e10-k405

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. þ

As of February 28, 2002, 8,553,879 shares of the registrant’s Common Stock, $.01 par value, were outstanding and the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $54,998,000 based on the New York Stock Exchange closing price on February 28, 2002.

Parts of the Proxy Statement for the Registrant’s 2002 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K Report.

Giant Industries, Inc., a Delaware corporation, together with its subsidiaries (“Giant” or the “Company”), through its wholly-owned subsidiary Giant Industries Arizona, Inc. and its subsidiaries (“Giant Arizona”), is engaged in the refining and marketing of petroleum products in New Mexico, Arizona, and Colorado, with a concentration in the Four Corners area where these states adjoin. In addition, Phoenix Fuel Co., Inc. (“Phoenix Fuel”), a wholly-owned subsidiary of Giant Arizona, operates an industrial/commercial petroleum fuels and lubricants distribution operation.

The Company currently has three strategic business units, the Refining Group, the Retail Group and Phoenix Fuel. Company operations, consisting primarily of the Company’s corporate staff operations, are not included in any of the strategic business units. The Company believes that the Refining Group, the Retail Group and Phoenix Fuel are its only material business segments for financial reporting purposes. See the discussion of Company segments contained in Item 8, Note 2.

The Refining Group consists of the Company’s two refineries, its fleet of crude oil and finished product truck transports, its crude oil pipeline gathering operations and its finished product terminaling operations. The Company’s two refineries manufacture various grades of gasoline, diesel fuel, and other products from crude oil, other feedstocks and blending components. In addition, finished products are acquired through exchange agreements, from third party suppliers, and from Phoenix Fuel. These products are sold through Company-operated retail facilities, independent wholesalers and retailers, industrial/ commercial accounts, and sales and exchanges with major oil companies. Crude oil, other feedstocks and blending components are purchased from third party suppliers.

The Retail Group consists of service station/convenience stores and one travel center. These operations sell various grades of gasoline, diesel fuel, general merchandise and food products to the general public through retail locations. The Refining Group or Phoenix Fuel supplies the petroleum fuels sold by the Retail Group. General merchandise and food products are obtained from third party suppliers.

Phoenix Fuel is an industrial/commercial petroleum fuels and lubricants distribution operation, which includes a number of bulk distribution plants, an unattended fleet fueling (“cardlock”) operation and a fleet of finished product truck transports. The petroleum fuels and lubricants sold are primarily obtained from third party suppliers and to a lesser extent from the Refining Group.

The Company’s strategy is to continue to profitably operate its refining, retail marketing and Phoenix Fuel operations. The immediate strategic focus is to:


	•	complete the acquisition of a refinery located in Yorktown, Virginia (the “Yorktown Refinery”) from BP Corporation North America Inc. and BP Products North America Inc.;

	•	efficiently integrate the Yorktown Refinery into the Company’s existing operations while maximizing the profitability of all the Company’s refineries;

	•	work with producers in the Four Corners area to augment crude oil supply;

	•	continue to maximize profitability of the Retail Group by increasing sales of high-margin merchandise and continuing to reduce costs;

	•	continue to maximize profitability of Phoenix Fuel by increasing wholesale fuel volumes, expanding its service offerings, and broadening its wholesale customer base;

	•	increase cash flow by continuing to reduce operating expenses and eliminating non-essential capital expenditures; and

	•	rationalize the Company’s asset base by selling non-strategic and underperforming assets and selectively pursuing acquisitions.

For a further discussion of the Yorktown Refinery acquisition, refer to the discussion under the heading “New Developments” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Giant Arizona owns and operates two refineries. The Ciniza Refinery is located on 880 acres near Gallup, New Mexico, and the Bloomfield Refinery is located on 285 acres near Farmington, New Mexico. Both of these refineries are located in the Four Corners area. This area serves as the Company’s primary market for its refined products and as the primary source of its supplies of crude oil and natural gas liquids (“NGLs”).

Management believes that the technical capabilities of both refineries, together with the high quality of locally available feedstocks, enable the Company to achieve refinery yields that are comparable to those achieved by some larger, more complex refineries located outside of the area. Both refineries are equipped with fluid catalytic cracking, naphtha hydrotreating, reforming, and liquefied petroleum gas recovery units, as well as diesel hydrotreating and sulfur recovery units to manufacture low sulfur diesel fuel. The Ciniza Refinery utilizes an alkylation process to manufacture high octane gasoline from its catalytic cracking unit olefins. The Bloomfield Refinery accomplishes this using a catalytic polymerization unit. The Ciniza Refinery is also equipped with an isomerization unit, which enables it to produce additional gasoline through the processing of NGLs, and cogeneration facilities. These processing configurations enable the refineries to yield 90% or more of high value products, including gasoline, diesel fuel and jet fuel, from each barrel of crude oil refined. The refineries manufacture a product slate that can include 100% unleaded gasoline and 100% low sulfur diesel fuel.

Set forth below is data with respect to the Company’s existing refinery operations and the primary refined products produced during the indicated periods.

In addition to its existing refineries, the Company is in the process of acquiring the 61,900 bpd Yorktown Refinery located in Yorktown, Virginia. For a further discussion of the Yorktown Refinery acquisition, refer to the discussion under the heading “New Developments” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Each refinery operating unit requires regular maintenance, as well as repair and upgrade shutdowns (referred to as “turnarounds”) during which it is not in operation. Turnaround cycles vary for different units. In general, refinery turnarounds are managed so that some units continue to operate while others are down for scheduled maintenance. Maintenance turnarounds are implemented using refinery personnel as well as additional contract labor. Turnaround work proceeds on a continuous 24-hour basis to minimize unit down time.

In general, a major refinery turnaround is scheduled every four years. The Ciniza Refinery had such a turnaround in 1998 and is scheduled to have a partial turnaround in the second quarter of 2002 and a major turnaround in 2003. The Bloomfield Refinery had a major turnaround in the fourth quarter of 2001. In addition, the platforming units at each refinery must be shut down one or two times a year to regenerate catalyst. This is typically a nine to 10 day shutdown and is necessary to rejuvenate the catalyst and enable continued production of platformate, a high octane blending component. During such shutdowns, turnaround maintenance and inspection is performed.

Unscheduled maintenance shutdowns also occur at the refineries, but the Company believes that the record of both refineries with respect to unscheduled maintenance shutdowns is generally good compared with the industry as a whole.

The refineries primarily process a mixture of high gravity, low sulfur crude oil, condensate and NGLs. The locally produced, high quality crude oil known as Four Corners Sweet is the primary feedstock for the refineries.

The Company acquires crude oil from a number of sources, including major oil companies and large and small independent producers, under arrangements that contain market-responsive pricing provisions. Many of these arrangements are subject to cancellation by either party or have terms that are not in excess of one year. In addition, these arrangements are subject to periodic renegotiation, which could result in higher or lower relative prices being paid for crude oil or reductions in purchased crude oil volumes. In 2000 and 2001, certain crude oil contracts were renegotiated resulting in reduced crude oil acquisition costs. A small percentage of the refineries’ purchases are structured as exchange agreements. In such exchanges, purchases are made in conjunction with matching sales to the supplier at other domestic locations, as may be negotiated periodically. The effect of such arrangements is to make a portion of the cost of the refineries’ supply dependent upon market conditions in other locations, which may differ from those pertaining to the Four Corners area. Such arrangements currently have a nominal effect on the Company’s crude oil acquisition costs.

The Four Corners basin is a mature production area and is subject to natural decline in production over time. In the past, this natural decline has been offset to some extent by new drilling, field workovers, and secondary recovery projects, which resulted in additional production from existing reserves. Many of these projects were cut back, however, when crude oil prices declined dramatically in 1998. Although crude oil prices have recovered from 1998 levels, a lower than anticipated allocation of capital to Four Corners basin production activities has resulted in greater than anticipated net declines in production.

The Company’s projections of Four Corners crude oil production indicate that the Company’s crude oil demand will exceed the crude oil supply that is available from local sources for 2002. The Company has decreased production runs at its refineries from levels it would otherwise schedule as a result of shortfalls in Four Corners crude oil production and anticipates it will do so for the foreseeable future. The Company may increase its production runs in the future if additional crude oil or other refinery feedstocks become available depending on demand for finished products and refining margins attainable.

The Company supplements the Four Corners crude oil used at its refineries with other feedstocks. These feedstocks currently include locally produced NGLs and other feedstocks produced outside of the Four Corners area. The Company continues to evaluate supplemental feedstock alternatives for its refineries on both a short-term and long-term basis. These alternatives include, among other possibilities, potential third party exploration and production activities on tribal reservation lands. No significant, cost effective crude oil feedstock alternatives have been identified to date. Whether or not supplemental feedstocks are used at the Company’s refineries depends on a number of factors. These factors include, but are not limited to, the availability of supplemental feedstocks, the cost involved, the quantities required, the quality of the feedstocks, the demand for finished products, and the selling prices of finished products.

The Company also is assessing other long-term options to address the continuing decline in Four Corners crude oil production. Among the options being considered are: (i) encouraging and offering short-term financial support for exploration and production activities in the Four Corners area, and (ii) examining other potentially economic raw material sources, such as crude oil produced outside the Four Corners area.

There is no assurance that current or projected levels of Four Corners crude oil supply for the Company’s refineries will be maintained. Any significant, long-term interruption or decline in Four Corners crude oil supply, due to prices or other factors, any significant long-term interruption of crude oil transportation systems, or any significant reduction in crude oil availability would have an adverse effect on the Company’s refinery operations in New Mexico, as well as the Company’s overall operations. In addition, the Company’s future results of operations are primarily dependent on producing or purchasing, and selling, sufficient quantities of refined products at margins sufficient to cover fixed and variable expenses.

The Ciniza Refinery is capable of processing approximately 6,000 barrels per day of NGLs, consisting of natural gasoline, normal butane and isobutane. NGLs are used as gasoline blending components and to supply the isomerization and alkylation units. NGLs increase the percentage of gasoline and the octane levels that the refinery can produce, which typically increases the Company’s refining margins. NGLs further enhance refinery margins because the Company has historically been able to purchase NGLs at a lower cost per barrel than crude oil. For most of 2001 and for the first two months of 2002, this historic relationship has not remained in place as the cost of NGLs has moved higher than crude oil. The Company anticipates that over time the price differential between crude oil and NGLs will return to more historical levels.

An adequate supply of NGLs is available for delivery to the Ciniza Refinery, primarily through a Company-owned pipeline connecting the Ciniza Refinery to an NGLs fractionation plant operated by a third party. NGLs also can be transported to the Ciniza Refinery by rail or transport truck. The Company currently acquires the majority of its NGL feedstocks pursuant to a long-term agreement under which NGLs are made available to the Company at the fractionation plant. This agreement contains market sensitive pricing arrangements under which prices are adjusted on a monthly basis.

The use of gasoline containing oxygenates has been government-mandated in certain areas in which the Company sells motor vehicle fuel. Oxygenates are oxygen-containing compounds that can be used as a motor vehicle fuel supplement to reduce carbon monoxide emissions. The Company anticipates that it will be able to purchase sufficient quantities of oxygenates from third parties at acceptable prices for the foreseeable future.

Crude oil supply for the Ciniza and Bloomfield refineries comes primarily from the Four Corners area and is either connected by Company-owned pipelines or delivered by Company-owned truck transports to pipeline injection points or refinery tankage. The Company owns approximately 371 miles of pipeline for gathering and delivering crude oil to the refineries. Approximately 132 miles of this pipeline were purchased in 2001 and 2000. The Company is currently negotiating with a third-party to sell substantially all the pipeline segments acquired in 2000 and 2001. The Company will continue to ship crude oil on these lines. The Company’s pipeline system reaches into the Paradox and San Juan Basins and connects with local common carrier pipelines. The Ciniza Refinery receives NGLs primarily through a 13-mile Company owned pipeline

The Four Corners Market. The Four Corners area is the primary market area for products refined by the Company. The Company’s secondary markets include the Albuquerque area, the largest market in New Mexico, and the Northern Arizona area. These secondary markets are primarily supplied from the Ciniza Refinery or the Company’s Flagstaff products terminal. The Company estimates that, during 2001, its gasoline production was distributed 49% in New Mexico, 38% in Arizona, 12% in Colorado and 1% in Utah; and its diesel production was distributed 55% in New Mexico, 35% in Arizona, 9% in Colorado and 1% in Utah. The Company’s truck transports support refinery sales in its primary market as well as its secondary markets. These vehicles hauled approximately 46% of the refineries’ sales barrels in 2001. Customer or common carrier trucking transported the balance.

Terminal Operations. In May 1999, the Company opened a 6,000 bpd capacity finished products terminal near Flagstaff, Arizona (the “Flagstaff Terminal”). This terminal includes 65,000 bbls of finished product tankage and a truck loading rack with three loading spots. Terminal capacity could be expanded to 12,000 bpd of finished products if demand for finished products in this market were to increase. Product deliveries to the Flagstaff Terminal are being made by truck transport from Phoenix, Arizona or the Company’s refineries.

In July 1995, the Company acquired a 10,000 bpd capacity finished products terminal in Albuquerque, New Mexico. This terminal includes approximately 170,000 bbls of finished product tankage and a truck loading rack with two loading spots. Product deliveries to this terminal are made from the Company’s Ciniza Refinery or by pipeline from El Paso, Texas.

The Company’s terminals are part of its strategy to maximize both product volumes and netbacks to the Ciniza and Bloomfield refineries, and to maximize the Company’s customer base.

Refined Product Sales. During 2001, the Company sold approximately 7,721,000 barrels of gasoline and 3,124,000 barrels of diesel fuel from its refineries. In 2000, approximately 8,255,000 barrels of gasoline and 3,506,000 barrels of diesel fuel were sold. The Company’s retail units sold an equivalent of approximately 54% and 56% of these gasoline sales and 29% and 28% of these diesel sales in 2001 and 2000, respectively. Gasoline and diesel deliveries made through product exchanges with large oil companies accounted for approximately 15% and 13% of the volume sold by the refineries in 2001 and 2000, respectively. The remaining gasoline and diesel sales were made to wholesalers, retailers and industrial/commercial customers. Supplementing sales barrels sourced from both refineries were purchases for resale of gasoline and diesel from other sources. The Company’s other refined products are marketed to various third party customers.

At December 31, 2001, the Company operated or managed 150 service station/convenience stores located in New Mexico, Arizona, and Colorado. This represents a net decrease of 29 units since December 31, 2000. The Company also operates a Travel Center located on I-40 adjacent to the Ciniza Refinery near Gallup, New Mexico. The Company’s retail units sold approximately 212,116,000 gallons of gasoline and diesel fuel in 2001 compared to approximately 234,823,000 gallons in 2000, a 10% decrease. The decrease in the volume of gasoline and diesel fuel sold is mainly attributable to two factors: (i) a decrease in total store count; and (ii) the cost of fuel in the Phoenix area, that precluded a competitive retail pricing position for most of 2001. Merchandise sales increased approximately 4% in 2001, to $144,531,000 from $138,544,000. The increase in merchandise sales was primarily due to increased sales volumes in higher dollar categories due to the continued implementation and execution of improved merchandise marketing programs. For 2001, same store sales increased 7% for merchandise and decreased 4% for gasoline and diesel fuel compared to 2000.

During 2001, the Company acquired one service station/convenience store on the Navajo Indian Reservation by the assignment of certain leases/subleases to the Company.

As a result of the Company’s ongoing retail asset evaluation initiated in 2001, the Company identified 60 non-strategic or underperforming units for possible divestiture. Eight of these units were subsequently removed from the list due to improved performance. Of the remaining units, 11 were sold, six were closed and reclassified as assets held for sale, one leased unit was returned to the lessor, and four are in escrow and are expected to close in the second quarter of 2002. The remaining 30 stores continue to be operated by the Company, but are being marketed for potential sale in accordance with the Company’s strategy, and may be divested if acceptable offers are received and negotiated during 2002.

In addition, 12 other units were closed in 2001. Seven of these units were classified as assets held for sale, three leased units were returned to the lessors, and the Company is attempting to sublease two others. Additionally, the management agreements for four Navajo-owned service station/convenience stores were terminated in 2001 and the locations returned to their owners.

In 2001, the Company continued to re-brand various retail locations in an effort to consolidate the number of gasoline brands under which its products are sold. At December 31, 2001, the Company had 25 Giant branded sites, 54 Mustang branded sites, seven Thriftway branded sites, and one each Gasamat, Gasaman, and Diamond Shamrock branded sites. At December 31, 2001, an additional 62 units (including the Travel Center) had been converted to the Conoco brand pursuant to a 1997 strategic branding/licensing agreement with Conoco Oil Co. This agreement allows the Company to brand approved gasoline locations with the Conoco gasoline brand. The Company is considering rebranding the remaining 10 miscellaneous branded sites.

Many of the Company’s service stations are modern, high-volume self-service stations. The Company’s service stations are augmented with convenience stores at most locations, which provide items such as general merchandise, tobacco products, alcoholic and nonalcoholic beverages, fast food, health and beauty aids, and automotive products. In addition, most locations offer services such as ATM’s and free air and water. The Company, in conjunction with Western Union, will implement a Western Union Money Transfer Service in approximately 90 locations in 2002.

The Company owns and operates a Travel Center adjacent to the Ciniza Refinery on I-40. The Travel Center provides a direct market for a portion of the Ciniza Refinery’s diesel production and allows diesel fuel to be sold at retail at virtually no incremental transportation cost. During 2001, the Company sold approximately 23,137,000 gallons of diesel fuel at the Travel Center (approximately 27% of the Ciniza Refinery’s total diesel production). This compares to approximately 24,852,000 gallons of diesel fuel sold (approximately 27% of the Ciniza Refinery’s total diesel production) during 2000. The decrease in fuel volumes sold is due in part to additional direct competition in the form of a truck stop/casino that opened in 2001 and is located 30 miles east of the Travel Center on I-40. The Travel Center facility includes 18 high volume diesel fuel islands, a large truck repair facility, and a 29,000 square foot shopping mall. The facility also contains a 265-seat, full-service restaurant; Taco Bell, Pizza Hut Express and A&W Root Beer fast food operations; two large convenience stores; a 24-hour movie theater; a hair salon; and other accommodations such as showers, laundry, security and lighted parking. A state of the art business center, serving the needs of both professional drivers and local residents, is planned for 2002.

Phoenix Fuel is an industrial/commercial petroleum products distributor marketing diesel fuel, gasoline, jet fuel, kerosene, motor oil, hydraulic oil, gear oil, cutting oil, grease and various chemicals and solvents. Phoenix Fuel operates five lubricant and bulk petroleum distribution plants, 19 cardlock fueling locations, a bulk lubricant terminal facility, and a fleet of 33 finished product transports and 22 finished product tankwagons. These operations are conducted throughout Arizona and southern Nevada.

In December, 2001, Phoenix Fuel sold its lubricants business in Las Vegas, Nevada. Under the terms of the sale agreement, Phoenix Fuel will continue to distribute finished products to customers in southern Nevada.

During 2001, Phoenix Fuel sold approximately 394,158,000 gallons of gasoline and diesel fuel. During 2000, approximately 424,290,000 gallons were sold. Sales of additional products, including approximately 4,500,000 gallons of lubricants in 2001 and 5,300,000 gallons in 2000, and other related items, totaled approximately $25,726,000 during 2001, compared to $27,703,000 during 2000. The petroleum products sold by Phoenix Fuel are primarily purchased for resale from other refiners and marketers and to a lesser extent from the Refining Group.

The Company and its subsidiaries employed approximately 2,440 persons on February 28, 2002, including approximately 2,170 full-time and approximately 270 part-time employees. Approximately 1,710 were employed in the Retail Group, including approximately 250 part-time. The Refining Group employed approximately 430 persons including five part-time. Phoenix Fuel employed approximately 200 persons, including 10 part-time. Corporate staff operations employed approximately 100 persons, including five part-time. The Company currently has no employees covered by a collective bargaining agreement.

The industry in which the Company is engaged is highly competitive. Many of the Company’s competitors are large, integrated oil companies which, because of their more diverse operations, stronger capitalization and better brand name recognition, are better able than the Company to withstand volatile industry conditions, including shortages or excesses of crude oil or refined products, or intense price competition.

The principal competitive factors affecting the Company’s refining and marketing operations are: (i) the quality, quantity and delivered costs of crude oil, NGLs and other refinery feedstocks; (ii) refinery processing efficiencies; (iii) refined product mix; (iv) refined product selling prices; (v) refinery processing costs per barrel; (vi) the cost of delivering refined products to markets; and (vii) the ability of competitors to deliver refined products into the Company’s primary market area by pipeline. The Company’s larger competitors have refineries that are located outside the Four Corners area and that are larger and more efficient than the Company’s refineries. As a result, such refineries have lower per barrel crude oil refinery processing costs. The Company competes with major and larger integrated oil companies and with independent refiners in Southeastern New Mexico, West Texas, the Texas Panhandle, Utah, Colorado and Southern California in connection with the sale of refined products. Refined products from the Texas and Southeastern New Mexico refineries can be shipped to Albuquerque, New Mexico, primarily through two common carrier pipelines, one originating in El Paso, Texas and the second originating in Amarillo, Texas. In late 1999, an existing NGLs pipeline was converted to a refined products pipeline. This converted line originates in Southeastern New Mexico and delivers petroleum products into the Four Corners area and diesel fuel to a terminal 40 miles east of Albuquerque, New Mexico in Moriarty. The Company understands that projects to expand the pumping capacity of the pipeline and to expand the terminal in Moriarty to include gasoline and jet fuel have been completed. This project, mergers between large integrated oil companies, and upgrades to competitors’ refineries have resulted in increased competition.

In addition, the Company is aware of a number of actions, proposals or industry discussions regarding product pipeline projects that could impact portions of its marketing areas. One of these projects is the potential conversion and extension of the existing Texas-New Mexico crude oil pipeline to transport refined products from West Texas to New Mexico, including Albuquerque and potentially Bloomfield. Another potential project would take product on to Salt Lake City, Utah. In addition, various actions have been undertaken to increase the supply of refined products to El Paso, Texas, which is connected by pipeline to the Albuquerque area to the north and the Tucson and Phoenix, Arizona markets to the west. In addition, there

are proposals that may eventually increase the volume of product that can be transported by pipeline from El Paso to the Tucson and Phoenix markets. The completion of some or all of these projects would result in increased competition by increasing the amount of refined products potentially available in these markets, as well as improving competitor access to these areas. It also could result in new opportunities for the Company, as the Company is a net purchaser of refined products in some of these areas.

The principal competitive factors affecting Phoenix Fuel are (i) the availability of product supply from other refiners and marketers, (ii) the ability to generate margins sufficient to cover fixed and variable expenses, and (iii) competition with major integrated oil companies and independent fuel and lubricant marketing organizations.

