______ $_____ Receivables B. Advance Rate x .90 x .85 C. Sub Total per Obligor $______ $_____ Type (AxB) D. Total Eligible Accounts $_____ Receivables (Sum of Column A and B) ANNEX 1(b) GIANT INDUSTRIES, INC. INVENTORY DETAIL _______________, 199__ Bloomfield Ciniza Portales Bbls Bbls Bbls Albuquerque Other Total Terminal Bbls Bbls $/Bbl $ FEED STOCK: Crude Oil Field Tanks/Terminals Pipeline Linefill Tex New Mex Pipeline Exchange and Other Common Carriers Refinery Crude (Less B.S.& W.) (Less Slop) NGL's Natural Gasoline Isobutane Normal Butane Other MTBE Ethanol Subtotal INTERMEDIATE PRODUCTS: Isomerate Cat Feed Gasoline Components Naptha Subtotal REFINED PRODUCTS Leaded Regular Unleaded Regular Unleaded Premium Propane JP-8 Jet-A Diesel Residual Fuel Oil Other: Portales Ethanol Gasolines Service Station Stop-N-Go Four Corners Travel Center Subtotal Inventory Total ANNEX 1(b) GIANT INDUSTRIES, INC. INVENTORY DETAIL _______________, 199__ Borrowing Base Calculation: Gross Inventory Advance Advance Product Line Amount Rate Amount Feedstock 80.00% Intermediate Products 80.00% Refined Products (Excluding SS and TC) 80.00% Service Stations and Travel Center 50.00% Total EX-23.1 6 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-35357 of Giant Industries, Inc. on Form S-8 of our reports on the Bloomfield Refining Company's financial statements dated October 13, 1995 appearing in the Current Report on Form 8-K of Giant Industries, Inc. for the date October 4, 1995. Arthur Andersen LLP Denver, Colorado October 13, 1995 -----END PRIVACY-ENHANCED MESSAGE-----