The principal competitive factors affecting the Company’s retail marketing business are location of service stations, product price, product availability and cost including prices being offered for refined products by major oil companies to competitors of the Company in certain markets, appearance and cleanliness of service stations, brand acceptance, and the development of gasoline retail operations by non-traditional marketers.

Operations. The Company’s operations are subject to a variety of federal, state and local health and environmental laws and regulations. These laws and regulations apply to, among other things: (i) the discharge of pollutants into the soil, air and water; (ii) product specifications; (iii) the generation, treatment, storage, transportation and disposal of solid and hazardous waste and materials; and (iv) employee health and safety. The Company believes that its refineries are processing currently utilized feedstocks in substantial compliance with currently effective laws and regulations pertaining to health and the environment.

Various federal and state programs relating to the composition of motor fuels are applicable to the Company’s operations. In December 1999, the Environmental Protection Agency (“EPA”) issued a rule that requires refiners to reduce the sulfur content of gasoline to 30 parts per million (“ppm”) by January 2006 unless they qualify for an extension of this deadline. The Company received approval to participate in the rule’s geographic phase-in area (“GPA”) and averaging, banking and trading (“ABT”) programs. Under the GPA program, the Company will have until January 2007 to reach the 30 ppm standard in connection with gasoline sold in most of the geographic areas in which its refineries’ gasoline is marketed, including gasoline marketed in New Mexico, Colorado, Utah, several counties in Northern Arizona, and on the Navajo Reservation. The ABT program allows the Company to generate sulfur credits that could either be sold to other refiners or used by the Company’s refineries during periods when they otherwise would not be in compliance. Due to the low sulfur baseline already established by the Company, however, the Company does not expect to generate significant amounts of sulfur credits, if any. The Company anticipates that it will expend approximately $3,500,000 to purchase and install the equipment necessary to produce gasoline with a 30 ppm sulfur content at its refineries, and projects that these expenditures will primarily be incurred in 2006.

In January 2001, EPA issued a rule that requires refiners to produce highway diesel fuel with a sulfur content of 15 ppm (“ULSD”) starting June 2006. Through May 2010, up to 20 percent of a refiner’s highway diesel production may continue to meet the current 500 ppm sulfur standard. The remaining 80 percent of highway diesel production must meet the ULSD standard. The rule also contains provisions extending the above-mentioned low sulfur gasoline deadline for small or GPA refiners who meet the ULSD standard, if a qualifying company produces 100% ULSD or 100% of its baseline highway diesel volume at 15 ppm by June 2006. The Company believes that it will qualify under these provisions for an extension of the low sulfur gasoline standard until December 2008. The Company anticipates that it will expend approximately $15,000,000 to make the necessary changes to its refineries to comply with the new diesel fuel rule, and projects that these expenditures will primarily be incurred in 2005 and 2006. The ULSD rule has been challenged in the District of Columbia Court of Appeals by a coalition of petroleum industry trade organizations, and it is possible that this litigation could have a significant impact on the Company’s projected compliance costs.

The federal Clean Air Act requires the sale of reformulated gasoline (“RFG”) in certain designated areas of the country. Motor fuels produced by the Company’s refineries are not sold in any such areas. Arizona, however, has adopted a cleaner burning gasoline (“CBG”) program. The Company does not presently manufacture gasolines that satisfy Arizona CBG specifications. The specifications are currently applicable to gasolines sold or used in Arizona in Maricopa County, and portions of Yavapai County and Pinal County. The Company operates approximately 20 service station/convenience stores in these areas, and also conducts wholesale marketing operations there. The Company currently does not intend to make the changes necessary to produce CBG because the capital costs associated with manufacturing large quantities of such gasolines would be significant. The Company is able to purchase or exchange for these gasolines to supply its operations in the CBG areas. It is possible that additional legislation or regulations affecting motor fuel specifications may be adopted that would impact geographic areas in which the Company markets its products.

In 2000, Arizona passed legislation that requires suppliers of gasoline in Arizona to submit a plan for phasing out the addition of methyl tertiary butyl ether (“MTBE”) to their gasoline. The Company timely submitted the required plan. This legislation stated that Arizona would phase out MTBE as soon as feasible, but not later than 180 days after MTBE is phased out in California. MTBE is scheduled to be phased out in California by December 31, 2003. The Company does not anticipate any significant impact on its operations if Arizona moves forward with its plans to phase out MTBE.

The Company from time to time needs to obtain new environmental permits or modifications to existing permits. Although there can be no guarantee that the Company will be able to obtain all required permits, the Company does not presently anticipate any unusual problems in obtaining the necessary permits and permit modifications, nor does it anticipate any significant problems in connection with the renewal of existing permits prior to their expiration.

The Company cannot predict what additional health and environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws or regulations will be administered or interpreted with respect to products or activities to which they have not been previously applied. In addition, laws and regulations relating to health and the environment are becoming increasingly stringent. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of regulatory agencies, could have an adverse effect on the financial position and the results of operations of the Company and could require substantial expenditures by the Company for, among other things: (i) the installation and operation of refinery equipment, pollution control systems and equipment not currently possessed by the Company; (ii) the acquisition or modification of permits applicable to Company activities; and (iii) the initiation or modification of cleanup activities.

Alleged Regulatory Violations. Notices of violations (“NOVs”), compliance orders (“Orders”), and similar governmental notices are issued by governmental authorities and may allege violations of environmental requirements. For a discussion of the Company’s significant outstanding NOVs and Orders, see Note 16 to the Company’s Consolidated Financial Statements, captioned “Commitments and Contingencies.” The Company has received other allegations of regulatory violations from governmental authorities from time to time. The Company has responded or intends to respond in a timely manner to all such matters. The Company does not believe any such matters to be material. Despite the Company’s ongoing efforts to comply with environmental laws and regulations, there can be no assurance that allegations of regulatory violations will not be received from governmental authorities in the future.

Discharges, Releases and Cleanup Activities. Refining, pipeline, trucking and marketing operations are inherently subject to accidental spills, discharges or other releases of petroleum or hazardous substances that may give rise to liability to governmental entities or private parties under federal, state or local environmental laws, as well as under common law. Accidental discharges of contaminants have occurred from time to time during the normal course of the Company’s operations, including discharges associated with the Company’s refineries and its pipeline and trucking operations. The Company has undertaken, intends to undertake, or has completed all investigative or remedial work thus far required by governmental agencies to address potential contamination by the Company. For a discussion of significant cleanup activities in which the Company is

The Company is incurring, and anticipates that it will continue to incur, remediation costs from time to time in connection with current and former gasoline service stations operated by the Company. The Company’s experience has been that such costs generally do not exceed $100,000 per incident, and a portion of such costs may be subject to reimbursement from state underground storage tank funds.

Although the Company has invested substantial resources to prevent and minimize future accidental discharges and to remediate contamination resulting from prior discharges, there can be no assurance that accidental discharges will not occur in the future, that future action will not be taken in connection with past discharges, that governmental agencies will not assess penalties against the Company in connection with any past or future contamination, or that third parties will not assert claims against the Company for damages allegedly arising out of any past or future contamination.

Rights-Of-Way. Certain irregularities in title may exist with respect to a limited number of the Company’s rights-of-way or franchises for its crude oil pipeline gathering system. The Company, however, has continued its use of the entirety of its pipeline gathering system. As of this date, no claim stemming from any right-of-way or franchise matter has been brought against the Company. The Company does not believe that its use or enjoyment of the pipeline gathering system will be adversely affected by any such right-of-way matters or irregularities in title. Certain rights-of-way for the Company’s crude oil pipeline system must be renewed periodically. A portion of the system, consisting of eight miles or approximately 2% of the entire system, must be renewed in 2006. The Company expects that approximately two years lead time will be required to negotiate and complete renewal of these rights-of-way. Additional rights-of-way for pipeline sections consisting of 174 miles or approximately 47% of the system, must be renewed in 2009, and initial discussions for renewal may begin in 2007.

Jet Fuel Claims. On June 11, 2001, the Company filed claims against the United States Defense Energy Support Center (“DESC”) in connection with jet fuel that the Company sold to DESC from 1983 through 1994. The Company asserted that the DESC underpaid for the jet fuel in the approximate amount of $17,000,000. For a further discussion of this matter, see Note 16 to the Company’s Consolidated Financial Statements in Item 8, captioned “Commitments and Contingencies.”

The Company is a party to ordinary routine litigation incidental to its business. There is also hereby incorporated by reference the information under the headings “Regulatory, Environmental and Other Matters” in Items 1 and 2, the discussions contained in Item 7, and the information regarding contingencies in Note 16 to the Company’s Consolidated Financial Statements in Item 8. In addition, the following proceeding is pending:

Giant Arizona leases approximately 8,176 square feet of space from a limited liability company in which James E. Acridge, the Company’s former Chairman and Chief Executive Officer (the “CCEO”) owns a 51% interest. Pursuant to a sublease between Giant Arizona and a separate limited liability company controlled by the CCEO, Giant Arizona subleases the space to such entity for use as an inn. The owner of the 49% interest in the lessor has notified Giant Arizona that the sublessee is delinquent on the payment of the rent due, and on or about December 28, 2001, such owner filed a derivative lawsuit for and on behalf of the lessor against Giant Arizona to collect all amounts owing under the lease. The suit is for the recovery of rents past due and owing in excess of $156,990 from August 1, 2000 through date of the complaint. Pursuant to a letter dated January 16, 2002, Giant Arizona made a formal demand on the sublessee for the sublessee to pay all of the past due amounts. In addition, Giant Arizona has filed a motion to dismiss the lawsuit for failure to comply with the express provisions of the Arizona derivative action statue or, alternatively, to compel binding arbitration pursuant to the terms of the lease.

Fredric L. Holliger has served as a director of the Company since October 1989 and as Chairman of the Board and Chief Executive Officer of the Company since March 29, 2002. From October 1989 to March 29, 2002, Mr. Holliger was Executive Vice President and Chief Operating Officer of the Company. Mr. Holliger joined Giant Arizona as Senior Vice President, and President of the Giant Arizona refining division, in February 1989. Mr. Holliger also has served as a director and the Chief Executive Officer of Phoenix Fuel Co., Inc. (“Phoenix Fuel”) since it was acquired by Giant Arizona in June 1997.

Morgan Gust has served as President of the Company since March 29, 2002. From September 1998 to March 29, 2002, Mr. Gust served as Executive Vice President of the Company and Giant Arizona. Mr. Gust joined the Company in August 1990, and over the years served in various senior management positions for the Company and Giant Arizona, including Vice President, Vice President Administration, General Counsel, and Secretary.

S. Leland Gould has served as Executive Vice President, Director of Retail Operations of the Company and Giant Arizona since March 2002. Mr Gould joined Giant Arizona in August 2000 as Vice President, Strategic Business Development. Prior to August 2000, Mr. Gould was Vice President and National Sales Manager for Wolf Camera, a photo store chain with 800 stores nationwide. Prior to that, Mr Gould served as Vice President of Fox Photo and CPI Corporation, a subsidiary of Eastman Kodak, from May 1993 to July 1998.

Jack W. Keller has served as the President of the Company’s Phoenix Fuel Strategic Business Unit since its formation in February 1999. He also has served as the President of Phoenix Fuel since Phoenix Fuel was acquired by Giant Arizona in June 1997 and as Chief Operating Officer of Phoenix Fuel since May 1998.

From 1989 to June 1997, Mr. Keller served in various senior management roles with Phoenix Fuel, including President from December 1996 to June 1997, Chief Operating Officer from 1993 to 1996, and General Manager from 1989 to 1993. From December 1997 to September 1998, Mr. Keller also served as Senior Vice President, Marketing Division of Giant Arizona.

Miguel A. Foegal has served as Executive Vice President of the Company’s Retail Group Strategic Business Unit and as Executive Vice President, Retail Group of Giant Arizona since May 2000. From March 1999 to May 2000, Mr. Foegal served as Senior Vice President, Retail Marketing for Giant Arizona. Mr. Foegal joined the Company as Vice President, Retail Marketing in February 1998. From January 1992 to February 1998, Mr. Foegal was a Regional Vice President for Circle K/Tosco Marketing Co., where he was responsible for convenience and gas stores in the western United States.

Carl D. Shook has served as Executive Vice President of the Company’s Refining Group Strategic Business Unit and as Executive Vice President, Refining Group of Giant Arizona since March 2000. From February 1999 to February 2000, Mr. Shook served as Senior Vice President, Engineering and Technical Services for Giant Arizona. From January 1998 to February 1999, Mr. Shook served as Vice President, Engineering and Analysis for Giant Arizona. From October 1996 until January 1998, Mr. Shook served as Vice President, Corporate Planning and Evaluation for Giant Arizona. From February 1995 until October 1996, Mr. Shook served as Senior Vice President of Refinery Operations for Giant Arizona.

C. Leroy Crow has served as Executive Vice President of the Company’s Refining Group Strategic Business Unit and as Executive Vice President, Refining Group of Giant Arizona since March 2000. From February 1999 to February 2000, Mr. Crow served as Senior Vice President, Refinery Operations and Raw Material Supply for Giant Arizona. From December 1997 to February 1999, Mr. Crow served as Senior Vice President, Operations Division for Giant Arizona. From February 1996 to June 1997, when it was acquired by Giant Arizona, Mr. Crow served as the Vice President of Operations for Phoenix Fuel. Following the acquisition, Mr. Crow served as Vice President of Operations until December 1997. Prior to joining Phoenix Fuel in February 1996, Mr. Crow was the General Manager of Pro Petroleum, a wholesale fuel distributor in Phoenix, Arizona, from 1993 to 1996.

Kim H. Bullerdick has served as Vice President and Secretary of the Company and Giant Arizona since December 1998 and General Counsel of the Company and Giant Arizona since May 2000. From December 1998 to May 2000, Mr. Bullerdick also was Legal Department Director of the Company and Giant Arizona. From September 1998 to December 1998, Mr. Bullerdick served as an Assistant Secretary of the Company and Giant Arizona. Mr. Bullerdick joined Giant Arizona in June 1987 as Corporate Counsel. In August 1995, he was appointed Assistant General Counsel of Giant Arizona, and in 1998, he was appointed Associate General Counsel; Manager, Legal Department; and Manager, Regulatory Affairs.

Mark B. Cox has served as Vice President, Treasurer, Financial Officer, and Assistant Secretary of the Company and Giant Arizona since December 1998. On March 29, 2002, Mr. Cox was named Chief Financial Officer. From September 1998 to December 1998, Mr. Cox served as Treasurer and Assistant Secretary of the Company and Giant Arizona. From December 1996 to September 1998, Mr. Cox served as Treasurer of the Company and Giant Arizona. From October 1994 to December 1996, Mr. Cox served as Assistant Treasurer of Giant Arizona.

Gary R. Dalke has served as Vice President, Controller, Accounting Officer, and Assistant Secretary of the Company and Giant Arizona since December 1998. On March 29, 2002, Mr. Dalke was named Chief Accounting Officer. From September 1998 to December 1998, Mr. Dalke served as an Assistant Secretary of the Company and Giant Arizona. From April 1998 to September 1998, Mr. Dalke served as Chief Information Officer of Giant Arizona, and from July 1998 to December 1998, Mr. Dalke served as the Controller for Giant Arizona. From January 1990 to June 1997 when it was acquired by Giant Arizona, Mr. Dalke served as Chief Financial Officer of Phoenix Fuel. From January 1997 to June 1997, Mr. Dalke also was Vice President of Phoenix Fuel. Following the acquisition, Mr. Dalke was Vice President and Chief Financial Officer of Phoenix Fuel from June 1997 to July 1998, and from June 1997 to September 1998, he also was Treasurer of Phoenix Fuel.

The principal United States market on which the Company’s common stock is traded is the New York Stock Exchange. The high and low sales prices for the Common Stock for each full quarterly period as reported on the New York Stock Exchange Composite Tape for the last two fiscal years are as follows:

The Company’s Board of Directors suspended the payment of cash dividends on common stock in the fourth quarter of 1998. At the present time, the Company has no plans to reinstate such dividends. Any future dividends are subject to the results of the Company’s operations, declaration by the Board of Directors, and existing debt covenants, as described below.

The Company has issued $150,000,000 of 9% Senior Subordinated Notes due 2007 (the “9% Notes”) and $100,000,000 of 9 3/4% Senior Subordinated Notes due 2003 (the “9 3/4% Notes”). The 9% Notes were issued pursuant to an Indenture dated August 26, 1997 (the “9% Indenture”) and the 9 3/4% Notes were issued pursuant to an Indenture dated November 29, 1993 (the “9 3/4% Indenture”, and collectively with the 9% Indenture, the “Indentures”). The Indentures are among the Company, its subsidiaries, as guarantors, Bank of New York, as trustee under the 9% Indenture and Bank One Trust Company (fka NBD Bank), as trustee under the 9 3/4% Indenture. The Indentures contain a number of covenants, which, among other provisions, place restrictions on the Company’s payment of dividends and purchase of its common stock.

The Indentures include the payment of dividends and purchase of the Company’s common stock in their definitions of “Restricted Payments.” The Indentures place limitations on “Restricted Payments,” the most significant of which are summarized as follows:


	The Company cannot, and cannot permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment, unless:

	(a) no Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such Restricted Payment;

	(b) at the time of and immediately after giving effect to such Restricted Payment, the Company would be able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of the covenant captioned “Limitation on Incurrence of Additional Indebtedness”; and

	(c) immediately after giving effect to such Restricted Payment, the aggregate amount of all Restricted Payments declared or made after the Issue Date does not exceed the sum of (A) 50% of the Consolidated Net Income of the Company and its Restricted Subsidiaries (or in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit) during the period (treated as one accounting period) subsequent to September 30, 1997 in the case of the 9% Indenture and September 30, 1993 in the case of the 9 3/4% Indenture and ending on the last day of the fiscal quarter immediately preceding the date of such Restricted Payment and (B) $30,000,000 in the case of the 9% Indenture and $15,000,000 in the case of the 9 3/4% Indenture. Consolidated Net Income excludes, among other things, any full cost ceiling limitation write-down.

At December 31, 2001, retained earnings available for dividends under the most restrictive terms of the Indentures were approximately $7,128,000. The Board of Directors will periodically review the Company’s policy regarding the payment of dividends.

Also see the “Capital Structure” discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 hereof.

Capitalized items used but not defined above have the meaning assigned to them in the Indentures.

The following table summarizes recent financial information of the Company. This selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations at Item 7, and the Consolidated Financial Statements, related notes thereto, and the Independent Auditors’ Report included in Item 8 hereof:


(1)	Operating data includes the operations of various Retail Group acquisitions made in 1997 and 1998.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Inherent in the preparation of the Company’s financial statements are the selection and application of certain accounting principles, policies, and procedures that affect the amounts that are reported. In order to apply these principles, policies, and procedures, the Company must make judgments, assumptions, and estimates based on the best available information at the time. Actual results may differ based on the accuracy of the information utilized and subsequent events, some of which the Company may have little or no control over. In addition, the methods used in applying the above may result in amounts that differ considerably from those that would result from the application of other acceptable methods.

The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements. Certain critical accounting policies that materially affect the amounts recorded in the consolidated financial statements are the use of the last in, first-out (“LIFO”) method of valuing certain inventories, the accounting for certain environmental remediation liabilities, the accounting for certain related party transactions, and assessing the possible impairment of certain long-lived assets.

As described in Note 1, the Company’s inventories are stated at the lower of cost or market. Costs for crude oil and refined products produced by the refineries, and lubricants and other merchandise of Phoenix Fuel are determined by the LIFO method. Under this method, the most recent acquisition costs are charged to cost of sales and inventories are valued at the earliest acquisition costs. The Company selected this method because it believes it more accurately reflects the cost of the Company’s current sales. The use of this method results in reported earnings that can differ significantly from those that might be reported under a different inventory method such as the first-in, first-out (“FIFO”) method. Under the FIFO method, the earliest acquisition costs are charged to cost of sales and inventories are valued at the latest acquisition costs. If inventories had been determined using the FIFO method at December 31, 2001, 2000, and 1999, net earnings and diluted earnings per share for the years ended December 31, 2001, 2000, and 1999 would have been (lower) higher by $(6,981,000) and $(0.79), $2,935,000 and $.32, and $4,408,000 and $0.41, respectively. In addition, the use of the LIFO inventory method may result in increases or decreases to cost of sales in years that inventory volumes decline as the result of charging cost of sales with LIFO inventory costs generated in prior periods. For the years ended December 31, 2001, 2000, and 1999, cost of sales were (lower) higher by $(231,000), $(1,737,000) and $2,551,000 because of declines in inventory volumes.

In periods of rapidly declining prices, LIFO inventories may have to be written down to market due to the higher costs assigned to LIFO volumes in prior periods. Market value is determined based on estimated selling prices less applicable refining, transportation and other selling costs, generally for the month subsequent to the end of the reporting period. For the year ended December 31, 2001, declining prices resulted in the write-down of inventory values by approximately $3,302,000. Further declines in prices could result in additional write-downs.

The Company has recorded various environmental remediation liabilities described in more detail in Note 16 to the Company’s Consolidated Financial Statements in Item 8. These liabilities result for the most part from past operations, including liabilities associated with past operations arising out of changes in environmental laws, and liabilities assumed in connection with acquired assets. The Company is conducting remediation activities in connection with these matters, including investigation, sampling, cleanup, disposal, and monitoring. Such liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Environmental liabilities are not discounted to their present value and are recorded without consideration of potential recoveries from third parties. The Company employs independent consultants or its own internal environmental personnel to investigate and assemble pertinent facts, recommend an appropriate remediation plan in light of regulatory standards, assist in estimating remediation costs based on existing technologies, and complete remediation according to approved plans. When consultants are not utilized, the Company estimates remediation costs based on the knowledge and experience of Company employees having responsibility for the remediation project. Because of the amount of uncertainty involved in the nature of the Company’s various remediation efforts and the period of time such efforts may take to complete, estimates are based on current regulatory standards. The Company

updates its estimates as needed to reflect changes in factual information, available technology, or applicable laws and regulations. Subsequent adjustments to estimates, which may be significant, often occur as more information becomes available, as the requirements of government agencies are changed or clarified, or as other circumstances change.

The Company has entered into various transactions with James E. Acridge, its former Chairman and Chief Executive Officer, (the “CCEO”) more fully described in Note 6 to the Company’s Consolidated Financial Statements in Item 8. The Board of Directors is responsible for the approval of these transactions. Among other things, management has obtained an independent appraisal and financial information from the CCEO to assist in evaluating the accounting for and the collectability of a note receivable from the CCEO. As discussed in Note 6, at December 31, 2001, the Company had fully reserved for the Note and related accrued interest.

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of the assets to be held and used may not be recoverable. For assets to be disposed of, the Company reports long-lived assets at the lower of the carrying amount or fair value less cost to sell. During 2001, the Company recorded impairment write-downs of $926,000 relating to assets held for disposal. Additionally, the Company has several operating service station/ convenience stores that are being marketed for potential sale if acceptable offers are received. These operating stores were evaluated for impairment using an undiscounted cash flow methodology. The sum of expected future cash flows for certain of the stores was less than the carrying value; accordingly an impairment loss of $1,293,000 based on estimated fair market values was recorded during 2001. In determining the amount of this write-down, the fair market value estimates used were based upon either internally prepared estimates based on comparable sales or sales offers received. In addition, write-downs of $500,000 were recorded for other impairments. Changes in current economic conditions, assumptions regarding the timing and amounts of cash flows, or fair market value estimates could result in additional write-downs of these assets in the future.

Included below are certain operating results and operating data for the Company and for the Company’s operating segments.

(1)

The Refining Group consists of the Company’s two refineries, its fleet of crude oil and finished product truck transports, its crude oil pipeline gathering operations, and its finished product terminaling operations. The Retail Group consists of service station/ convenience stores and one travel center. Phoenix Fuel is an industrial/ commercial petroleum fuels and lubricants distribution operation, which includes a number of bulk distribution plants, an unattended fleet fueling (“cardlock”) operation and a fleet of finished product truck transports. The Other category is primarily corporate staff operations.

In the second quarter of 2000, the Company changed its methodology for treating product purchased to supply Company retail operations and, as a result, certain segment information for the Refining Group is not comparable with that reported for 2000. This change in methodology had no effect on gross margin or net income.

For the year ended December 31, 2001, earnings before income taxes were $20,108,000, an increase of $8,771,000 from earnings before income taxes of $11,337,000 for the year ended December 31, 2000. The increase was primarily due to a 27% increase in refinery margins, due in part to a reduction in crude oil costs resulting from contract negotiations with suppliers; lower operating expenses, including depreciation and amortization; and a 4% increase in retail merchandise sales with relatively flat margins year-to-year. These increases were offset in part by a 7% decline in refinery sourced finished product sales volumes, due in part to reduced crude oil production and competitive conditions in the Four Corners area; a 10% decline in wholesale fuel volumes sold by Phoenix Fuel to third party customers, due in part to a slowdown in the commercial/industrial sector in Arizona and increased volumes sold in the third quarter of 2000 related to increased diesel demand because of disruptions of natural gas supplies into Arizona; a 5% decrease in Phoenix Fuel finished product margins; and an increase in selling, general and administrative expenses (“SG&A”).

In addition, 2001 earnings before income taxes were reduced by $6,212,000 as the result of losses on the disposal/ write-down of various refining and retail assets and by $5,409,000 due to the recording of a reserve for a note and interest receivable from the CCEO, as discussed in Note 6 to the Company’s Consolidated Financial Statements in Item 8.

Revenues for the year ended December 31, 2001, decreased approximately $105,683,000 or 10% to $968,679,000 from $1,074,362,000 in the comparable 2000 period. The decrease was due to, among other things, a 10% decline in wholesale fuel volumes sold by Phoenix Fuel to third party customers, due in part to the factors stated above, along with a 6% decrease in related finished product selling prices; an 8% decline in refinery average selling prices, along with a 7% decrease in refinery sourced finished product sales volumes;

The volumes of finished products sold through the Company’s retail units decreased approximately 10% from 2000 levels. The volume of finished product sold from service station/ convenience stores that were in operation for a full year in each period decreased approximately 4%. These declines were primarily due to increased price competition in the Company’s Phoenix and Tucson markets. In addition, the Company has closed or sold 39 service station/ convenience stores and opened or acquired three since the beginning of 2000. Volumes sold from the Company’s travel center declined approximately 6%, due in part to direct competition from a truck stop/casino that opened in 2001.

For the year ended December 31, 2001, cost of products sold decreased $120,487,000 or 14% to $738,514,000 from $859,001,000 in the comparable 2000 period. The decrease was due in part to a 15% decline in average crude oil costs; a 10% decline in wholesale fuel volumes sold by Phoenix Fuel to third party customers, along with a 5% decrease in the cost of finished products purchased; and a 7% decline in refinery sourced finished product sales volumes. These decreases were partially offset by a 4% increase in retail merchandise sales. In addition, 2001 cost of products sold increased by approximately $3,302,000 as a result of a reduction in the carrying value of inventories related to declines in crude oil and refined product prices.

For the year 2001, certain lower cost refinery LIFO inventory layers were liquidated, which resulted in a decrease in the cost of products sold of approximately $231,000. For the year 2000, certain lower cost Phoenix Fuel LIFO inventory layers were liquidated, which resulted in a decrease in the cost of products sold of approximately $1,737,000.

For the year ended December 31, 2001, operating expenses decreased approximately $8,390,000 or 7% to $114,260,000 from $122,650,000 in the comparable 2000 period. The decrease was due to, among other things, reduced expenses for payroll and related costs for retail operations, including operating bonuses, along with a reduction in other operating expense categories, due in part to the closure of 20 and sale of 19 service station/ convenience stores during 2000 and 2001; lower lease expense due to the repurchase of 59 service/ station convenience stores from FFCA Capital Holding Corporation (“FFCA”) in July 2001, which had been sold as part of a sale-leaseback transaction between the Company and FFCA in December 1998; decreased payroll and related costs and repair and maintenance expenses for Phoenix Fuel; and lower chemical and additive costs and reduced purchase fuel costs for the refineries. These decreased costs were offset in part by higher refinery costs for materials, contract labor, and utilities.

For the year ended December 31, 2001, depreciation and amortization increased approximately $296,000 or 1% to $33,875,000 from $33,579,000 in the comparable 2000 period. The increase was primarily related to the repurchase of 59 service/ station convenience stores from FFCA in July 2001; newly acquired service station/convenience stores; the capitalization of the 2000 contingent payment related to the acquisition of the Bloomfield Refinery discussed in more detail in Note 3 to the Company’s Consolidated Financial Statements in Item 8; and construction, remodeling and upgrades in retail and refining operations during 2000 and 2001. These increases were offset in part by lower refinery turnaround amortization costs in 2001.

For the year ended December 31, 2001, SG&A increased approximately $2,491,000 or 10% to $27,864,000 from $25,373,000 in the comparable 2000 period. The increase was primarily due to increased expense accruals for bonuses paid under the Company’s management incentive bonus plan in January 2002; certain outside legal expenditures, including expenditures related to transactions involving the CCEO or related entities; certain consulting expenditures; certain related party transactions discussed in more detail in

Note 6 to the Consolidated Financial Statements; and accruals for certain environmental costs. These increases were offset in part by lower self-funded group health insurance costs in 2001 due to improved claims experience, severance pay costs incurred in the first quarter of 2000 relating to a reorganization and staff reduction program, and expenditures incurred in 2000 for certain strategic planning costs.

For the year ended December 31, 2001, the Company recorded a pre-tax loss on the disposal/ write-down of assets of $6,212,000. This amount included losses of $609,000 on the sale of assets in the ordinary course of business, primarily related to the sale of eleven service station/convenience stores; losses of $2,719,000 on the write-down of assets due to impairment, resulting from the application of Statement of Financial Accounting Standard (“SFAS”) No. 121 due to a strategy to sell certain service station/convenience stores, some of which were closed; losses of $592,000 relating to the value of leasehold improvements included in leased service station/convenience stores returned to the lessors; and losses of $2,292,000 primarily related to the retirement or replacement of certain refinery property, plant, and equipment. In addition, the Company recorded a reserve in the amount of $5,409,000 for a note and interest receivable from the CCEO as discussed in Note 6 to the Company’s Consolidated Financial Statements in Item 8.

For the year ended December 31, 2001, interest expense decreased approximately $313,000 or 1% to $24,098,000 from $24,411,000 in the comparable 2000 period. The decrease was primarily due to interest expense in 2000 related to borrowings under the Company’s revolving credit facility.

For the year ended December 31, 2001, interest and investment income decreased approximately $328,000 or 16% to $1,661,000 from $1,989,000 in the comparable 2000 period. The decrease was primarily due to a decline in the amount of funds available for investment in short-term instruments, as a result of the FFCA repurchase.

The effective tax rate for the year ended December 31, 2001 was approximately 38% and for the year ended December 31, 2000 was approximately 35%. The difference in the rates was primarily the result of coal seam gas tax and state pollution control credits utilized in 2000.

The Company’s strategy is to continue to profitably operate its refining, retail marketing and Phoenix Fuel operations. The immediate strategic focus is to:


	•	complete the acquisition of a refinery located in Yorktown, Virginia (the “Yorktown Refinery”) from BP Corporation North America Inc. and BP Products North America Inc.;

	•	efficiently integrate the Yorktown Refinery into the Company’s existing operations while maximizing the profitability of all of the Company’s refineries;

	•	work with producers in the Four Corners area to augment crude oil supply;

	•	continue to maximize profitability of the Retail Group by increasing sales of high-margin merchandise and continuing to reduce costs;

	•	continue to maximize profitability of Phoenix Fuel by increasing wholesale fuel volumes, expanding its service offerings, and broadening its wholesale customer base;

	•	increase cash flow by continuing to reduce operating expenses and eliminating non-essential capital expenditures; and

	•	rationalize the Company’s asset base by selling non-strategic and underperforming assets and selectively pursuing acquisitions.

The Company’s refining operations continue to be affected by reduced crude oil production in the Four Corners area and could further be affected by periodic supply contract negotiations if such negotiations are not successful in retaining material volumes. This has had a direct effect on the refinery’s crude oil supply and refined product production. In addition, new pipelines bringing refined products into this market area have directly impacted the Company’s operations. The Company has been able to meet refined product demand in it markets, while achieving acceptable margins, and believes it will continue to do so.

The Company’s refineries continue to run well with no significant operational problems and have been able to respond to a variety of supply and demand situations resulting from changing economic conditions in order to maximize refinery netbacks.

The Company’s retail operations will continue to evaluate and potentially dispose of non-strategic and underperforming assets. The Company continues to face increased competition in the markets in which it operates from major oil companies, independent oil companies, and non-traditional gasoline marketers. The Company has been, and expects to continue to be, competitive in most of these markets and to realize acceptable margins. The Company’s Phoenix market has been, and continues to be, extremely competitive due to dealer tankwagon pricing and the Company continues to lose market share. The Company has implemented and is evaluating new marketing strategies for its fuel and merchandise operations in order to address this increased competition.

The Company’s Phoenix Fuel operations have been affected by the events of September 11, 2001, as well as an economic downturn in its major markets. This has resulted in reduced demand for finished products and lubricants, as well as having a negative impact on finished product margins. The Company expects that these conditions will persist until the economy improves.

The Company’s future results of operations are primarily dependent on producing or purchasing, and selling, sufficient quantities of refined products at margins sufficient to cover fixed and variable expenses.

For the year ended December 31, 2000, earnings before income taxes were $11,337,000, a decrease of $5,119,000 from earnings before income taxes of $16,456,000 for the year ended December 31, 1999. The decrease was primarily due to higher operating expenses, including depreciation and amortization; an 8% decline in refinery sourced finished product sales volumes, due in part to reduced crude oil production in the Four Corners area, competitive conditions and, in the first quarter of 2000, to customers using inventory they had stored at the end of 1999 in anticipation of potential Y2K problems; a 7% decline in retail fuel margins; and a 19% decline in Phoenix Fuel finished product margins. These decreases were offset in part by an 11% increase in refinery margins, due in part to a reduction in crude oil costs resulting from contract negotiations with suppliers; a 17% increase in retail merchandise sales with relatively flat margins year-to-year; a reduction in “SG&A; and a 5% increase in wholesale fuel volumes sold by Phoenix Fuel to third party customers.

In addition, 1999 earnings were reduced as the result of the write-off of $2,387,000 in net book value of assets that were either demolished for new construction or replaced with new systems.

Revenues for the year ended December 31, 2000, increased approximately $291,679,000 or 37% to $1,074,362,000 from $782,683,000 in the comparable 1999 period. The increase was due to, among other things, a 48% increase in refinery weighted average selling prices; a 41% increase in Phoenix Fuel weighted average selling prices, along with a 5% increase in wholesale fuel volumes sold to third party customers, due in part to increased diesel demand related to allocations and disruptions of natural gas supplies into Arizona, primarily in the third quarter of 2000; and a 17% increase in retail merchandise sales. This increase was partially offset by an 8% decline in refinery sourced finished product sales volumes.

The volumes of refined products sold through the Company’s retail units decreased approximately 2% from 1999 levels. The volume of finished product sold from service station/ convenience stores that were in operation for a full year in each period decreased approximately 3%, while volumes sold from the Company’s travel center declined approximately 5%. These declines were offset in part by volumes sold from nine Company constructed and remodeled service station/ convenience stores, opened in 1999 and 2000, that exceeded the volumes lost from the sale of 10 units during the same period.

For the year ended December 31, 2000, cost of products sold increased $290,996,000 or 51% to $859,001,000 from $568,005,000 in the comparable 1999 period. The increase was due in part to a 66% increase in average crude oil costs, despite negotiated supply cost reductions; a 45% increase in the cost of finished products purchased by Phoenix Fuel, along with a 5% increase in wholesale fuel volumes sold to third party customers; and a 17% increase in retail merchandise sales. These increases were partially offset by an 8% decline in refinery sourced finished product sales volumes.

For the year 2000, certain lower cost Phoenix Fuel LIFO inventory layers were liquidated which resulted in a decrease in the cost of products sold of approximately $1,737,000. For the year 1999, certain higher cost refinery LIFO inventory layers were liquidated which resulted in an increase in the cost of products sold of approximately $2,551,000.

For the year ended December 31, 2000, operating expenses increased approximately $7,051,000 or 6% to $122,650,000 from $115,599,000 in the comparable 1999 period. The increase was due to, among other things, increased retail operating costs related to new service station/convenience stores opened or acquired in 1999 and 2000, including wages and related costs, and increased retail credit card processing fees resulting from an increase in the number of transactions, as well as the average dollar amount of each transaction due to higher fuel prices. There also were higher costs and increased volumes of purchased fuel for the refineries, along with higher expenditures for catalyst, chemicals and additives. These increases were offset in part by lower lease expenses due to the repurchase of 24 service station/convenience stores in the third and fourth quarters of 1999, which had originally been sold to FFCA as part of a sale-leaseback transaction completed in December 1998, and reduced expense accruals for refinery related management incentive bonuses. In addition, 2000 reflects reduced retail advertising costs, as well as reduced expenditures for other promotional programs.

For the year ended December 31, 2000, depreciation and amortization increased approximately $2,450,000 or 8% to $33,579,000 from $31,129,000 in the comparable 1999 period. The increase was primarily related to newly acquired service station/ convenience stores; construction, remodeling and upgrades in retail and refining operations during 1999 and 2000; the capitalization of the 1999 contingent payment related to the acquisition of the Bloomfield Refinery; the amortization of refinery turnaround costs; and the repurchase of 24 service station/ convenience stores sold as part of a sale-leaseback transaction between the Company and FFCA in December 1998. The increase was offset in part by reduced depreciation and amortization in 2000 resulting from the sale of certain natural gas properties that were being amortized in 1999 and the 1999 adjustment of the value of certain real estate assets held for sale.

For the year ended December 31, 2000, SG&A decreased approximately $2,793,000 or 10% to $25,373,000 from $28,166,000 in the comparable 1999 period. The decrease was primarily due to a more normal contribution of $825,000 to the Company’s former Employee Stock Ownership Plan (“ESOP”) in 2000, after a larger than normal $3,000,000 contribution in 1999; lower expenses for the estimated costs of incentive bonuses and accruals for other employee benefits made in 2000 as compared to 1999; and reduced costs related to a reorganization and staff reduction program implemented in the first quarter of 2000. The

decrease was offset in part by severance pay costs incurred in 2000 relating to the reorganization and staff reduction program, certain strategic planning costs, and higher wages and related costs. In addition, 1999 costs were reduced because of insurance reimbursements received relating to prior workers compensation claims that had been paid by the Company.

For the year ended December 31, 2000, interest expense increased approximately $994,000 or 4% to $24,411,000 from $23,417,000 in the comparable 1999 period. The increase was due in part to additional interest expense related to borrowings from the Company’s revolving credit facility in the first six months of 2000 and the capitalization of more interest in 1999.

For the year ended December 31, 2000, interest and investment income decreased approximately $487,000 or 20% to $1,989,000 from $2,476,000 in the comparable 1999 period. The decrease was primarily due to a decline in the amount of funds available for investment in short-term instruments.

The effective tax rate for each of the years ended December 31, 2000 and 1999 was approximately 35%. These rates were somewhat lower than the Company’s expected effective tax rate of between 39% and 40% because of coal seam gas tax and state pollution control credits utilized in 2000 and the resolution of various tax matters and deferred tax adjustments in 1999.

Operating cash flows increased for the year ended December 31, 2001 compared to the year ended December 31, 2000 primarily as a result of an increase in net earnings and related non-cash adjustments in 2001, along with an increase in cash flows related to changes in operating assets and liabilities in each period. Net cash provided by operating activities totaled $65,256,000 for the year ended December 31, 2001, compared to $29,492,000 in the comparable 2000 period.

Working capital at December 31, 2001 consisted of current assets of $135,981,000 and current liabilities of $78,837,000, or a current ratio of 1.72:1. At December 31, 2000, the current ratio was 1.49:1 with current assets of $165,184,000 and current liabilities of $110,690,000.

Current assets decreased during 2001, primarily due to a decrease in trade receivables. This decrease was offset in part by an increase in inventories. Trade receivables decreased due to a decrease in weighted average selling prices and lower sales volumes in December 2001 as compared to December 2000. Inventories increased primarily due to an increase in the volumes of refinery crude oil and refinery and Phoenix Fuel refined products on hand. These increases were offset in part by a decline in weighted average inventory costs, along with a decrease in certain retail refined product volumes.

Current liabilities decreased due to decreases in accounts payable and accrued expenses. Accounts payable decreased primarily as a result of a decrease in the cost of certain raw materials and finished products. In addition, two months of natural gas liquids purchases were included in accounts payable at December 31, 2000, due to the timing of year-end payments. Accrued expenses decreased primarily as a result of the payment of the final accrued contingent payment related to the 1995 acquisition of the Company’s Bloomfield Refinery more fully discussed in Note 3 to the Company’s Consolidated Financial Statements in Item 8, lower accruals for federal and state excise taxes, settlement and payment of certain legal matters previously accrued for, and lower or reduced accruals for refinery purchased fuel and utilities. These decreases were offset in part by increased accruals for bonus, profit sharing and retirement plans.

Net cash used in investing activities for the purchase of property, plant and equipment, excluding the $38,052,000 repurchase of 59 service station/ convenience stores from FFCA in July 2001, totaled approximately $19,004,000 for the year ended December 31, 2001. Expenditures included amounts for, among other things, certain major maintenance turnaround costs for the Bloomfield Refinery, the acquisition and replacement of certain pipeline assets, operational and environmental projects for the refineries, and remodeling and upgrades for retail operations.

The Company received proceeds of approximately $7,889,000 from the sale of property, plant and equipment and other assets in 2001, primarily from the sale of 11 service station/ convenience stores, a bulk plant, and certain vacant land. A loss of approximately $609,000 resulted from these sales. In addition, the Company recorded the retirement or replacement of certain refinery and retail property, plant, and equipment with a net book value of approximately $2,292,000, recorded impairment losses on various retail assets of $2,719,000, and losses of $592,000 for the value of leasehold improvements included in leased retail units returned to the lessors.

As a result of the Company’s ongoing retail asset evaluation initiated in 2001, the Company identified 60 non-strategic or underperforming units for possible divestiture. Eight of these units were subsequently removed from the list due to improved performance. Of the remaining units, 11 were sold, six were closed and reclassified as assets held for sale, one leased unit was returned to the lessor, and four are in escrow and are expected to close in the second quarter of 2002. The remaining 30 stores continue to be operated by the Company, but are being marketed for potential sale in accordance with the Company’s strategy and may be divested if acceptable offers are received and negotiated during 2002.

In October 1995, the Company acquired the Bloomfield Refinery. The purchase agreement provided for potential contingent payments of approximately $35,000,000 to be made over approximately six years from the acquisition date, not to exceed a net present value of $25,000,000 as of October 1995, should certain criteria be met. The contingent payments are considered additional purchase price, were allocated to the appropriate assets, and are being amortized over their remaining useful lives. In the first quarter of 2001, the Company made the final payment of approximately $5,139,000 required under the purchase agreement.

On January 25, 2001, the Company’s Board of Directors accepted an offer from the CCEO, on behalf of a trust of which the CCEO is the beneficiary, to sell a parcel of land (the “Jomax Property”) to the Company, or to a company affiliated with the Company, for the lesser of $5,000,000 or the Jomax Property’s appraised value. The Jomax Property was subsequently sold to the Company for $5,000,000 plus closing costs. The Company subsequently purchased from the trust an option and first right held by the trust for $600,000. Refer to Note 6 to the Company’s Consolidated Financial Statements in Item 8 for a detailed discussion of this transaction.

In December 1998, the Company and FFCA completed a sale-leaseback transaction in which the Company sold 83 service station/convenience stores to FFCA for $51,763,000 and leased them back. Net proceeds to the Company, after expenses, were approximately $50,124,000. In the second half of 1999, the Company repurchased 24 of the service station/ convenience stores for approximately $13,711,000, plus closing costs. In the second quarter of 2001, FFCA approached the Company to determine whether the Company had any interest in acquiring the remaining 59 service station/convenience stores. Subsequently, in July 2001, the Company repurchased the remaining 59 service station/convenience stores for approximately $38,052,000 plus closing costs. These amounts were equal to the original selling prices of the units. Certain deferrals on the Company’s Consolidated Balance Sheet relating to the sale-leaseback transaction, including a deferred gain on the original sale to FFCA and deferred lease allocations included in “Other Liabilities and Deferred Income,” and deferred costs associated with the original sale included in “Other Assets,” reduced the value of the assets recorded in property, plant and equipment by approximately $1,736,000. The repurchase of these service station/ convenience stores will reduce the Company’s average annual lease

The Company budgeted approximately $20,900,000 for capital expenditures in 2002, excluding growth projects, the Yorktown Refinery acquisition discussed below and any related capital expenditures, and any other potential acquisitions. Of this amount, approximately $3,000,000 is for the completion of projects that were started in 2001. In addition, approximately $12,500,000 is budgeted for non-discretionary projects that are required by law or regulation or to maintain the physical integrity of existing assets. These expenditures are primarily for operational and environmental projects at the Company’s existing refineries, including approximately $3,200,000 for a partial turnaround at the Ciniza Refinery, and replacements and upgrades for the retail operations. Another $3,400,000 is budgeted for discretionary projects to sustain or enhance the current level of operations, increase earnings associated with existing or new business and to expand existing operations. The remaining budget of $2,000,000 is for capital expenditure contingencies. The Company expects that similar dollar expenditures will be made over the next three years for capital expenditures, exclusive of any growth projects, acquisitions, and acquisition related capital expenditures.

The Company continues to investigate other capital improvements to its existing facilities. The amount of capital projects that are actually undertaken in 2002 will depend on, among other things, general business conditions, results of operations, and financial constraints resulting from the Yorktown Refinery acquisition. The Company is also evaluating the possible sale or exchange of other non-strategic or under-performing assets in addition to the retail assets described above.

Much of the capital currently budgeted for environmental compliance is integrally related to operations or to operationally required projects. The Company does not specifically identify capital expenditures related to such projects on the basis of whether they are for environmental as opposed to economic purposes. With respect to capital expenditures budgeted primarily to satisfy environmental regulations, the Company estimates that approximately $1,900,000, $1,100,000 and $900,000 were spent in 2001, 2000 and 1999, respectively, and that approximately $1,700,000 will be spent in 2002. With respect to the Company’s operating expenses for environmental compliance, while records are not kept specifically identifying or allocating such expenditures, management believes that the Company incurs significant operating expense for such purposes.

Changes in the tax laws, changes in federal and state clean air and clean fuel requirements and other changes in environmental laws and regulations also may increase future capital and operating expenditure levels.

The Company anticipates that working capital, including that necessary for capital expenditures and debt service, will be funded through existing cash balances, cash generated from operating activities, and, if necessary, future borrowings. Future liquidity, both short and long-term, will continue to be primarily dependent on producing or purchasing, and selling, sufficient quantities of refined products at margins sufficient to cover fixed and variable expenses. The Company believes that it will have sufficient working capital to meet its needs over the next 12-month period.

The Company’s operations are subject to fluctuations in supply and demand that could adversely affect costs and selling prices, and in return margins realized. Any long-term adverse relationships between costs and prices could impact the Company’s ability to generate sufficient operating cash flows to meet its working capital needs. In addition, the Company’s ability to borrow funds under its current Credit Agreement could be adversely impacted by low product prices that could limit the availability of funds by reducing the borrowing base tied to eligible accounts receivable and inventories. The Company’s Credit Agreement also contains certain restrictive covenants that could limit the Company’s ability to borrow funds if certain thresholds are not maintained. Although the above factors could impact the Company’s ability to generate or access funds, the Company is not aware of any limiting factors at this time.

The Standard & Poor’s rating agency has recently placed the Company’s Senior Subordinated rating on credit watch with negative implications, due to the recently announced pending acquisition of the Yorktown Refinery, which will primarily be debt financed. This should not have an impact on the Company’s ability to

Refer to the discussion below under “New Developments” for a detailed discussion of the Yorktown Refinery acquisition.

On February 8, 2002, the Company entered into an agreement with BP Corporation North America Inc. and BP Products North America Inc. (collectively, “BP”) to purchase a refinery in Yorktown, Virginia (the “Yorktown Refinery”). The refinery has a crude oil processing capacity of 61,900 barrels per day. Gasoline comprises approximately 50% of the refinery’s current product slate, which also encompasses a wide range of other products including diesel fuel, heating oil and coke. The refinery is the only refinery in Virginia and, due to its coastal location, is able to purchase crude oil produced around the world and to deliver refined petroleum products to New York Harbor as well as to the area around the refinery.

The Company believes that benefits to the Company associated with the Yorktown Refinery acquisition include the ability to: (i) deliver petroleum products to many nearby market terminals on short notice to supplement shortages that may result from, among other things, unscheduled downtime by other refineries supplying the Yorktown Refinery’s market areas and peak product demand; (ii) sell petroleum products in markets selected by the Company in response to higher margins than those attainable in other markets; (iii) exchange products to and from the Gulf Coast and New York Harbor; and (iv) select from a large number of world crude oils to maximize the refinery’s profitability. The acquisition also will diversify the Company’s geographic exposure, lessen its dependence on its existing refinery operations, and provide a source for potential future Company growth.

The Yorktown Refinery will be acquired by a new wholly-owned subsidiary of the Corporation for $127,500,000, plus the value of inventory at closing, which the Company currently projects will have a value of approximately $42,000,000. The agreement also provides for conditional monthly payments, in an amount not to exceed a combined total of $25,000,000, if certain refining margin spreads over a specified index are reached. The payments begin in the year 2003 and conclude at the end of 2005. The Company made a deposit of $10,000,000 to BP when the refinery purchase agreement was executed, which is only refundable under limited circumstances. In addition to the purchase price, the Company anticipates that it will incur direct costs in connection with the refinery acquisition of approximately $800,000 excluding financing costs. In addition, the Company has budgeted $7,700,000 for capital expenditures for 2002.

The Company expects the refinery purchase to close during the second quarter of 2002. The closing is contingent on satisfaction of all contract conditions, including the nonexercise of a right of first refusal held by an adjacent property owner and the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvement Act (“HSR”) and any extension of this waiting period by the federal government. The purchase agreement can be terminated by the Company or BP if the closing does not occur on or prior to May 31, 2002, although the Company may not terminate the agreement until September 30, 2002 if the only condition to closing that has not occurred is termination or expiration of the HSR waiting period. By letter dated February 26, 2002, the Federal Trade Commission notified the Company that the HSR waiting period had been terminated.

The Company intends to finance the acquisition of the Yorktown Refinery with a combination of committed financing and cash on hand. The debt financing is anticipated to consist of borrowing under: (i) the Company’s Credit Agreement, which will be amended and restated to, among other things, increase the Company’s maximum available borrowing under the facility and extend the facility’s term by an additional year; (ii) a capital lease facility; (iii) a mortgage financing facility; and (iv) potentially additional public debt. The Company anticipates that financing costs associated with the Yorktown Refinery acquisition, including the possible refinancing of the Company’s 9 3/4% Notes, will be approximately $13,500,000 to $15,000,000.

The Yorktown Refinery acquisition potentially could have a significant impact on the Company’s liquidity, especially during the first three years of operation, due to expected capital expenditure requirements discussed below, expenditures estimated to be approximately $20,000,000 in each of 2003 and 2004 to meet low sulfur gasoline and diesel requirements, and repayment of debt associated with the acquisition. The Company does not, however, believe that any of its presently contemplated activities will be constrained.

The Company will assume certain liabilities and obligations in connection with its purchase of the Yorktown Refinery, but will be provided with specified levels of indemnification for certain matters. These liabilities and obligations include, subject to certain exceptions and indemnifications, all obligations, responsibilities, liabilities, costs and expenses under health, safety and environmental laws, caused by, arising from, incurred in connection with or relating in any way to the ownership of the refinery or its operation. The Company has agreed to indemnify BP from and against losses of any kind incurred in connection with or related to liabilities and obligations assumed by the Company.

Environmental obligations assumed by the Company will include BP’s responsibilities and liabilities under a consent decree among various parties covering many locations (the “Consent Decree”). Parties to the Consent Decree include the United States, BP Exploration and Oil Co., Amoco Oil Company, and Atlantic Richfield Company. BP entered into the Consent Decree on August 29, 2001. As applicable to the Yorktown Refinery, the Consent Decree requires, among other things, reduction of NO_x, SO₂ and particulate matter emissions and upgrades to the refinery’s leak detection and repair program. The precise obligations to be assumed by the Company under the Consent Decree must be negotiated with the United States and the other parties to the Consent Decree. The Company estimates that it will incur capital expenditures in the approximate amount of $20,000,000 to $27,000,000 to comply with the Consent Decree and that these costs will be incurred over a period of approximately five years, although the Company believes most of the expenditures will be incurred in 2006. In addition, the Company estimates that it will incur operating expenses associated with the requirements of the Consent Decree of approximately $1,600,000 to $2,600,000 per year.

The environmental obligations assumed by the Company in connection with the acquisition of the Yorktown Refinery also will include BP’s obligations under an administrative order issued by EPA in 1991 (the “Order”) pursuant to the Resource Conservation and Recovery Act (“RCRA”). The Order requires an investigation of certain areas of the refinery and the development of measures to correct any releases of contaminants or hazardous constituents found in these areas. A RCRA Facility Investigation and a Corrective Measures Study (“RFI/CMS”) already has been prepared. It was revised by BP, in draft form, to incorporate comments from EPA and the Virginia Department of Environmental Quality, although a final RFI/CMS has not yet been approved. The draft RFI/CMS proposes certain investigation, sampling, monitoring, and cleanup measures, including the construction of an on-site corrective action management unit that would be used to consolidate hazardous materials associated with these measures. These proposed actions relate to soil, sludge, and remediation wastes relating to certain solid waste management units, groundwater in the aquifers underlying the refinery, and surface water and sediment in a small pond and tidal salt marsh on the refinery property. The Company estimates that expenses associated with the actions described in the proposed RFI/CMS will cost approximately $10,000,000 to $15,000,000, and will be incurred over a period of approximately 30 years, with approximately $5,000,000 of this amount being incurred over an initial 6-year period. The Company, however, may not be responsible for all of these expenditures as a result of the environmental indemnification provisions included in its purchase agreement with BP, as more fully discussed in the following paragraph.

BP has agreed to indemnify, defend, save and hold harmless the Company from and against all losses that are caused by, arising from, incurred in connection with or relate in any way to property damage caused by, or any environmental remediation required due to, a violation of health, safety and environmental laws during the pre-closing operation of the refinery by BP (“Remediation Losses”). In order to have a claim against BP, however, the aggregate of all Remediation Losses must exceed $5,000,000, in which event the Company’s claim only relates to the amount exceeding $5,000,000 (the “First Threshold”). After the First Threshold is reached, the Company’s claim is limited to 50% of the amount by which the Remediation Losses exceed the First Threshold until the aggregate of all such losses exceeds $10,000,000 (the “Second Threshold”). After the Second Threshold is reached, the Company’s claim includes 100% of the amount by which the

Remediation Losses exceed the Second Threshold. In applying these provisions, Remediation Losses amounting to less that $250,000 in the aggregate arising out of the same occurrence or matter are not aggregated with any other Remediation Losses for purposes of determining whether and when the First Threshold or Second Threshold has been reached. After the First Threshold or Second Threshold has been reached, BP has no obligation to indemnify the Company with respect to such matters for any Remediation Losses amounting to less than $250,000 in the aggregate arising out of the same occurrence or matter. Further, BP’s aggregate liability for indemnification under the refinery purchase agreement, including liability for environmental indemnifications, is limited to $35,000,000.

Under SFAS No. 141, “Business Combinations”, the acquisition of the Yorktown Refinery will be accounted for as a purchase, and the purchase price will be allocated to the assets acquired, including intangibles, and liabilities assumed based upon their respective fair market values at the time of acquisition. As noted above, the acquisition is expected to close in the second quarter of 2002, subsequent to which the Company will file a Current Report on Form 8-K including audited financial statements and pro forma information. For additional information refer to the Company’s Current Report on Form 8-K dated February 8, 2002, filed on February 12, 2002.

At December 31, 2001 and December 31, 2000, the Company’s long-term debt was 65.3% and 66.9% of total capital, respectively, and the Company’s net debt (long-term debt less cash and cash equivalents) to total capitalization percentages were 62.8% and 64.4%, respectively.

The Company’s current capital structure includes $150,000,000 of 9% senior subordinated notes due 2007 (the “9% Notes”) and $100,000,000 of 9 3/4% senior subordinated notes due 2003 (the “9 3/4% Notes”, and collectively with the 9% Notes, the “Notes”). The Indentures supporting the Notes contain restrictive covenants that, among other things, restrict the ability of the Company and its subsidiaries to create liens, to incur or guarantee debt, to pay dividends, to repurchase shares of the Company’s common stock, to sell certain assets or subsidiary stock, to engage in certain mergers, to engage in certain transactions with affiliates or to alter the Company’s current line of business. At December 31, 2001, approximately $7,128,000 was available for Restricted Payments, which the Notes define as, among other things: (i) the payment of dividends, (ii) the repurchase of the Company’s common stock, (iii) the payment of principal in connection with certain types of indebtedness prior to their scheduled maturity, and (iv) certain types of investments.

Subject to certain conditions, the Company is obligated to offer to purchase a portion of the Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, with the net cash proceeds of certain sales or other dispositions of assets. Upon a change of control, the Company would be required to offer to purchase all of the Notes at 101% of the principal amount thereof, plus accrued interest, if any, to the date of purchase.

Repayment of the Notes is jointly and severally guaranteed on an unconditional basis by the Company’s direct and indirect wholly-owned subsidiaries, subject to a limitation designed to ensure that such guarantees do not constitute a fraudulent conveyance. Except as otherwise allowed in the Indentures pursuant to which the Notes were issued, there are no restrictions on the ability of such subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances. General provisions of applicable state law, however, may limit the ability of any subsidiary to pay dividends or make distributions to the Company in certain circumstances.

Separate financial statements of the Company’s subsidiaries are not included herein because the aggregate assets, liabilities, earnings, and equity of the subsidiaries are substantially equivalent to the assets, liabilities, earnings, and equity of the Company on a consolidated basis; the subsidiaries are jointly and severally liable for the repayment of the Notes; and the separate financial statements and other disclosures concerning the subsidiaries are not deemed by the Company to be material to investors.

as lead bank and administrative agent. On December 19, 2001, this Credit Agreement was extended until November 14, 2003, under substantially the same terms and conditions. The Credit Agreement, a revolving loan agreement, is primarily a working capital and letter of credit facility and is secured by eligible accounts receivable and inventories as defined in the Credit Agreement. The Credit Agreement also allows the Company to borrow up to $10,000,000 for other acquisitions as defined in the Credit Agreement. The availability of funds under this facility is the lesser of (i) $65,000,000, or (ii) the amount determined under a borrowing base calculation tied to the eligible accounts receivable and inventories. At December 31, 2001, the availability of funds under the Credit Agreement was $57,215,000. The borrowing base is less than $65,000,000 primarily due to lower selling prices and sales volumes that affected eligible accounts receivable, and reduced inventory valuations that affected eligible inventories. There were no direct borrowings outstanding under this facility at December 31, 2001, and there were approximately $4,258,000 of irrevocable letters of credit outstanding, primarily to insurance companies and regulatory agencies.

The interest rate applicable to the Credit Agreement is tied to various short-term indices. At December 31, 2001, this rate was approximately 4% per annum. The Company is required to pay a quarterly commitment fee ranging from 0.325% to 0.500% per annum of the unused amount of the facility. The exact rate depends on meeting certain conditions in the Credit Agreement.

The Credit Agreement contains certain restrictive covenants which require the Company to, among other things, maintain a minimum consolidated net worth, a minimum interest coverage ratio, and a maximum capitalization ratio. It also places limits on investments, dispositions of assets, prepayments of senior subordinated debt, guarantees, liens and restricted payments. The Credit Agreement is guaranteed by certain of the Company’s direct and indirect wholly-owned subsidiaries.

In connection with the acquisition of the Yorktown Refinery, the Company expects to replace the Credit Agreement with a new and larger credit facility. Refer to the discussion above under the caption “New Developments” for details regarding the financing of the Yorktown Refinery.

The Indentures supporting the Company’s Notes and the Company’s Credit Agreement contain certain restrictive covenants, as described in more detail above, and other terms and conditions that if not maintained, if violated, or if certain conditions are met, could result in default, early purchase of the Notes, and affect the Company’s ability to borrow funds, make certain payments, or engage in certain activities.

As of December 31, 2001, the Company was not aware of any matters that it reasonably expected to restrict its ability to borrow funds, make payments, or engage in other contemplated activities under the terms of the Indentures supporting its Notes or its Credit Agreement. The acquisition of the Yorktown Refinery, however, could constrain the Company’s ability to take such actions, particularly in the first three years of operations, but the Company does not believe that any presently contemplated activities will be constrained. A prolonged period of low refining margins, however, would have a negative impact on the Company’s ability to borrow funds and to make expenditures for certain purposes.

The Company is presently evaluating the potential of refinancing the 9 3/4% Notes. This evaluation includes an overall review of the Company’s existing and proposed capital structure following the closing of the Yorktown Refinery acquisition. Certain provisions relating to the financing of the Yorktown Refinery require that the refinancing of the 9 3/4% Notes be completed by May 15, 2003. The Company recently announced the solicitation of consents from the holders of its 9% Notes to amend the 9% Notes Indenture to permit the Company to refinance the 9 3/4% Notes prior to their maturity. The consent solicitation is conditioned on the receipt of consents from holders of at least a majority in the aggregate principal amount of the outstanding 9% Notes and other customary conditions. The consent solicitation will expire at 5:00 p.m., New York City time, on April 3, 2002, unless extended.

Included in the tables below are a list of the Company’s obligations and commitments to make future payments under contracts and under contingent commitments.

The Company is committed under a long-term purchase contract that expires in August 2005 to purchase a minimum of 3,500 barrels per day of natural gasoline at market price plus an additional amount per gallon.

The Company’s Board has authorized the repurchase of up to 2,900,000 shares of the Company’s common stock. These purchases may be made from time to time as conditions permit. Shares may be repurchased through privately-negotiated transactions, block share purchases and open market transactions. During 2001, the Company repurchased 417,300 shares of its common stock under this program. Of this amount, the Board directed the Company to repurchase 400,000 shares from the CCEO. The shares were purchased at a price of $8.80 per share, which was the closing price of the Company’s common stock on the New York Stock Exchange on the date that the conditions to purchase set by the Board were satisfied, including the receipt of necessary bank waivers and consents. The remaining 17,300 shares were purchased on the open market for approximately $8.89 per share. Since the inception of the stock repurchase program, the Company has repurchased 2,582,566 shares for approximately $25,716,000, resulting in a weighted average cost of $9.96 per share. The repurchased shares are treated as treasury shares.

Shares repurchased under the Company’s program are available for a number of corporate purposes including, among other things, for options, bonuses, and other employee stock benefit plans. The number of shares actually repurchased will be dependent upon market conditions and existing debt covenants, and there is no guarantee as to the exact number of shares to be repurchased by the Company. The Company may discontinue the program at any time without notice.

As previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, the Company filed a Schedule 13E-4 Issuer Tender Offer Statement with the Securities and Exchange Commission on December 21, 1999, to acquire up to 1,333,333 shares of its common stock at a price of $9.00 per share, net to the seller in cash. The offer expired on February 4, 2000, at which time 1,169,414 shares had been properly tendered to the Company. The Company purchased all of these shares at the stated price, at a cost of approximately $10,525,000 plus expenses of approximately $213,000 on February 8, 2000. These repurchased shares are treated as treasury shares.

The Board suspended the payment of cash dividends on common stock in the fourth quarter of 1998. At the present time, the Company has no plans to reinstate such dividends. The payment of future dividends is subject to the results of the Company’s operations, declaration by the Company’s Board of Directors, and compliance with certain debt covenants.

The Company is engaged in a number of transactions with related parties, primarily the CCEO. These transactions are summarized in the table below.


(1)	On January 25, 2001, the Board accepted an offer from the CCEO, on behalf of a trust of which the CCEO is the beneficiary, to sell a parcel of land (the “Jomax Property”) to the Company, or to a company affiliated with the Company, for the lesser of $5,000,000 or the Jomax Property’s appraisal value. In March 2001, the Jomax Property was sold to the Company for $5,000,000. A portion of the proceeds from the sale were used to pay all interest due and payable as of March 28, 2001 under the terms of the Company’s outstanding loan to the CCEO. As part of the transaction, the trust also was granted an option, exercisable for a period of two years, to repurchase the property at the greater of the amount paid by the Company to purchase the property and the property’s appraised value, and a right of first refusal, exercisable for a period of two years, to repurchase the property on the same terms as contained in a bona fide offer from a bona fide purchaser.

(2)	On September 20, 2001, the Board directed the Company to purchase the trust’s option and right of first refusal (collectively, the “Rights”) for $600,000, and the Rights were subsequently sold to the Company for this price. At the time of the sale, the Company was negotiating with a potential purchaser for the sale of the Jomax Property for a price in excess of the Company’s purchase price. The potential purchaser was requiring the Company to represent in the purchase and sale agreement that there were no effective options to purchase, or rights of first refusal, affecting the property. The Company’s purchase of the Rights would have enabled the Company to make this representation and would have avoided any other complications associated with the Rights that potentially could have affected the sale. The potential purchaser subsequently advised the Company that it was discontinuing negotiations regarding the possible sale because general market and economic conditions, coupled with the financial uncertainties arising out of the events that occurred on September 11, 2001, had severely depressed the real estate market. Although the potential purchaser reapproached the Company during the first quarter of 2002 about purchasing the property, the Company is exploring other alternatives.

(3)	In August 2000, the Board approved the purchase of certain artwork from the CCEO for display in the Company’s headquarters building. The artwork was purchased at its appraised fair market value of approximately $450,000. A substantial portion of the artwork had been displayed in the Company’s headquarters building for up to 10 years without any financial consideration being provided to the CCEO for its use. The proceeds of that transaction were used by the CCEO to pay balances due on certain amounts owed to Giant Arizona by the CCEO and by entities controlled by the CCEO.

In the first quarter of 2001, the Board approved the purchase of up to $165,000 worth of additional artwork from the CCEO for display in the Company’s headquarters building. The purchase price for such artwork was the appraised fair market value of the pieces. The proceeds of that transaction were used by the CCEO to pay balances due on certain amounts owed to Giant Arizona by the CCEO and by entities


	controlled by the CCEO. A substantial portion of the artwork had been displayed in the Company’s headquarters building for up to 10 years as well.


(4)	During August 1999, the Company repurchased 440,000 shares of its Common Stock under its stock repurchase program from the CCEO for $4,950,000 or $11.25 per share. The per share price paid for the shares was at a discount to the then current fair market value. During August and September 2000, the board approved the repurchase by the Company of 129,466 shares of its Common Stock from the CCEO under the Company’s stock repurchase program for $896,887 or $7.00 per share for 99,466 shares and $6.6875 per share for 30,000 shares. The per share price paid for the shares was the low price reported for the Company’s Common Stock on the New York Stock Exchange on the dates the purchases were made. During October 2001, the Board approved the repurchase by the Company of 400,000 shares of its Common Stock from the CCEO for $8.80 per share or $3,520,000. The purchase price was the closing price of the Company’s Common Stock on the New York Stock Exchange on October 11, 2001, the date the conditions to purchase set by the Board were satisfied, including the receipt of necessary bank waivers and consents.

(5)	The terms of this loan, as well as other matters related to the loan, are discussed in detail in Note 6 to the Company’s Consolidated Financial Statements in Item 8. As of December 31, 2001, a reserve for this loan and related accrued interest has been recorded.

(6)	Total includes amounts due from entities controlled by the CCEO for rent, landscaping, and fuel purchases.

(7)	Total includes certain amounts considered compensation to the CCEO that are described in more detail in Note 6 to the Company’s Consolidated Financial Statements in Item 8.

(8)	The total represents the net amount of (i) certain miscellaneous amounts paid by the Company to the CCEO or entities controlled by the CCEO, including certain amounts for joint marketing programs, the lease of certain real property for one of the Company’s service stations, and the assumption by the Company of a lease, and (ii) certain miscellaneous amounts paid by, or due from, the CCEO or entities controlled by the CCEO, including rent for office space in the Company’s headquarters building.

Excluded from the above table are a number of immaterial transactions involving the Company and the CCEO or entities controlled by the CCEO, including (i) amounts paid to the Company for purchases of fuel, (ii) payments made to entities controlled by the CCEO for events held at facilities owned by such entities, (iii) reimbursements for certain landscaping and maintenance services provided for the CCEO and entities controlled by the CCEO, and (iv) the value of products and services provided to the Company by the CCEO or entities controlled by him. Various immaterial amounts involving other related parties are also excluded from the table.

The Company anticipates requesting reimbursement in an amount up to $96,000 for the time spent by an employee of the Company on projects for entities controlled by the CCEO. The Company expects, however, to reimburse entities controlled by the CCEO of amounts up to $30,000 for the time their employees spent on matters for the Company.

The Company is exposed to various market risks, including changes in certain commodity prices and interest rates. To manage the volatility relating to these normal business exposures, the Company has in the past used commodity futures and options contracts to reduce price volatility, to fix margins in its refining and marketing operations and to protect against price declines associated with its crude oil and finished products inventories.

The Company had no open commodity futures or options contracts at December 31, 2001.

The Company’s Credit Agreement is floating-rate debt tied to various short-term indices. As a result, the Company’s annual interest costs associated with this debt may fluctuate. At December 31, 2001, however, there were no direct borrowings outstanding under this Credit Agreement.

On January 1, 2001 the Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138 “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment to SFAS No. 133.” SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that entities record all derivatives as either assets or liabilities, measured at fair value, with any change in fair value recognized in earnings or in other comprehensive income, depending on the use of the derivative and whether it qualifies for hedge accounting. There was no effect on the Company’s financial position, results of operations, or cash flows as a result of adopting SFAS No. 133.

The Company’s operations are subject to normal hazards of operations, including fire, explosion and weather-related perils. The Company maintains various insurance coverage, including business interruption insurance, subject to certain deductibles. The Company is not fully insured against certain risks because such risks are not fully insurable, coverage is unavailable or premium costs, in the judgment of the Company, do not justify such expenditures.

Credit risk with respect to customer receivables is concentrated in the geographic area in which the Company operates and relates primarily to customers in the oil and gas industry. To minimize this risk, the Company performs ongoing credit evaluations of its customers’ financial position and requires collateral, such as letters of credit, in certain circumstances.

Federal, state and local laws and regulations relating to health and the environment affect nearly all of the operations of the Company. As is the case with other companies engaged in similar industries, the Company faces significant exposure from actual or potential claims and lawsuits involving environmental matters. These matters include soil and water contamination, air pollution and personal injuries or property damage allegedly caused by substances manufactured, handled, used, released or disposed of by the Company. Future expenditures related to health and environmental matters cannot be reasonably quantified in many circumstances for various reasons, including the speculative nature of remediation and cleanup cost estimates and methods, imprecise and conflicting data regarding the hazardous nature of various types of substances, the number of other potentially responsible parties involved, various defenses that may be available to the Company and changing environmental laws and interpretations of environmental laws. For a further discussion of health and environmental matters affecting the Company’s operations, see the discussion of such matters contained in Items 1 and 2 hereof under the heading “Regulatory, Environmental and Other Matters.”

Rules and regulations implementing federal, state and local laws relating to health and the environment will continue to affect the operations of the Company. The Company cannot predict what health or environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws or regulations will be administered or enforced with respect to products or activities of the Company. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies, could have an adverse effect on the financial position and the results of operations of the Company and could require substantial expenditures by the Company for, among other things: (i) the installation and operation of refinery equipment, pollution control systems and other equipment not currently possessed by the Company; (ii) the acquisition or modification of permits applicable to Company activities; and (iii) the initiation or modification of cleanup activities.

As of December 31, 2001, the Company had an environmental liability accrual of approximately $2,500,000. Approximately $1,600,000 of this accrual is for the following projects, all of which are discussed in more detail in Note 16 to the Company’s Consolidated Financial Statements in Item 8: (i) the remediation of the hydrocarbon plume that appears to extend no more than 1,800 feet south of the Company’s inactive Farmington refinery; (ii) environmental obligations assumed in connection with the acquisition of the Bloomfield Refinery; and (iii) hydrocarbon contamination on and adjacent to the 5.5 acres that the Company owns in Bloomfield, New Mexico. The remaining amount of the accrual relates to the closure of certain solid waste management units at the Ciniza Refinery, which is being conducted in accordance with the refinery’s

Resource Conservation and Recovery Act permit; closure of the Ciniza Refinery land treatment facility, including post-closure expenses; and certain smaller remediation projects. The accrual balance reflects a reduction in amounts accrued for environmental obligations assumed in connection with the acquisition of the Bloomfield Refinery and increases in reserves for other environmental projects. The environmental accrual is recorded in the current and long-term sections of the Company’s Consolidated Balance Sheets.

The Company’s refineries primarily process a mixture of high gravity, low sulfur crude oil, condensate and NGLs. The locally produced, high quality crude oil known as Four Corners Sweet is the primary feedstock for the refineries. The Company’s current receipts and projections of Four Corners crude oil production indicate that the Company’s crude oil demand will exceed the crude oil supply that is available from local sources for 2002. The Company has decreased production runs at its refineries from levels it would otherwise schedule as a result of shortfalls in Four Corners crude oil production and anticipates it will do so for the foreseeable future. For a further discussion of raw material supply for the Company’s refineries, see the discussion contained in Items 1 and 2 hereof under the heading “Raw Material Supply.”

In late 1999, an existing NGLs pipeline was converted to a refined products pipeline. This converted line originates in Southeastern New Mexico and delivers petroleum products into the Four Corners area and diesel fuel to a terminal 40 miles east of Albuquerque, New Mexico in Moriarty. The Company understands that projects to expand the pumping capacity of the pipeline and to expand the terminal in Moriarty to include gasoline and jet fuel have been completed. In addition, the Company is aware of a number of actions, proposals or industry discussions regarding product pipeline projects that could impact portions of its marketing areas. The completion of some or all of these projects would result in increased competition by increasing the amount of refined products potentially available in these markets, as well as improving competitor access to these areas. It also could result in new opportunities for the Company, as the Company is a net purchaser of refined products in some of these areas. For a further discussion of the potential impact of pipeline projects on the Company’s operations, as well as other competitive factors affecting these operations, see the discussion of competitive factors contained in Items 1 and 2 hereof under the heading “Competitive Conditions.”

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This report contains forward-looking statements that involve known and unknown risks and uncertainties. Forward-looking statements are identified by words or phrases such as “believes,” “expects,” “anticipates,” “estimates,” “could,” “plans,” “intends,” variations of such words and phrases and other similar expressions. While these forward-looking statements are made in good faith and reflect the Company’s current judgment regarding such matters, actual results could vary materially from the forward-looking statements. Important factors that could cause actual results to differ from forward-looking statements include, but are not limited to: economic, competitive and governmental factors affecting the Company’s operations, markets, products, services and prices; declines in production of Four Corners sweet crude oil; risks associated with the negotiation of crude oil supply contracts; risks associated with non-compliance with certain debt covenants or the satisfaction of financial ratios contained in such covenants; the risk that the Company will not be able to refinance its 9 3/4% Notes; the adequacy of the Company’s reserves, including its reserves for environmental and tax matters; the availability of indemnification from third parties in connection with various legal proceedings; the Company’s ability to resolve alleged legal violations without the assessment of additional fines or penalties; the risk that the Company may not be able to close the Yorktown Refinery acquisition; the risk that the Yorktown Refinery may not be successfully integrated into and may not be profitable to the Company; the risks associated with liabilities that will be assumed in the Yorktown Refinery acquisition; the expansion of the Company’s refining, retail and Phoenix Fuel operations through acquisition and construction; the adequacy and cost of raw material supplies; the potential effects of various pipeline projects, and various actions that have been undertaken to increase the supply of refined products to El Paso, Texas, as they relate to the Company’s market area and future profitability; the impact of the mandated use of gasolines satisfying governmentally mandated specifications on the Company’s operations; the ability of the Company to reduce operating expenses and non-essential capital expenditures; the risk that the Company will not be able to sell non-strategic and underperforming assets on terms favorable to the Company; the risk that the CCEO will not be able to pay amounts that become due and payable to the Company under the terms of the Company’s

outstanding $5,000,000 loan to the CCEO; the risk that the LLC will not be able to service the first lien holder debt when due; the risk that adverse circumstances may occur that prevent the Company from recovering amounts that may become due and payable under the $5,000,000 loan; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on behalf of the Company, are expressly qualified in their entirety by the foregoing. Forward-looking statements made by the Company represent its judgment on the dates such statements are made. The Company assumes no obligation to update any forward-looking statements to reflect new or changed events or circumstances.

The information required by this item is incorporated herein by reference to the “Risk Management” section in the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7.

We have audited the accompanying consolidated balance sheets of Giant Industries, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of earnings, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Giant Industries, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

The accompanying notes are an integral part of these consolidated financial statements.

Significant Noncash Investing and Financing Activities. During 2001, the Company received 103,430 shares of its own common stock valued at approximately $1,107,000 from James E. Acridge, the Company’s former Chairman of the Board and Chief Executive Officer (the “CCEO”), as payment for the exercise by the CCEO of 126,601 common stock options. These shares were immediately cancelled. In addition, the Company repurchased, for cash, 59 service station/ convenience stores from FFCA Capital Holding Corporation (“FFCA”) for approximately $38,052,000 plus closing costs. These service station/ convenience stores had been sold to FFCA in a sale-leaseback transaction completed in December 1998. Certain deferrals on the Balance Sheet relating to the sale-leaseback transaction reduced the cost basis of the assets recorded in “Property, Plant and Equipment” by approximately $1,736,000. These deferrals included a deferred gain on the original sale to FFCA and deferred lease allocations included in “Other Liabilities and Deferred Income,” and deferred costs associated with the original sale included in “Other Assets.” During 2000, approximately $5,200,000 was incurred as a contingent payment related to the 1995 acquisition of the Bloomfield Refinery. This amount was adjusted downward in 2001 to $5,139,000, the amount that was actually paid. During 1999, the Company received 87,036 shares of its own common stock valued at approximately $975,000 from two officers of the Company as payment for the exercise of 108,857 common stock options. These shares were immediately cancelled. In addition, approximately $10,692,000 was incurred as a contingent payment related to the 1995 acquisition of the Bloomfield Refinery, of which $5,250,000 was paid in 1999 and $5,442,000 in 2000.

The accompanying notes are an integral part of these consolidated financial statements.

Giant Industries, Inc., a Delaware corporation, together with its subsidiaries, (“Giant” or the “Company”), through its wholly-owned subsidiary Giant Industries Arizona, Inc. and its subsidiaries (“Giant Arizona”), is engaged in the refining and marketing of petroleum products in New Mexico, Arizona, and Colorado, with a concentration in the Four Corners area where these states adjoin. In addition, Phoenix Fuel Co., Inc. (“Phoenix Fuel”), a wholly-owned subsidiary of Giant Arizona, operates an industrial/commercial petroleum fuels and lubricants distribution operation.

The Company operates primarily as an independent refiner and marketer of petroleum products. The Company’s principal business is the refining of crude oil into petroleum products which are sold through branded retail outlets as well as through distributors, industrial/commercial accounts and major oil companies. The Company has two operating refineries in New Mexico. The Ciniza Refinery, with a crude oil throughput capacity of 20,800 barrels per day (“bpd”) and a total capacity including natural gas liquids of 26,000 bpd, is located near Gallup, New Mexico. The Bloomfield Refinery, with a crude oil throughput capacity of 16,000 bpd and a total capacity including natural gas liquids of 16,600 bpd, is located in Bloomfield, New Mexico.

At December 31, 2001, the Company had 150 retail service station/convenience stores and a travel center. These operations sell various grades of gasoline, diesel fuel, general merchandise and food products to the general public.

In addition, through Phoenix Fuel, the largest independent petroleum products distributor in the state of Arizona, the Company distributes gasoline, diesel fuel and various lubricants to industrial and commercial accounts.

(See Note 2 for a further discussion of business segments, Note 3 for recent acquisitions and dispositions, and Note 18 for the pending acquisition of the Yorktown Refinery.)

The consolidated financial statements include the accounts of Giant and all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

The preparation of the Company’s consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenues are recognized from sales when product ownership is transferred to the customer. Excise and other similar taxes are excluded from net revenues.

All highly liquid instruments with an original maturity of three months or less are considered to be cash equivalents.

The Company has in the past entered into futures or option contracts to hedge its exposure to price fluctuations on crude oil and refined products. For purposes of the Statement of Cash Flows, hedging transactions are considered to be operating activities.

The Company from time to time speculates in the purchasing and selling of crude oil and finished products and may enter into futures, options and wet barrel contracts to speculate on price fluctuations in these commodities. These activities are transacted in accordance with policies established by the Company, which set limits on quantities, requires various levels of approval and requires certain review and reporting procedures. Gains and losses on all speculative transactions are reflected in earnings in the period that they occur.

The Company had no open commodity futures or options contracts at December 31, 2001.

On January 1, 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment to SFAS No. 133.” SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that entities record all derivatives as either assets or liabilities, measured at fair value, with any change in fair value recognized in earnings or in other comprehensive income, depending on the use of the derivative and whether it qualifies for hedge accounting. There was no effect on the Company’s financial position, results of operations or cash flows as a result of adopting SFAS No. 133.

Inventories are stated at the lower of cost or market. Costs for crude oil and refined products produced by the refineries, and the lubricants and other merchandise of Phoenix Fuel, are determined by the last-in, first-out (“LIFO”) method. Costs for retail, exchange and terminal refined products and shop supplies are determined by the first-in, first-out (“FIFO”) method. Costs for merchandise inventories at retail locations are determined by the retail inventory method.

Property, plant and equipment are stated at cost and are depreciated on the straight-line method over their respective estimated useful lives.

The estimated useful lives for the various categories of property, plant and equipment are:

Routine maintenance, repairs and replacement costs are charged against earnings as incurred. Turnaround costs, which consist of complete shutdown and inspection of significant units of the refineries at intervals of two or more years for necessary repairs and replacements, are deferred and amortized over the period until the next expected shutdown, which generally ranges from 24 to 48 months depending on the type of shutdown and the unit involved. Expenditures which materially increase values, expand capacities or extend useful lives are capitalized. Interest expense is capitalized as part of the cost of constructing major facilities and equipment.

The American Institute of Certified Public Accountants has issued a “Statement of Position” exposure draft on cost capitalization that is expected to require companies to expense the non-capital portion of major maintenance costs as incurred. The statement is expected to require that any existing unamortized deferred non-capital major maintenance costs be expensed immediately. The exposure draft indicates that this change will be required to be adopted for fiscal years beginning after June 15, 2002, and that the effect of expensing existing unamortized deferred non-capital major maintenance costs will be reported as a cumulative effect of an accounting change in the consolidated statement of operations. At December 31, 2001, the Company had $12,769,000 of turnaround costs, classified as machinery and equipment, included in property, plant and equipment. Company management has not determined the amount, if any, of these costs that could be capitalized under the provisions of the exposure draft.

Goodwill, which results from business acquisitions, represents the excess of the purchase price over the fair value of the net assets acquired and is carried at cost less accumulated amortization. Goodwill is amortized on the straight-line method over the period of expected benefit ranging from 15 to 30 years.

Effective in 2002, the Company is required to adopt SFAS No. 142, “Goodwill and Other Intangible Assets.” This Statement requires, among other things, that goodwill not be amortized, but be tested for impairment. The provisions of the Statement apply to fiscal years beginning after December 15, 2001. Impairment losses for goodwill and indefinite-lived intangible assets that arise due to the initial application of this Statement (resulting from a transitional impairment test) must be reported as resulting from a change in accounting principle. At December 31, 2001, the Company had goodwill of $19,815,000, of which $14,722,000 related to the acquisition of Phoenix Fuel and $4,891,000 related to various retail acquisitions. The Company has not determined, but is in the process of evaluating, the impact that this new standard will have on its financial position and results of operations.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, issued by the Financial Accounting Standards Board (“FASB”), the Company reviews the carrying values of its long-lived assets and identifiable intangibles for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets to be held and used may not be recoverable. For assets to be disposed of, the

Company reports long-lived assets and certain identifiable intangibles at the lower of carrying amount or fair value less cost to sell. (See Note 4)

Effective in 2002, the Company is required to adopt SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement defines an impairment as “the condition that exists when the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value.” It develops a single accounting model for the disposal of long-lived assets, whether previously held or newly acquired. This Statement applies to recognized long-lived assets of an entity to be held and used or to be disposed of, and applies to the entire group when a long-lived asset is a part of the group. A group is defined as the lowest level of operations with identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. The Statement identifies the circumstances that apply when testing for recoverability, as well as other potential adjustments or revisions relating to recoverability. Specific guidance is provided for recognition and measurement and reporting and disclosure for long-lived assets held and used, disposed of other than by sale, and disposed of by sale. The Company has not determined, but is in the process of evaluating, the impact that this new standard will have on its financial position and results of operations.

The Company’s Board of Directors has authorized the repurchase of up to 2,900,000 shares of the Company’s common stock. These purchases may be made from time to time as conditions permit. Shares may be repurchased through privately-negotiated transactions, block share purchases and open market transactions. Through the end of 2001, the Company had repurchased 2,582,566 shares under this program at a cost of approximately $25,716,000. These shares are being treated as treasury shares. In addition, the Company purchased 1,169,414 shares of its common stock, as treasury shares, for $9.00 per share, net to the sellers, through a Schedule 13E-4 Issuer Tender Offer completed on February 8, 2000.

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Environmental liabilities are not discounted to their present value and are recorded without consideration of potential recoveries from third parties. Subsequent adjustments to estimates, which may be significant, may be made as more information becomes available or as circumstances change (See Note 16).

The provision for income taxes is based on earnings (loss) reported in the financial statements. Deferred income taxes are provided to reflect temporary differences between the basis of assets and liabilities for financial reporting purposes and income tax purposes, as well as the effects of tax credits.

Earnings per share are calculated in accordance with SFAS No. 128, “Earnings Per Share.” Basic earnings per common share are computed by dividing consolidated net earnings by the weighted average number of shares of common stock outstanding during each period. Earnings per common share assuming dilution is computed by dividing consolidated net earnings by the sum of the weighted average number of shares of common stock outstanding plus additional shares representing the exercise of outstanding common stock options using the treasury stock method, unless such calculation is antidilutive. (See Note 5.)

In June 2001, the Company adopted SFAS No. 141, “Business Combinations.” This Statement requires, among other things, that the purchase method of accounting be used to account for all business combinations. The provisions of the Statement apply to all business combinations initiated after June 30, 2001, and to all business combinations accounted for using the purchase method for which the date of acquisition is July 1, 2001, or later. The Company has always used the purchase method of accounting for acquisitions and business combinations and does not anticipate that the application of SFAS No. 141 will have a material affect on the way the Company records acquisitions or business combinations. However, the Company does anticipate that more intangible assets will be recorded as a result of SFAS No. 141.

In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. As used in this Statement, a legal obligation is an obligation that a party is required to settle as a result of an existing or enacted law, statute, ordinance, or written or oral contract or by legal construction of a contract under the doctrine of promissory estoppel.

SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. Disclosure requirements include descriptions of asset retirement obligations and reconciliations of changes in the components of those obligations. This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company has not determined, but is evaluating the effect SFAS No. 143 will have relative to its refining and marketing assets.

For the years ended December 31, 2001, December 31, 2000, and December 31, 1999, respectively, the only component of other comprehensive income is net income as reported on the Company’s Consolidated Statements of Earnings.

Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the statement classifications used in the current year. These reclassifications had no effect on reported earnings or stockholders’ equity.

The Company is organized into three operating segments based on manufacturing and marketing criteria. These segments are the Refining Group, the Retail Group and Phoenix Fuel. A description of each segment and principal products and operations are as follows:

— Refining Group: The Refining Group consists of the Company’s two refineries, its fleet of crude oil and finished product truck transports, its crude oil pipeline gathering operations, and its finished product terminaling operations. The Company’s two refineries manufacture various grades of gasoline, diesel fuel, and other products from crude oil, other feedstocks and blending components. In addition, finished products are acquired through exchange agreements, from third party suppliers, and from Phoenix Fuel. These products are sold through Company-operated retail facilities, independent wholesalers and retailers, industrial/commercial accounts, and sales and exchanges with major oil companies. Crude oil, other feedstocks, and blending components are purchased from third party suppliers.

— Retail Group: The Retail Group consists of service station/convenience stores and one travel center. These operations sell various grades of gasoline, diesel fuel, general merchandise and food products to the general public through retail locations. The Refining Group or Phoenix Fuel supplies the petroleum fuels sold by the Retail Group. General merchandise and food products are obtained from third party suppliers.

— Phoenix Fuel: Phoenix Fuel is an industrial/commercial petroleum fuels and lubricants distribution operation, which includes a number of bulk distribution plants, an unattended fleet fueling (“cardlock”) operation and a fleet of finished product truck transports. The petroleum fuels and lubricants sold are primarily obtained from third party suppliers and to a lesser extent from the Refining Group.

Operations that are not included in any of the three segments are included in the category “Other.” These operations consist primarily of corporate staff operations, including selling, general, and administrative expenses.

Operating income for each segment consists of net revenues less cost of products sold, operating expenses, depreciation and amortization and the segment’s selling, general, and administrative expenses. The sales between segments are made at market prices. Cost of products sold reflects current costs adjusted, where appropriate, for LIFO and lower of cost or market inventory adjustments.

The total assets of each segment consist primarily of net property, plant and equipment, inventories, accounts receivable and other assets directly associated with the segment’s operations. Included in the total assets of the corporate staff operations are a majority of the Company’s cash and cash equivalents, various accounts receivable, net property, plant and equipment and other long-term assets.

Disclosures regarding the Company’s reportable segments with reconciliations to consolidated totals are presented below.

In December 1998, the Company and FFCA Capital Holding Corporation (“FFCA”) completed a sale-leaseback transaction. Under the terms of the Sale and Lease Agreement (the “Agreement”), FFCA purchased 83 service station/convenience stores from the Company for approximately $51,763,000. The Company in turn leased the 83 service station/convenience stores back from FFCA under an operating lease arrangement with an initial term of 15 years and three separate options to continue the lease for successive periods of five years. In the second half of 1999, the Company reacquired 24 of the service station/convenience stores for approximately $13,711,000, which was the original selling price of these properties. In the second quarter of 2001, FFCA approached the Company to determine whether the Company had any interest in acquiring the remaining 59 service station/convenience stores. Subsequently, in July 2001, the Company repurchased, for cash, the 59 service station/convenience stores for approximately $38,052,000, which was the original selling price of these properties, plus closing costs. Certain deferrals on the Balance Sheet relating to the sale-leaseback transaction reduced the cost basis of the assets recorded in “Property, Plant and Equipment” by approximately $1,736,000. These deferrals included a deferred gain on the original sale to FFCA and deferred lease allocations included in “Other Liabilities and Deferred Income,” and deferred costs associated with the original sale included in “Other Assets.” Lease expense related to these assets totaled $2,610,000 for 2001, $4,556,000 for 2000, and $4,556,000 for 1999. Depreciation expense related to these same assets totaled $2,937,000 in 2001, $1,499,000 in 2000, and $627,000 in 1999. For 2002, depreciation expense is estimated to be approximately $4,137,000 based on depreciation expense recorded in January 2002. This amount could change depending on the sale of any of these assets. The original total base rent payments under the FFCA sale-leaseback transaction, included scheduled increases of six percent on the second anniversary of the Agreement and every second anniversary thereafter, on a compounded basis during the initial lease term and any extension thereof. At December 31, 2000, the Company had recorded a deferred credit of approximately $1,628,000 to reflect the excess of rent expense over cash payments made. This deferred credit is included in “Other Liabilities and Deferred Income” in the Company’s Consolidated Balance Sheet at December 31, 2000. The Company had recorded a gain of approximately $5,650,000 on the original transaction, which was deferred and was being amortized over the initial lease period of 15 years. This deferred gain was reduced to $990,000 at December 31, 2000, as the result of the 1999 repurchase and annual amortization. The deferred gain is reflected in “Other Liabilities and Deferred Income” in the Company’s Consolidated Balance Sheet at December 31, 2000. The amounts recorded for deferred credits and deferred gain were used to reduce the cost basis of the 59 units repurchased in 2001, as described above.

In October 1995, the Company completed the purchase of the Bloomfield Refinery along with related pipeline and transportation assets for $55,000,000 from Gary-Williams Energy Co. and its wholly-owned subsidiary, Bloomfield Refining Company (“BRC”). The purchase agreement provided for potential contingent payments to be made to BRC over approximately six years from the acquisition date of approximately $35,000,000, not to exceed a net present value of $25,000,000 as of October 1995, should certain criteria be met. These contingent payments were considered to be additional purchase price and were allocated to the assets acquired in the same proportions as the original purchase price was allocated, not to exceed the estimated current replacement cost, and amortized over the estimated remaining life of the assets. For 2000, the Company accrued $5,200,000 in accordance with the purchase agreement relating to 2000 operations. This amount was adjusted downward in 2001 to $5,139,000, which amount was paid. This payment represented the final amount due under the purchase agreement. For 1999, the Company paid approximately $5,250,000 and had accrued an additional $5,442,000 at December 31, 1999, relating to 1999 operations. In addition, the Company accrued $2,250,000 in 1996 relating to certain environmental obligations assumed in the purchase, which amount was also considered to be additional purchase price.

Refer to Note 18 for a discussion of the pending acquisition of the Yorktown Refinery.

For the year ended December 31, 2001, the Company recorded a pre-tax loss on the disposal/write-down of assets of $6,212,000. This amount included losses of $609,000 on the sale of assets in the ordinary course of business, primarily related to the sale of 11 service station/convenience stores; losses of $2,719,000 on the write-down of assets due to impairment, resulting from the application of Statement of Financial Accounting Standard (“SFAS”) No. 121 due to a strategy to sell certain service station/convenience stores, some of which were closed; losses of $592,000 relating to the value of leasehold improvements included in leased service station/convenience stores returned to the lessors; and losses of $2,292,000 primarily related to the retirement or replacement of certain refinery property, plant, and equipment.

In 2001, the Company also recorded a reserve totaling $5,409,000 related to a note and accrued interest receivable from a related party. For a further discussion of this matter refer to Note 6.

The following is a reconciliation of the numerators and denominators of the basic and diluted per share computations for earnings as required by SFAS No. 128:

In October 2001, the Company’s Board of Directors (the “Board”) directed the Company to purchase 400,000 shares of its common stock under its stock repurchase program from the CCEO for $3,520,000 or $8.80 per share. This was the closing price of the Company’s common stock on the New York Stock Exchange on the date that the conditions to purchase set by the Board were satisfied, including the receipt of necessary bank waivers and consents.

At December 31, 2001 and 2000, there were 8,553,879 and 8,948,008 shares, respectively, of the Company’s common stock outstanding.

There were no transactions subsequent to December 31, 2001, that if the transactions had occurred before December 31, 2001, would materially change the number of common shares or potential common shares outstanding as of December 31, 2001.

The Company loaned $4,000,000 to James E. Acridge, its former Chairman and Chief Executive Officer (the “CCEO”) on September 17, 1998 (the “Loan”). The Loan was originally evidenced by an unsecured promissory note bearing interest at the prime rate published by the Wall Street Journal on September 17, 1998 (the “Prime Rate”) plus 2%. Principal and accrued interest were due and payable in one lump sum on February 28, 1999. On December 23, 1998, the Company and the CCEO entered into a revised loan agreement. The amount of the Loan was increased to $5,000,000, the Loan’s interest rate was increased to the Prime Rate plus 3%, and the Loan’s maturity date was extended to February 28, 2001. An initial interest payment was made on February 28, 1999 for interest due through December 31, 1998. Subsequent interest was due and payable semi-annually on June 30 and December 31 of each year.

The Loan was modified again on March 10, 2000. The terms of the Loan were revised so that all principal and interest, including interest that otherwise would have been payable on December 31, 1999, became due and payable on February 28, 2001. As security for the modified loan, the Company received a pledge by an entity owned by the CCEO (the “LLC”) of a 49% equity interest in an entity that owns certain real property in north Scottsdale, Arizona (the “Real Property”). The loan was further modified on February 28, 2001 to extend the Loan’s maturity date to March 28, 2001. This modification reflected the fact that the Company’s purchase of a parcel of land from a trust of which the CCEO was the beneficiary had not closed. A portion of the proceeds of this sale was used to pay the interest that became due and payable under the Loan on February 28, 2001. On March 21, 2001, the Company’s Board of Directors (the “Board”) approved an additional two-year extension of the Loan’s maturity date, making all principal and interest due and payable on March 28, 2003. This extension was conditioned upon, among other things, the CCEO’s payment of all interest due and payable on March 28, 2001, which was paid. In return for the extension of the Loan, the CCEO provided additional security for the Loan by pledging all of his equity interest in the LLC.

The Company is aware of prior liens on the Real Property and on certain of the collateral pledged to the Company (the “Prior Liens”) that relate to loans entered into by the LLC (the “LLC Loans”). The Company also understands that the CCEO has personally guaranteed the LLC Loans. On July 18, 2001, the Board was advised that the LLC was not able to make the monthly payment due and owing to its lenders (the “Lenders”) in the month of July. The Board was asked to make such payment, in the amount of $240,833, on behalf of the CCEO for the benefit of the LLC. The Board authorized the Company to make the July payment in order to avoid a default under the LLC Loans. The Company also has been advised that the LLC did not make, when due, the monthly payment due and owing to the Lenders in December 2001 (the “December Payment”). The Company understands that a letter agreement was entered into with the Lenders, in which the Lenders agreed to forbear from exercising certain rights and remedies available to them in connection with the December payment if certain terms and conditions were satisfied (the “Forbearance Letter”). The Company further understands that, in connection with the Forbearance Letter, the CCEO pledged 29,622 shares of the Company’s common stock owned by him to the Lenders as additional collateral.

The LLC’s failure to make the December Payment when due constitutes a default under the terms of the Loan. The Company has been advised that the CCEO also is in default under a provision of the Loan that addresses the CCEO’s failure to discharge when due all sums owed under any loan secured by a stock pledge.

In view of recent events, including the CCEO’s defaults under the terms of the Loan and the failure of a limited liability company controlled by the CCEO to pay rent in connection with space subleased to the limited liability company by the Company, the Company has evaluated the collectability of the Loan. The limited liability company’s sublease and certain associated litigation is further discussed in Note 16. The

Company has reviewed financial information requested from the CCEO, including a personal financial statement and 2000 tax returns for the CCEO and certain of his material affiliated entities. It has also obtained an appraisal of the Real Property and conducted a search of public records for third party claims evidenced by filed litigation and liens.

The Company believes that the Yorktown Refinery acquisition will constrain the Company’s ability to obtain waivers or other approvals in connection with restrictive covenants contained in the Company’s $65,000,000 secured Credit Agreement that may be applicable to certain courses of action potentially available to the Company in connection with the collateral for the Loan. Restrictive covenants in the Indenture supporting the Company’s senior subordinated notes due 2003 and in the Indenture supporting the Company’s senior subordinated notes due 2007 also could constrain the Company’s ability to take certain actions. It is possible that the Company will not be able to recover all or any of the amounts due and owing from the CCEO as a result of such restrictive covenants. Accordingly, in view of the Company’s evaluation of the Loan’s collectability, under generally accepted accounting principles, it is appropriate to record a financial reserve in the full amount of the Loan, including interest accrued through December 31, 2001, and such a reserve totaling $5,409,000 has been recorded as of December 31, 2001. The Company is aware that the CCEO is pursuing a number of potential transactions that may provide him with funds to satisfy his obligations under the Loan. In the event that certain of these transactions occur, the Company will reevaluate its reserve.

On January 25, 2001, the Board accepted an offer from the CCEO, on behalf of a trust of which the CCEO is the beneficiary, to sell a parcel of land (the “Jomax Property”) to the Company for the lesser of $5,000,000 or the Jomax Property’s appraised value. In March 2001, the Jomax Property was sold to the Company for $5,000,000. The trust had an option, exercisable for a period of two years, to repurchase the property at the greater of the amount paid by the Company to purchase the property or the property’s appraised value. The trust also had a right of first refusal, exercisable for a period of two years, to repurchase the property on the same terms as contained in a bona fide offer from a bona fide purchaser. On September 20, 2001, the Board directed the Company to purchase the trust’s option and right of first refusal (collectively, the “Rights”) for $600,000, and the Rights were subsequently sold to the Company for this price. At the time of the sale, the Company was negotiating with a potential purchaser for the sale of the Jomax Property for a price in excess of the Company’s purchase price. The potential purchaser was requiring the Company to represent in the purchase and sale agreement that there were no effective options to purchase, or rights of first refusal, affecting the property. The Company’s purchase of the Rights would have enabled the Company to make this representation and would have avoided any other complications associated with the Rights that potentially could have affected the sale. The potential purchaser subsequently advised the Company that it was discontinuing negotiations regarding the possible sale because general market and economic conditions, coupled with the financial uncertainties arising out of the events that occurred on September 11, 2001, had severely depressed the real estate market. Although the potential purchaser re-approached the Company during the first quarter of 2002 about purchasing the property, the Company is exploring other alternatives.

In the third quarter of 2001, the Board directed the transfer to the CCEO of a life insurance policy on his life with a cash surrender value of $251,078. This policy and life insurance policies for another executive had been issued prior to the Company’s going public in 1989. In connection with its determination that the policy should be transferred to the CCEO, the Board considered historical information and other relevant matters relating to the policy, including the fact that several life insurance policies on the other executive’s life had previously been transferred to that executive. The cash value of the life insurance policy was considered compensation to the CCEO for tax purposes in 2001. The $251,078 cash surrender value recorded on the Company’s books was expensed by the Company in the third quarter and is included in selling, general and administrative expenses (“SG&A”).

In the third quarter of 2001, the CCEO submitted statements to the Company for reimbursement of certain expenditures made by the CCEO on behalf of the Company in the current year and prior years for which the CCEO had not previously been reimbursed. In August 2001, the Company reimbursed the CCEO $204,293 in connection with such statements. This amount was considered compensation to the CCEO for tax purposes in 2001. The $204,293 was expensed by the Company in the third quarter and is included in SG&A.

As described above, the payment of $240,833 made on behalf of the CCEO was expensed by the Company in the third quarter of 2001. This amount was considered compensation to the CCEO for tax purposes in 2001 and is included in SG&A.

During 2001, the Board directed the Company to repurchase 400,000 shares of its common stock from the CCEO for $3,520,000 or $8.80 per share. This was the closing price of the Company’s common stock on the New York Stock Exchange on the date that the conditions to purchase set by the Board were satisfied, including the receipt of necessary bank waivers and consents. The Board directed the Company to purchase these shares under the stock repurchase program. The repurchased shares are treated as treasury shares. In addition, the Board authorized the purchase of artwork from the CCEO for display in the corporate headquarters. The artwork was purchased at its appraised value of $162,550. A substantial portion of the artwork had been displayed in the Company’s corporate office for up to ten years without any financial consideration being provided to the CCEO for its use. The proceeds of the artwork transaction were used by the CCEO to pay balances due on certain amounts owed to Giant Arizona by the CCEO and by entities controlled by the CCEO.

During 2000, the Company repurchased 129,466 shares of its common stock under its stock repurchase program from the CCEO for $896,887 or $7.00 per share for 99,466 shares and $6.6875 per share for 30,000 shares. The per share price paid for the shares was the low price reported for the Company’s common stock on the New York Stock Exchange on the dates the purchases were made. All of the repurchased shares are treated as treasury shares. In addition, the Company’s Board of Directors authorized the purchase of artwork from the CCEO for display at the Company’s headquarters building. The artwork was purchased at its appraised value of approximately $450,000. A substantial portion of the artwork had been displayed in the Company’s corporate office for up to ten years without any financial consideration being provided to the CCEO for its use.

During 1999, the Company repurchased 440,000 shares of its common stock under its stock repurchase program from the CCEO for $4,950,000 or $11.25 per share. The per share price paid for the shares was at a discount to the then current fair market value. The repurchased shares are treated as treasury shares.

All of the material foregoing transactions were reviewed and approved by the Board or committees of the Board.

The portion of inventories valued on a LIFO basis totaled $30,872,000 and $28,319,000 at December 31, 2001 and 2000, respectively. The data in the following paragraph will facilitate comparison with the operating results of companies using the FIFO method of inventory valuation.

If inventories had been determined using the FIFO method at December 31, 2001, 2000 and 1999, net earnings and diluted earnings per share for the years ended December 31, 2001, 2000 and 1999 would have been (lower) higher by $(6,981,000) and $(0.79), $2,935,000 and $0.32, and $4,408,000 and $0.41, respectively.

In 2001, cost of products sold were increased by approximately $3,302,000 as a result of a reduction in the carrying value of inventories related to a decline in crude oil and refined product prices.

For the year 2001, certain lower cost refinery LIFO inventory layers were liquidated resulting in an increase in 2001 earnings of approximately $139,000 or $0.02 per share.

For the year 2000, certain lower cost Phoenix Fuel LIFO inventory layers were liquidated resulting in an increase in 2000 earnings of approximately $1,042,000 or $0.11 per share.

For the year 1999, certain higher cost refinery LIFO inventory layers were liquidated resulting in a reduction of 1999 earnings of approximately $1,531,000 or $0.14 per share.

Separate financial statements of the Company’s subsidiaries are not included herein because the aggregate assets, liabilities, earnings and equity of the subsidiaries are substantially equivalent to the assets, liabilities, earnings and equity of the Company on a consolidated basis; the subsidiaries are jointly and severally liable for repayment of the Notes; and the separate financial statements and other disclosures concerning the subsidiaries are not deemed material to investors.

The Indentures supporting the Notes contain restrictive covenants that, among other things, restrict the ability of the Company and its subsidiaries to create liens, to incur or guarantee debt, to pay dividends, to repurchase shares of the Company’s common stock, to sell certain assets or subsidiary stock, to engage in certain mergers, to engage in certain transactions with affiliates or to alter the Company’s current line of business. In addition, subject to certain conditions, the Company is obligated to offer to purchase a portion of the Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, with the net cash proceeds of certain sales or other dispositions of assets. Upon a change of control, the Company would be required to offer to purchase all of the Notes at 101% of the principal amount thereof, plus accrued interest, if any, to the date of purchase. At December 31, 2001, retained earnings available for dividends under the most restrictive terms of the Indentures were approximately $7,128,000.

On December 23, 1998, the Company entered into a $65,000,000 secured Credit Agreement (the “Credit Agreement”) that was to expire December 23, 2001, with a group of banks including Bank of America, N.A. as lead bank and administrative agent. On December 19, 2001, this Credit Agreement was extended until November 14, 2003, under substantially the same terms and conditions. This Credit Agreement, a revolving loan agreement, is primarily a working capital and letter of credit facility and is secured by eligible accounts receivable and inventories as defined in the Credit Agreement. The Credit Agreement also allows the Company to borrow up to $10,000,000 for other acquisitions as defined in the Credit Agreement. The availability of funds under this facility is the lesser of (i) $65,000,000, or (ii) the amount determined under a borrowing base calculation tied to the eligible accounts receivable and inventories. At December 31, 2001, the

availability of funds under the Credit Agreement was $57,215,000. The borrowing base is less than $65,000,000 primarily due to lower selling prices and sales volumes that affected eligible accounts receivable, and reduced inventory valuations that affected eligible inventories. There were no direct borrowings outstanding under this facility at December 31, 2001, and there were approximately $4,258,000 of irrevocable letters of credit outstanding, primarily to insurance companies and regulatory agencies.

The Credit Agreement contains certain restrictive covenants, which require the Company to, among other things, maintain a minimum consolidated net worth, a minimum interest coverage ratio, and a maximum capitalization ratio. It also places limits on investments, dispositions of assets, prepayments of senior subordinated debt, guarantees, liens and restricted payments. The Credit Agreement is guaranteed by certain of the Company’s direct and indirect wholly-owned subsidiaries.

In connection with the acquisition of the Yorktown Refinery, the Company expects to replace the Credit Agreement with a new and larger credit facility.

In 1997, as part of the acquisition of certain service station/convenience stores, the Company leased 64 service station/convenience stores for a period of 10 years with options to purchase the assets during the ten-year period for approximately $22,904,000. These leases were accounted for as capital leases. At December 31, 2001, six stores remained to be purchased and continue to be leased under the original terms. One of these stores is a grocery store and does not sell gasoline. The Company intends to purchase the six stores pursuant to options to purchase during the remaining lease period for approximately $6,700,000, of which $2,000,000 has been paid in advance and is recorded in “Other Assets” in the Company’s Consolidated Balance Sheet. The remaining lease obligations of approximately $6,700,000 are being accounted for as capital leases and require annual lease payments of approximately $753,000, all of which are recorded as interest expense. Assets associated with these lease obligations of approximately $7,601,000 are included in property, plant and equipment. Accumulated depreciation as of December 31, 2001 of approximately $3,079,000 is related to these assets. Assets of $580,000, primarily liquor licenses, are included in other assets.

Aggregate annual maturities of long-term debt as of December 31, 2001 are: 2002 — $45,000; 2003 — $100,029,000; 2004 — $17,000; 2005 — $0; 2006 — $0; and all years thereafter — $156,703,000.

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” as amended by SFAS No. 133. The Company, using available market information and valuation methodologies described below, determined the estimated fair value amounts. Considerable judgment is required, however, in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein may not be indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows:

The fair value of fixed rate long-term debt was determined using quoted market prices, where applicable, or estimated by discounting future cash flows using rates estimated to be currently available for debt of similar terms and remaining maturities.

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued expenses approximate fair values due to the short-term maturities of these instruments. Variable rate long-term debt instruments are estimated to approximate fair values as rates are tied to short-term indices.

The Company also has a $5,000,000 long-term note receivable with a related party. This note was fully reserved for at December 31, 2001.

From time to time, the Company enters into futures and options contracts to reduce price volatility, to fix margins in its refining and marketing operations and to protect against price declines for inventory volumes.

At December 31, 2001 and 2000, the Company had no hedging transactions in place.

Gains and losses from market changes on contracts not qualifying for hedge accounting are recognized immediately in operations. For 2001, 2000 and 1999 the Company incurred losses of $10,000, $471,000 and $306,000, respectively, related to these activities.

Income taxes paid in 2001, 2000 and 1999 were $4,675,000, $4,060,000, and $2,099,000, respectively.

A reconciliation of the difference between the provision for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows:

Deferred income taxes are provided to reflect temporary differences in the basis of net assets for income tax and financial reporting purposes, as well as available tax credit carryforwards. The tax effected temporary differences and credit carryforwards which comprise deferred taxes are as follows:

At December 31, 2001, the Company had an alternative minimum tax credit carryforward of approximately $8,282,000 available to offset future income taxes payable to the extent regular income taxes payable

exceeds alternative minimum taxes payable. Alternative minimum tax credits can be carried forward indefinitely.

In 2001, the Company utilized $3,777,000 of general business credits. There are no remaining general business credits to offset regular taxes payable at December 31, 2001.

The Company has a 401(k) retirement plan (“401(k)”) for its employees who meet plan eligibility requirements. Until it was merged into the 401(k) effective December 31, 2000, the Company also had an Employee Stock Ownership Plan (“ESOP”), which was a noncontributory defined contribution plan established primarily to acquire shares of the Company’s common stock. The ESOP’s assets were transferred into the 401(k) on April 24, 2001. The merger was done to reduce costs and simplify reporting and accounting obligations. On December 31, 2000, the ESOP’s assets included 1,187,897 shares of the Company’s common stock. All of these shares were allocated to the participants’ accounts effective as of December 31, 2000. In addition to investments in the Company’s common stock, the ESOP held investments in a balanced mutual fund. Contributions to the ESOP were made at the discretion of the Company’s Board of Directors. The Company made contributions of $825,000 and $3,000,000 to the ESOP for 2000 and 1999, respectively.

The Company matches the employee’s contributions to the 401(k) at a rate of 50% up to a maximum of 6% of the employee’s annual compensation, subject to a per participant maximum contribution amount. For the years ended December 31, 2001, 2000, and 1999, the Company expensed $1,454,000, $1,415,000, and $1,388,000, respectively, for matching contributions under this plan. The Company’s matching contribution can be invested in available options at the discretion of the participant. Additional contributions to the 401(k) are made at the discretion of the Company’s Board of Directors. For the year ending December 31, 2001, the Company made a discretionary contribution of $900,000 to the 401(k). This amount is similar to the discretionary contributions made in past years to the ESOP. This amount will be used to purchase the Company’s common stock, which will be allocated to employees’ accounts according to the same formula used for discretionary contributions to the ESOP. At December 31, 2001, the assets of the 401(k) included 995,568 shares of the Company’s common stock.

Under the 1998 Stock Incentive Plan (the “1998 Plan”), shares of the Company’s common stock are authorized to be issued to deserving employees in connection with awards of options, appreciation rights, restricted shares, performance shares or performance units, all as defined in the 1998 Plan. Appreciation rights, performance shares and performance units may be settled in cash, common shares of the Company or any combination thereof.

The total number of shares available for grant under the 1998 Plan is 2% of the total number of common shares outstanding as of the first day of each calendar year, which amount was 178,960 shares for 2001, and was 206,070 shares for 2000, subject to a 400,000 share annual limitation on the number of common shares available for the grant of options that are intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code. Common shares available for grant in any particular calendar year that are not, in fact, granted in such year cannot be added to the common shares available for grant in any subsequent calendar year. For 2002, the number of shares available for grant is 171,077.

On May 17, 2001, 177,500 nonqualified stock options were granted to 13 employees under the 1998 Plan. The exercise price for all of the options was $9.95, which was the closing price for the Company’s Common Stock on the New York Stock Exchange on the date of grant. One-third of each grant vested on the date of grant, one-third on May 17, 2002, and the remaining one-third on May 17, 2003. All of the options expire on May 16, 2011.

The 1998 Plan provides that all grants are subject to restrictions, conditions and terms more specifically described in the 1998 Plan, including, but not limited to, the exercise price for stock options and appreciation rights and time vesting requirements for all awards. In general, the 1998 Plan provides that grants of stock options and appreciation rights must expire no more than 10 years from the date of grant. In addition, all grants under the 1998 Plan are subject to forfeiture under certain circumstances, and all unvested awards may vest immediately under various circumstances defined in the 1998 Plan.

On December 31, 1999, 100,000 nonqualified stock options were granted under the 1998 Plan, 50,000 stock options at an exercise price of $12.00 per share and 50,000 stock options at $18.50 per share. The stock options were granted to two employees who had been granted an equal number of Phantom Stock units under the Giant Industries, Inc. 1998 Phantom Stock Plan (the “Phantom Stock Plan”), which was terminated by the Company in 1999. Each Phantom Stock unit was equivalent to one share of the Company’s common stock. The stock options were granted under the original terms of the Phantom Stock Plan grant as to exercise price, vesting and expiration date. The exercise prices exceeded the fair market value at the date of grant, 60,000 options became vested on the grant date, and the remaining options vest in varying amounts, and at various times, through December 31, 2001. All of the options expire on February 1, 2008. No other awards were outstanding under the Phantom Stock Plan at the time of its termination.

Under the Company’s 1989 Stock Incentive Plan (the “1989 Plan”), 500,000 shares of the Company’s common stock were authorized to be issued to deserving employees in the form of options and/or restricted stock. At December 31, 2001, no shares were available for future grants under the 1989 Plan because, by its terms, no new awards may be made after December 11, 1999.

All of the options or restricted stock granted under the 1989 Plan are fully vested. At December 31, 2001, 121,450 shares granted under the 1989 Plan remained to be exercised.

The following summarizes stock option transactions under the 1989 and 1998 Plans:

The following summarizes information about stock options outstanding under the 1989 and 1998 Plans at December 31, 2001:

In October 1995, the FASB issued SFAS No. 123 “Accounting for Stock Based Compensation.” The Company has determined that it will not change to the fair value method prescribed in the Statement and will continue to use Accounting Principles Board Opinion No. 25 for measurement and recognition of employee stock based compensation.

The Company has adopted the disclosure-only provisions of SFAS No. 123. If the Company had elected to recognize compensation costs based on the fair value at the date of grant for awards granted in 2001, 1999 and 1998, consistent with the provisions of SFAS No. 123, the Company’s net earnings and earnings per share for the years ended December 31, 2001, 2000 and 1999 would have decreased by approximately $634,000 and $0.07 per share, $289,000 and $0.03 per share, and $497,000 and $0.05 per share, respectively.

The pro forma effects of applying SFAS No. 123 in this disclosure are not necessarily indicative of future amounts.

The estimated weighted average fair values of options granted during 2001, 1999 and 1998 were $5.96, $9.14 and $5.40 per share, respectively, and were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:

Interest paid and capitalized for 2001 was $24,135,000 and $0, for 2000 was $24,458,000 and $62,000, and for 1999 was $24,176,000 and $183,000, respectively.

As discussed in Note 3, on December 31, 1998, the Company and FFCA completed a sale-leaseback transaction. Under the terms of the Agreement, FFCA purchased 83 service station/convenience stores from the Company and the Company in turn leased the 83 service station/convenience stores back from FFCA under an operating lease arrangement with an initial term of 15 years and three separate options to continue the lease for successive periods of five years. The Company reacquired 24 of the service station/convenience stores in the second half of 1999 and the remaining 59 in the third quarter of 2001.

The Company is committed to annual minimum rentals under noncancelable operating leases that have initial or remaining lease terms in excess of one year as of December 31, 2001 as follows:

Total rent expense was $8,459,000, $11,017,000, and $12,134,000 for 2001, 2000, and 1999, respectively.

Various legal actions, claims, assessments and other contingencies arising in the normal course of the Company’s business, including those matters described below, are pending against the Company and certain of its subsidiaries. Certain of these matters involve or may involve significant claims for compensatory, punitive or other damages. These matters are subject to many uncertainties, and it is possible that some of these matters could be ultimately decided, resolved or settled adversely. The Company has recorded accruals for losses related to those matters that it considers to be probable and that can be reasonably estimated. Although the ultimate amount of liability at December 31, 2001, that may result from those matters for which the Company has recorded accruals is not ascertainable, the Company believes that any amounts exceeding the Company’s recorded accruals should not materially affect the Company’s financial condition. It is possible, however, that the ultimate resolution of these matters could result in a material adverse effect on the Company’s results of operations for a particular reporting period.

Federal, state and local laws and regulations relating to health and the environment affect nearly all of the operations of the Company. As is the case with all companies engaged in similar industries, the Company faces significant exposure from actual or potential claims and lawsuits involving environmental matters. These matters include soil and water contamination, air pollution and personal injuries or property damage allegedly caused by substances manufactured, handled, used, released or disposed of by the Company. Future expenditures related to health and environmental matters cannot be reasonably quantified in many circumstances for various reasons, including the speculative nature of remediation and clean-up cost estimates and methods, imprecise and conflicting data regarding the hazardous nature of various types of substances, the number of other potentially responsible parties involved, various defenses which may be available to the Company and changing environmental laws and interpretations of environmental laws.

In June 2001, NMED issued four compliance orders (“Orders”) to the Company in connection with alleged violations of air regulations at the Company’s Ciniza and Bloomfield refineries. The Orders allege violations discovered during NMED inspections in 1999 and 2000. The civil penalties proposed in connection with the Orders originally totaled approximately $550,000. The Company settled the alleged violations for $135,000 during the first quarter of 2002.

In 1973, the Company constructed the Farmington Refinery that was operated until 1982. The Company became aware of soil and shallow groundwater contamination at this facility in 1985. The Company hired environmental consulting firms to investigate the contamination and undertake remedial action. The

consultants identified several areas of contamination in the soils and shallow groundwater underlying the Farmington property. A consultant to the Company has indicated that contamination attributable to past operations at the Farmington property has migrated off the refinery property, including a hydrocarbon plume that appears to extend no more than 1,800 feet south of the refinery property. Remediation activities are ongoing by the Company under the supervision of the New Mexico Oil Conservation Division (“OCD”), although no cleanup order has been received. The Company’s environmental reserve for this matter is approximately $570,000.

The Farmington property is located adjacent to the Lee Acres Landfill (the “Landfill”), a closed landfill formerly operated by San Juan County, which is situated on lands owned by the United States Bureau of Land Management (the “BLM”). Industrial and municipal wastes were disposed of in the Landfill by numerous sources. While the Landfill was operational, the Company used it to dispose of office trash, maintenance shop trash, used tires and water from the Farmington refinery’s evaporation pond.

The Landfill was added to the National Priorities List as a CERCLA Superfund site in 1990. In connection with this listing, EPA defined the site as the Landfill and the Landfill’s associated groundwater plume. EPA excluded any releases from the Farmington refinery itself from the definition of the site. In May 1991, EPA notified the Company that it may be a potentially responsible party under CERCLA for the release or threatened release of hazardous substances, pollutants or contaminants at the Landfill.

BLM made a proposed plan of action for the Landfill available to the public in 1996. Remediation alternatives examined by BLM in connection with the development of its proposed plan ranged in projected cost from no cost to approximately $14,500,000. BLM proposed the adoption of a remedial action alternative that it believes would cost approximately $3,900,000 to implement. BLM’s $3,900,000 cost estimate is based on certain assumptions that may or may not prove to be correct and is contingent on confirmation that the remedial actions, once implemented, are adequately addressing Landfill contamination. For example, if assumptions regarding groundwater mobility and contamination levels are incorrect, BLM is proposing to take additional remedial actions with an estimated cost of approximately $1,800,000.

BLM has received public comment on its proposed plan. The final remedy for the site, however, has not yet been selected. Although the Company was given reason to believe that a final remedy would be selected in 2000, that selection did not occur. The Company has been advised that the site remedy may be announced in 2002. In 1989, a consultant to the Company estimated, based on various assumptions, that the Company’s share of potential liability could be approximately $1,200,000. This figure was based upon estimated Landfill remediation costs significantly higher than those being proposed by BLM. The figure also was based on the consultant’s evaluation of such factors as available clean-up technology, BLM’s involvement at the site and the number of other entities that may have had involvement at the site, but did not include an analysis of all of the Company’s potential legal defenses and arguments, including possible setoff rights.

Potentially responsible party liability is joint and several, such that a responsible party may be liable for all of the clean-up costs at a site even though the party was responsible for only a small part of such costs. Although it is possible that the Company may ultimately incur liability for clean-up costs associated with the Landfill, a reasonable estimate of the amount of this liability, if any, cannot be made at this time because, among other reasons, the final site remedy has not been selected, a number of entities had involvement at the site, allocation of responsibility among potentially responsible parties has not yet been made, and potentially applicable factual and legal issues have not been resolved. Based on current information, the Company does not believe that it needs to record a liability in relation to BLM’s proposed plan.

BLM may assert claims against the Company and others for reimbursement of investigative, cleanup and other costs incurred by BLM in connection with the Landfill and surrounding areas. It is also possible that the Company will assert claims against BLM in connection with contamination that may be originating from the Landfill. Private parties and other governmental entities also may assert claims against BLM, the Company

and others for property damage, personal injury and other damages allegedly arising out of any contamination originating from the Landfill and the Farmington property. Parties also may request judicial determination of their rights and responsibilities, and the rights and responsibilities of others, in connection with the Landfill and the Farmington property. Currently, however, there is no outstanding litigation against the Company by BLM or any other party.

In connection with the acquisition of the Bloomfield Refinery, the Company assumed certain environmental obligations including Bloomfield Refining Company’s (“BRC”) obligations under an administrative order issued by EPA in 1992 pursuant to the Resource Conservation and Recovery Act (the “Order”). The Order required BRC to investigate and propose measures for correcting any releases of hazardous waste or hazardous constituents at or from the Bloomfield Refinery. EPA has delegated its oversight authority over the Order to NMED’s Hazardous Waste Bureau (“HWB”). In 2000, OCD approved the groundwater discharge permit for the refinery, which included an abatement plan that addressed the Company’s environmental obligations under the Order. The abatement plan reflects new information relating to the site as well as remediation methods that were not originally contemplated in connection with the Order. Discussions between OCD, HWB and the Company have resulted in proposed revisions to the abatement plan. Adoption of the abatement plan as the appropriate corrective action remedy under the Order would significantly reduce the Company’s corrective action costs. The Company estimates that remediation expenses associated with the abatement plan will be in the range of approximately $50,000 to $150,000, and will be incurred over a period of approximately 30 years. If the Company’s request is not granted, the Company estimates that remaining remediation expenses could range as high as $1,000,000, which is reflected in the Company’s environmental reserve for this matter, and could be as low as $600,000. If, as expected, the abatement plan is approved as submitted, the Company anticipates that the reserve will be reduced.

The Company has discovered hydrocarbon contamination adjacent to a 55,000 barrel crude oil storage tank (the “Tank”) that was located in Bloomfield, New Mexico. The Company believes that all or a portion of the Tank and the 5.5 acres owned by the Company on which the Tank was located may have been a part of a refinery, owned by various other parties, that, to the Company’s knowledge, ceased operations in the early 1960s. Based upon a January 13, 2000 report filed with OCD, it appears possible that contaminated groundwater is contained within the property boundaries and does not extend offsite. The Company anticipates that OCD will not require remediation of offsite soil based upon the low contaminant levels found there. In the course of conducting cleanup activities approved by OCD, it was discovered that the extent of contamination was greater than anticipated. The Company received approval to conduct a pilot bioventing project to address remaining contamination at the site, which was completed on June 26, 2001, at a cost of approximately $15,000. Based on the results of the pilot project, the Company submitted a remediation plan to OCD that proposes the use of bioventing to address remaining contamination. The Company anticipates that it would incur approximately $150,000 in remediation expenses in connection with this plan over a period of one to two years, and the Company has created an environmental reserve in this amount. If the Company’s plan is not approved, the Company cannot reasonably estimate remaining remediation costs because, among other reasons, it does not know what remediation technology would be approved by OCD for use at the site.

As of December 31, 2001, the Company had an environmental liability accrual of approximately $2,500,000. Approximately $1,600,000 of this accrual is for the following previously discussed projects: (i) the remediation of the hydrocarbon plume that appears to extend no more than 1,800 feet south of the Company’s inactive Farmington refinery; (ii) environmental obligations assumed in connection with the acquisition of the Bloomfield Refinery; and (iii) hydrocarbon contamination on and adjacent to the 5.5 acres that the Company owns in Bloomfield, New Mexico. The remaining amount of the accrual relates to the closure of certain solid waste management units at the Ciniza Refinery, which is being conducted in accordance with the refinery’s Resource Conservation and Recovery Act permit; closure of the Ciniza Refinery land treatment facility including post-closure expenses; and amounts for smaller remediation projects. The accrual balance reflects a reduction in amounts accrued for environmental obligations assumed in connection with the acquisition of the

Bloomfield Refinery and increases in reserves for other environmental projects. The environmental accrual is recorded in the current and long-term sections of the Company’s Consolidated Balance Sheets.

On June 11, 2001, the Company filed claims against the United States Defense Energy Support Center (“DESC”) in connection with jet fuel that the Company sold to DESC from 1983 through 1994. The Company asserted that the DESC underpaid for the jet fuel in the approximate amount of $17,000,000. The Company believes that its claims are supported by recent federal court decisions, including decisions from the United States Claims Court, dealing with contract provisions similar to those contained in the contracts that are the subject of the Company’s claims. On March 12, 2002, the DESC denied the Company’s claims. The Company has 12 months to bring an action in the United States Court of Federal Claims relating to the denied claims. The DESC has indicated that it will counterclaim if the Company pursues its claims and will assert, based on its interpretation of the contract provisions, that the Company may owe additional amounts of approximately $4,900,000. The Company is evaluating its options. Due to the preliminary nature of this matter, there can be no assurance that the Company would ultimately prevail should it decide to pursue its claims nor is it possible to predict when any payment would be received if the Company were successful. Accordingly, the Company has not recorded a receivable for this claim.

Giant Arizona leases approximately 8,176 square feet of space from a limited liability company in which the CCEO owns a 51% interest. Pursuant to a sublease between Giant Arizona and a separate limited liability company controlled by the CCEO, Giant Arizona subleases the space to such entity for use as an inn. The owner of the 49% interest in the lessor has notified Giant Arizona that the sublessee is delinquent on the payment of the rent due, and on or about December 28, 2001, such owner filed a derivative lawsuit for and on behalf of the lessor against Giant Arizona to collect all amounts owing under the lease. The suit is for the recovery of rents past due and owing in excess of $156,990 from August 1, 2000 through date of the complaint. Pursuant to a letter dated January 16, 2002, Giant Arizona made a formal demand on the sublessee for the sublessee to pay all of the past due amounts. In addition, Giant Arizona has filed a motion to dismiss the lawsuit for failure to comply with the express provisions of the Arizona derivative action statute or, alternatively, to compel binding arbitration pursuant to the terms of the lease.

In the fourth quarter of 2001, the Company recorded a loss on the disposal/ write-down of certain refining and retail assets due to obsolescence and replacement, recorded the write-down of various service station/convenience stores due to impairment, and recorded an allowance for a related party note and interest receivable.

On February 8, 2002, the Company entered into an agreement with BP Corporation North America Inc. and BP Products North America Inc. (collectively “BP”) to purchase a refinery in Yorktown, Virginia (the “Yorktown Refinery”). The refinery is located in Yorktown, Virginia, on the York River. It has a crude oil processing capacity of 61,900 barrels per day. Gasoline comprises approximately 50% of the refinery’s current product slate, which also encompasses a wide range of other products including diesel fuel, heating oil and coke. The refinery is the only refinery in Virginia and, due to its coastal location, is able to purchase crude oil produced around the world and to deliver refined petroleum products to New York Harbor as well as to the area around the refinery.

The Yorktown Refinery will be acquired for $127,500,000, plus the value of inventory at closing, which the Company currently projects will have a value of approximately $42,000,000. The agreement also provides for conditional potential monthly payments, in an amount not to exceed a combined total of $25,000,000, if certain refining margin spreads over a specified index are reached. The payments begin in the year 2003 and conclude at the end of 2005. The Company made a deposit of $10,000,000 to BP when the refinery purchase agreement was executed, which is only refundable under limited circumstances. In addition to the purchase price, the Company anticipates that it will incur direct costs in connection with the refinery acquisition of approximately $800,000, excluding financing costs.

The Company will assume certain liabilities and obligations, including certain environmental obligations, in connection with its purchase of the Yorktown Refinery, but will be provided with specified levels of indemnification for certain matters.

The Company expects the refinery purchase to close during the second quarter of 2002. The closing is contingent on satisfaction of all contract conditions, including the nonexercise of a right of first refusal held by an adjacent property owner and the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvement Act (“HSR”) and any extension of this waiting period by the federal government. The purchase agreement can be terminated by the Company or BP if the closing does not occur on or prior to May 31, 2002, although Buyer may not terminate the agreement until September 30, 2002 if the only condition to closing that has not occurred is termination or expiration of the HSR waiting period. By

letter dated February 2002, the Federal Trade Commission notified the Company that the HSR waiting period had been terminated.

The Company intends to finance the acquisition of the refinery with a combination of committed financing and cash on hand. The debt financing is anticipated to consist of borrowing under: (i) the Company’s Credit Agreement, which will be amended and restated to, among other things, increase the Company’s maximum available borrowing under the facility and extend the facility’s term by an additional year; (ii) a capital lease facility; (iii) a mortgage financing facility; and (iv) potentially additional public debt. The Company anticipates that financing costs associated with the Yorktown Refinery acquisition, including the possible refinancing of the Company’s 9 3/4% Notes, will be approximately $13,500,000 to $15,000,000.

Certain information required by Part III is omitted from this Report by virtue of the fact that the Registrant will file with the Securities and Exchange Commission a definitive proxy statement relating to the Company’s Annual Meeting of Stockholders to be held May 9, 2002 pursuant to Regulation 14A (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this Report, and certain information to be included therein is incorporated herein by reference. The Company expects to disseminate the Proxy Statement to stockholders on or about April 5, 2002.

The information concerning the Company’s directors required by this Item is incorporated by reference to the information contained in the Proxy Statement under the caption “Election of Directors.”

The information concerning the Company’s executive officers required by this Item is incorporated by reference to the section in Part I hereof entitled “Executive Officers of the Registrant,” following Item 4.

The information concerning compliance with Section 16(a) of the Exchange Act required by this Item is incorporated by reference to the information contained in the Proxy Statement under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.”

The information required by this Item is incorporated by reference to the information contained in the Proxy Statement under the captions “Election of Directors,” “Executive Compensation,” “Compensation Committee Report on Executive Compensation” and “Compensation Committee Interlocks and Insider Participation.”

The information required by this Item is incorporated by reference to the information contained in the Proxy Statement under the captions “Election of Directors,” “Security Ownership of Management” and “Shares Owned by Certain Shareholders.”

The information required by this Item is incorporated by reference to the information contained in the Proxy Statement under the captions “Compensation Committee Interlocks and Insider Participation,” “Certain Transactions” and “Indebtedness of Management.”


	(iii)	Consolidated Statements of Earnings — Years ended December 31, 2001, 2000 and 1999

	(iv)	Consolidated Statements of Stockholders’ Equity — Years ended December 31, 2001, 2000 and 1999

	(v)	Consolidated Statements of Cash Flows — Years ended December 31, 2001, 2000 and 1999

(2) Financial Statement Schedule. The following financial statement schedule of Giant Industries, Inc. for the years ended December 31, 2001, 2000 and 1999 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Giant Industries, Inc.

Schedules not listed above have been omitted because they are not applicable or are not required or because the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto.

(3) Exhibits. The Exhibits listed on the accompanying Index to Exhibits immediately following the financial statement schedule are filed as part of, or incorporated by reference into, this Report.

Contracts with management and any compensatory plans or arrangements relating to management are as follows:

(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company during the fourth quarter of the fiscal year ended December 31, 2001. On February 12, 2002, the Company filed a Form 8-K dated February 8, 2002, relating to an Asset Purchase Agreement between the Company and BP Corporation North America Inc. and BP Products North America Inc. (collectively, “BP”) pursuant to which the Company will purchase BP’s Yorktown, Virginia refinery and related assets.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	By:	/s/ FREDRIC L. HOLLIGER



	Fredric L. Holliger
	Chairman of the Board
	and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

We have audited the consolidated financial statements of Giant Industries, Inc. and subsidiaries (the “Company”) as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, and have issued our report thereon dated March 29, 2002; such financial statements and report are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Form S-1 — Refers to the Form S-1 Registration Statement under the Securities Act of 1933 as filed October 16, 1989, File No. 33-31584.

Amendment No. 3 — Refers to the Amendment No. 3 to Form S-1 Registration Statement under the Securities Act of 1933 as filed December 12, 1989, File No. 33-31584.

Form S-3 — Refers to the Form S-3 Registration Statement under the Securities Act of 1933 as filed September 22, 1993, File No. 33-69252.

78 EX-2.3 3 p66366ex2-3.txt EX-2.3 Exhibit 2.3 EXECUTION COPY - -------------------------------------------------------------------------------- ASSET PURCHASE AGREEMENT By and Among BP CORPORATION NORTH AMERICA INC., BP PRODUCTS NORTH AMERICA INC., and GIANT INDUSTRIES, INC. Dated as of February 8, 2002 Relating to the Purchase and Sale of the Yorktown Refinery and Related Assets - -------------------------------------------------------------------------------- TABLE OF CONTENTS

-i-

-ii-

-iii-

-iv- SCHEDULES

-v- EXHIBITS

-vi- INDEX TO DEFINED TERMS

-vii-

-viii- ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT for the purchase and sale of assets ("Agreement"), is made and entered into as of February 8, 2002, by and among BP Corporation North America Inc., an Indiana corporation ("BP"), and BP Products North America Inc., a Maryland corporation ("BP Products," and together with BP, "Seller"), on the one hand, and Giant Industries, Inc., a Delaware corporation ("Buyer"), on the other hand. W I T N E S S E T H: -------------------- WHEREAS, upon and subject to the terms and conditions of this Agreement, Seller wishes to sell its petroleum refining assets located in the vicinity of Yorktown, Virginia and related assets, as described below (the "Business") and certain liabilities, each as further described in Sections 1 and 4, and Buyer wishes to purchase the Business and to assume certain liabilities relating thereto, in each case upon the terms and subject to the conditions set forth herein; and NOW, THEREFORE, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, and subject to the conditions hereinafter set forth, the parties hereto agree as follows: 1. PURCHASE AND SALE OF THE BUSINESS. Subject to the terms and conditions of this Agreement (including the provisions of Section 10(c)(ii)), Seller agrees to sell, assign, convey, transfer and deliver, or cause such sale, assignment, conveyance, transfer and delivery by Seller's affiliates, to Buyer, as of the Closing Date, and Buyer agrees to purchase and take assignment and delivery from Seller as of the Closing Date, of all of Seller's rights, title and interest in the following assets relating to the Business (the "Purchased Assets"): (a) the refinery and related equipment and facilities of Seller located in the vicinity of Yorktown, Virginia, including the process units, docks, storage tanks, control houses, office buildings, laboratory facilities, warehouses, boiler houses, power plants, waste water treatment facilities and other similar facilities of such refinery, major items of which are listed on Schedule 1(a) attached hereto (the "Refinery"); (b) the real property on which the Refinery is situated, whether or not contiguous, owned by Seller and used in the operation of the Business as it is currently operated by Seller, in each case as more particularly described on Schedule 1(b) attached hereto, including (subject to Section 2(h)) the improvements to such real property together with all appurtenances thereto and the fixtures thereon (the "Real Property"); (c) the hydrocarbon inventories (the "Hydrocarbon Inventories") of the Business as of the Closing Date (which shall be measured and valued in accordance with Exhibit A attached hereto), including: (i) all crude oil inventories at, or in transit to, the Business where title has passed to Seller; (ii) all crude oil inventories in the storage tanks at the Business, and in any off-site storage facilities described on Schedule 1(c)(ii) (it being expressly understood by the parties hereto that all such hydrocarbon inventories shall consist of the total contents thereof, regardless of whether above or below the off-take pipe, including bottom sediment and water); (iii) all refined and intermediate product inventories at the Business; and (iv) all additives at the Business; but in all cases excluding all finished and unfinished products which have left the Business and are en route to any customer (including the BP Group) where title has passed to the customer; (d) the non-hydrocarbon inventories of the Business as of the Closing Date consisting of (i) the chemicals and catalyst inventories located at the Business, (ii) the stores inventories, including maintenance and capital spares, joints, valves and parts located at the Business or in any off-site storage facility and (iii) any precious metals and other non-hydrocarbon inventories of the Business (collectively, the "Non-Hydrocarbon Inventories," and together with Hydrocarbon Inventories, the "Inventories"); (e) the machinery (including machinery related to the utilities), vehicles and other personal property owned and used exclusively in the operation of the Business as it is currently operated by Seller (collectively, the "Personal Property"); (f) subject to Section 10(c)(ii), all assignable or transferable rights and obligations of Seller under the supply, distribution, exchange, collective bargaining and other agreements, contracts, leases, licenses and similar instruments relating exclusively to the Business as it is currently operated by Seller, including those set forth on Schedule 1(f) attached hereto; (g) subject to Section 10(c)(ii), all assignable or transferable permits or licenses of Seller from any federal, state or local regulatory agencies which are necessary to and used exclusively in connection with the ownership and operation of the Business as it is currently operated by Seller (collectively, the "Permits"), including any approval, registration, authorization, certificate, certificate of occupancy, consent, exemption, license, order or permit or other similar authorization of or filing with any governmental authority required by applicable Health, Safety and Environmental Laws in effect on or prior to the Closing Date, as they are enforced with respect to the Business, for the ownership or operation of the Business as it is currently operated by Seller (collectively, the "Environmental Permits"); (h) subject to and in accordance with the Technology Transfer and License Agreement attached hereto as Exhibit B (the "Technology Agreement"), a nonexclusive, royalty-free license -2- to use in the operation of the Business as it is currently operated by Seller certain technology, software, know-how and proprietary information owned by Seller, BP p.l.c. and/or its other direct or indirect subsidiaries and its affiliates (together with Seller, the "BP Group"), whether patented or unpatented, as more specifically described in the Technology Agreement; (i) subject to Section 10(c)(ii) and subject to and in accordance with the Technology Agreement, Seller's assignable or transferable rights under the process technology licenses with third parties listed on Schedule 1(i) attached hereto, all as are necessary and used exclusively for the operation of the Business as it is currently operated by Seller; (j) subject to Section 2(e), all operating records and data in possession of Seller or any other member of the BP Group and relating exclusively to and necessary for the operation of the Business as it is currently operated by Seller, including all books, records, cost and pricing information, accounting records, supplier lists and records, training materials and equipment, training records, maintenance and inspection reports, equipment lists, repair notes and archives; (k) subject to Section 10(c)(ii) and in accordance with the Technology Agreement, all assignable or transferable technical drawings in possession of Seller located at the Business and relating exclusively to and necessary for the operation of the Business as it is currently operated by Seller; and (l) all other assignable or transferable assets, active or inactive, owned or leased by, or licensed to or used by Seller and located at the Business and used exclusively in the operation of the Business as it is currently operated by Seller; provided that the Purchased Assets shall not include the Excluded Assets. At any time and from time to time prior to the Closing, Seller shall have the right to update and supplement the description of the Purchased Assets (including the Schedules and Exhibits referred to above) to reflect changes, including additions and deletions, occurring in the ordinary course of business prior to the Closing. For purposes of this Agreement, the term "ordinary course of business" shall include all reasonably necessary actions taken in connection with, in contemplation of or in preparation for, the sale of the Business, the Closing and any other transaction contemplated by this Agreement so long as such actions do not have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller or the Purchased Assets, taken as a whole. 2. EXCLUDED ASSETS. The Purchased Assets shall not include any assets other than those specifically described in Section 1 above, and, without limiting the generality of the foregoing, Seller (or, as applicable, other members of the BP Group) shall retain and not sell, convey, transfer or deliver to Buyer, and Buyer shall not purchase or have any rights in, the following assets, each of which is specifically excluded from the Purchased Assets being sold hereunder (collectively, the "Excluded Assets"): -3- (a) cash and cash equivalents (including marketable securities and short-term investments); (b) accounts and notes receivable and exchange balances due from a third party as of 12:01 a.m., Central Time, on the Closing Date, including payments for all finished and unfinished products which have left the Business and are en route to any customer (including members of the BP Group) prior to the Closing Date where title has passed to the customer, provided that all accounts receivable with respect to any Inventories included or to be included in the Purchased Assets shall not be Excluded Assets; (c) assets owned by other members of the BP Group not used exclusively by Seller in the operation of the Business or not located at the Business, including employee and other records (including employee personnel and medical records) necessary to administer salaried payrolls and benefits and welfare plans retained by Seller or other members of the BP Group and to file tax returns, assets related to certain support services provided by the BP Group to the Business including those described on Schedule 2(c) attached hereto and certain other specified assets not located at the Business as described on Schedule 2(c) attached hereto; (d) tax refunds arising out of all taxes, charges, fees, imposts, duties, levies, withholdings or other assessments imposed by any governmental entity, including environmental taxes, excise taxes, customs, duties, utility, property, income, sales, use, value added, transfer and fuel taxes, and any interest, fines, penalties or additions to tax attributable to or imposed on or with respect to any such assessment, including all applicable income, sales, use, excise, business, occupation or other tax, if any, relating in any way to this Agreement or any other service, supply or operating agreement (collectively, "Taxes") relating to the Purchased Assets accruing to or for any period, or portion thereof, ending prior to or on the Closing Date; (e) all forecasts, financial information or financial statements and proprietary manuals (except rights to use manuals specific to and necessary for the operation of the Business as it is currently operated by Seller (as determined by Seller in its reasonable discretion)) prepared by or used by Seller or another member of the BP Group to the extent not relating exclusively to the Business and all copies of and subscriptions to third-party reports; (f) except as otherwise expressly provided in the Technology Agreement, all proprietary BP Group computer systems and software; (g) defenses and claims that Seller could assert against third parties, other than claims which Seller could assert on account of matters or acts as to which Buyer has agreed to assume liability or as to matters to the extent Buyer is entitled to be indemnified by Seller pursuant to this Agreement; (h) any assets, property improvements, appurtenances, fixtures, equipment or goods located at the Business which are not owned by Seller, including spare parts on consignment, certain chemicals on consignment, leased nitrogen units, transformers, wires, pipes and equipment -4- owned by Virginia Electric and Power Company ("VEPCO"), city water mains and other equipment, leased and rented mobile equipment, leased office equipment, copiers, telephones and other leased items; (i) to the extent not otherwise excluded, proprietary information, intellectual property (including patents, inventions and trade secrets (in each case, whether patentable or not) and copyrights) and technology of Seller and other members of the BP Group not used exclusively in the operation of the Business as it is currently operated by Seller or not otherwise assignable by Seller; (j) all service marks, trademarks, trade names, trade dress or other indicia of origin of Seller and other members of the BP Group and variants thereof, including the following: the words "Amoco" and "Standard," any items that include the words "Amoco" or "Standard," the BP Group torch and oval design, the letters "BP," any items that include the word "BP," the phrase "BP Oil," the BP Group shield or the BP Group Helios logo and/or variants thereof; (k) all books, documents, records and files prepared in connection with or relating in any way to the transactions contemplated by this Agreement, including bids received from other parties and analyses relating in any way to the Purchased Assets, the Assumed Liabilities and the Refinery; (l) all rights of Seller and other members of the BP Group under or pursuant to this Agreement and the other agreements and transactions contemplated hereby; (m) any assets, properties and rights of Seller and/or other members of the BP Group not used exclusively in the operation of the Business as it is currently operated by Seller; (n) employment records, including personnel records and medical records, relating to employees of the Business, and subject to Section 11, all rights of Seller and other members of the BP Group and any assets under employee benefit plans or trusts; (o) the assets, property and property improvements, appurtenances, fixtures, equipment, goods and rights listed on Schedule 2(o) attached hereto; (p) the rights and obligations of Seller and other members of the BP Group under any agreements, contracts, leases, licenses and similar instruments that do not relate exclusively to the Refinery or are not assignable by Seller, including those set forth on Schedule 2(p) attached hereto; (q) any rights under or amounts payable from present or former insurance policies applicable to the Business; and (r) all arrangements, contracts, agreements, understandings or commitments, whether written or oral by and among members of the BP Group, other than those listed on Schedule 2(r) -5- attached hereto (it being understood that all such arrangements, contracts, agreements, understandings or commitments will be terminated on or prior to Closing). To the extent that any Excluded Assets remain located at the Business or any other owned or leased real property constituting part of the Purchased Assets after the Closing Date, Buyer shall grant to Seller and other members of the BP Group and their respective representatives reasonable access to such property from and after the Closing Date for a reasonable period of time not to exceed 180 days in order to permit Seller and such persons to review and remove such Excluded Assets and make any other appropriate arrangements with respect thereto. Seller agrees that it will consult with Buyer in advance of taking any such actions following the Closing Date with a view towards establishing a mutually agreeable plan for such review and removal so that these actions will not unreasonably interfere with the normal operation of the Business. 3. DEPOSIT AND PURCHASE PRICE. (a) Deposit. On the date hereof, Buyer shall pay to Seller (or Seller's designee) in immediately available funds, by wire transfer to an account designated by Seller, a non-refundable deposit against the Purchase Price of certain of the Purchased Assets (excluding the Real Property) in the amount of Ten Million Dollars ($10,000,000.00) (the "Deposit"). The Deposit shall be non-refundable in that it shall not be returned to Buyer under any circumstances, unless this Agreement shall be terminated by Buyer or by Seller, the Closing shall not have occurred and a Deposit Return Event has occurred in which event Seller shall transfer to Buyer, in immediately available funds by wire transfer to an account designated by Buyer, a cash amount equal to the Deposit plus interest thereon from the date on which the Deposit was received by Seller through and including the date on which such payment is made at a rate of 4% per annum. As used herein, the term "Deposit Return Event" means the occurrence of any of the following: (i) between the date hereof and the Closing Date, there shall have occurred any damage, destruction or other casualty losses with respect to the Purchased Assets that (A) cause the Purchased Assets to become unusable or inoperable and not capable of repair for a period of at least ninety (90) days or (B) individually or in the aggregate, have an estimated cost (as determined by Seller in good faith) to repair or replace of more than Fifty Million Dollars ($50,000,000.00), that has not been substantially repaired or rectified by Seller by the later of the Closing Date or within ninety (90) days after Seller becomes aware of the existence of such matter (provided, for the avoidance of doubt, that if Seller elects to repair or rectify any such damage, destruction or other casualty losses, Seller shall bear the cost of any such repair or replacement); (ii) each of Buyer and Seller mutually agree that the closing condition set forth in Sections 12(d) and 13(d) has become incapable of fulfillment and each of Buyer and Seller have complied with the obligations of Section 10(c)(i); (iii) this Agreement is terminated pursuant to Section 18(a)(i); -6- (iv) this Agreement is terminated by Buyer pursuant to Section 18(a)(ii) (other than pursuant to Section 12(d) which is covered under Section 3(a)(ii) above); provided, however, that at the time of such termination, Buyer is not in material breach of its representations, warranties, covenants or agreements contained in this Agreement; (v) this Agreement is terminated by Seller pursuant to Section 18(a)(iv); provided, however, that at the time of such termination, Buyer is not in material breach of its representations, warranties, covenants or agreements contained in this Agreement; (vi) this Agreement is terminated by Buyer pursuant to Section 18(a)(vi); provided, however, that at the time of such termination, Buyer is not in material breach of its representations, warranties, covenants or agreements contained in this Agreement; or (vii) this Agreement is terminated as a result of a consummation of the sale of the Refinery in accordance with the exercise of rights under that certain Terminal Agreement, dated February 28, 1986, among Amoco Oil Company, VEPCO and Waterview Seafood Company (the "Terminal Agreement"). (b) Purchase Price. In consideration for the Purchased Assets, Buyer shall pay, transfer and undertake to Seller as follows (collectively, the "Purchase Price"): (i) Buyer shall pay to Seller (or Seller's designee) in cash: (A) a base price of One Hundred Twenty Seven Million Five Hundred Thousand Dollars ($127,500,000.00), representing the value of the Purchased Assets (excluding the value of the Hydrocarbon Inventories) as of the Closing Date (the "Base Price"); plus (B) an amount equal to the estimated market value of the Hydrocarbon Inventories, as of the Closing Date, as determined by Seller in accordance with Exhibit A attached hereto; (ii) Buyer shall pay to Seller (or Seller's designee) the Margin Payments, as described in Section 3(e) below; and (iii) Buyer shall assume and agree to pay and perform and discharge when due the Assumed Liabilities. For purposes of determining the market value of the Hydrocarbon Inventories, all Hydrocarbon Inventories which are located in storage tanks shall be valued as specified on Exhibit A based on the total contents thereof, regardless of whether above or below the off-take pipe, excluding only the bottom sediment and water (it being expressly understood by the parties hereto, -7- however, that such bottom sediment and water shall constitute part of the Purchased Assets to be transferred to Buyer). (c) Closing Date Payments. On the Closing Date, Buyer shall pay to Seller (or Seller's designee), in immediately available funds by wire transfer to an account designated by Seller, the total of (i) the amount equal to the Base Price plus (ii) the amount specified by Section 3(b)(i)(B) above, minus (iii) an amount equal to the Deposit specified in Section 3(a) above (which amount shall already have been paid by Buyer to Seller upon the execution of this Agreement) plus interest thereon from the date on which the deposit was received by Seller through and including the Closing Date at a rate of 4% per annum. (d) Post-Closing Adjustment. The Purchase Price shall be subject to adjustment based on the final market value of the Hydrocarbon Inventories as described in this Section 3(d). Within thirty (30) days following the Closing Date, the final market value of the Hydrocarbon Inventories as of the Closing Date shall be determined by Seller and Buyer in accordance with procedures specified in Exhibit A. If the final market value of the Hydrocarbon Inventories is greater than the estimated market value of the Hydrocarbon Inventories referenced in Section 3(b) above, Buyer shall pay to Seller an amount equal to such difference, and if the final market value of the Hydrocarbon Inventories is less than such estimated market value of the Inventories, Seller shall pay to Buyer an amount equal to such difference. In either case, such payment shall include interest from the Closing Date through and including the date the payment is made at a rate of 4% per annum, and such payment shall be made in immediately available funds within five (5) business days after the determination of the final market value of the Hydrocarbon Inventories. (e) Margin Payment. For the period commencing January 1, 2003 through and including December 31, 2005 (except as set forth otherwise herein) (the "Margin Payment Period"), Buyer shall pay to Seller (or Seller's designee) on a monthly basis in immediately available funds, by wire transfer to an account designated by Seller, an amount (each such amount, a "Margin Payment") equal to (I) the Gasoline Margin Payment for such month, plus (II) the Heating Oil Margin Payment for such month, plus (III) any portion of any previous Margin Payment (including any interest accrued thereon) that remains unpaid; provided, however, that Buyer's total Margin Payments under this Agreement shall not exceed Twenty Five Million Dollars ($25,000,000) (excluding interest paid, if any, by Buyer to Seller as a result of Buyer's failure to make payment when due on any Margin Payment), and the Margin Payment Period shall expire upon Buyer's payment of such amount. Buyer's obligation to pay each Margin Payment when due shall not be conditioned upon or related in any way to the performance of the Business or any other businesses of the Buyer, Buyer's operation thereof, the condition of the Purchased Assets or Buyer's ownership of the Purchased Assets. (i) For purposes of this Section 3(e), the "Gasoline Margin Payment" in any month shall equal an amount determined by multiplying (x) 10,000 by (y) the amount by which the Actual Gasoline Margin exceeds $5.500 per barrel by (z) the number of days in the month. For purposes of this Section 3(e), the "Heating Oil Margin Payment" in any given month shall equal an amount determined by multiplying (x) 10,000 by (y) the -8- amount by which the Actual Heating Oil Margin exceeds $4.000 per barrel by (z) the number of days in the month. (ii) For purposes of this Section 3(e), the "Actual Gasoline Margin" shall be an amount equal to (a) the average amount per barrel of the near month unleaded gasoline contract quoted on the New York Mercantile Exchange for each day of the month on which such contract is quoted, measured at settlement less (b) the average amount per barrel of the near month light sweet crude oil contract quoted on the New York Mercantile Exchange for each day of the month on which such contract is quoted, measured at settlement. For purposes of this Section 3(e), the "Actual Heating Oil Margin" shall be an amount equal to (a) the average amount per barrel of the near month heating oil contract quoted on the New York Mercantile Exchange for each day of the month on which such contract is quoted, measured at settlement, less (b) the average amount per barrel of the near month light sweet crude oil contract quoted on the New York Mercantile Exchange for each day of the month on which such contract is quoted, measured at settlement. (iii) Each Margin Payment shall be paid no later than the fifth day on which banks located in New York, NY conduct business of the month immediately succeeding the month for which such Margin Payment is calculated (each such date, a "Due Date"). In the event that Buyer fails to pay any Margin Payment by the corresponding Due Date, such Margin Payment shall accrue interest at an annual rate equal to the lower of (i) the rate appearing on page 3750 of the Telerate Service (or on any successor or substitute page of such service, or any successor to or substitute for such services, providing rate quotations comparable to those currently provided on such page of such service for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market)("LIBOR") (calculated at the end of the day on the Due Date, as adjusted at the end of each subsequent Due Date while any Margin Payment and corresponding interest remains outstanding) plus five percent (5%) or (ii) the highest interest rate allowable by law. All amounts of any Margin Payment (including any interest accrued thereon) that remain unpaid as of the Due Date of the immediately succeeding month shall become part of the succeeding Margin Payment in the manner set forth in Section 3(e) above. (iv) Upon Buyer's failure to make three (3) successive Margin Payments on or prior to the Due Date as provided in this Section 3(e), Buyer shall immediately pay to Seller (a) Twenty Five Million Dollars ($25,000,000) less (b) the sum of all Margin Payments previously made by Buyer under this Agreement (excluding interest paid, if any, by Buyer to Seller, or outstanding, as a result of Buyer's failure to make payment when due on any Margin Payment). (v) Notwithstanding any of the provisions in this Section 3(e), at any time during the life of this Agreement Buyer may discharge all of its obligations relating to such Margin Payments and shall not be subject to any further requirement to make any Margin Payments (other than the payment of interest, if any, accruing as a result of a failure to -9- make any Margin Payment as described in Section 3(e)(iii) above) and the Margin Payment Period shall expire if (i) Buyer provides written notice to Seller (or Seller's designee) of its intent to make a payment under this Section 3(e)(v) at least ninety (90) days prior to any such payment, and (ii) Buyer pays to Seller (or Seller's designee) an amount in cash equal to (i) Twenty Five Million Dollars ($25,000,000) less (ii) the sum of all Margin Payments previously made by Buyer under this Agreement (excluding interest paid, if any, by Buyer to Seller, or outstanding, as a result of Buyer's failure to make payment when due on any Margin Payment). 4. ASSUMPTION OF LIABILITIES. (a) Assumed Liabilities. As of the Closing Date, Buyer shall, without any further action on the part of Buyer or Seller, assume and agree to pay, perform and discharge, and indemnify, defend and hold Seller and the other members of the BP Group harmless from, each of the following liabilities (collectively, the "Assumed Liabilities") (provided that the Assumed Liabilities shall not include the Excluded Liabilities): (i) all obligations, responsibilities, liabilities, costs and expenses of whatever kind and nature, primary or secondary, direct or indirect, absolute or contingent, whether based in common law or statute or arising under written contract or otherwise, known or unknown, liquidated or unliquidated, real or potential, tangible or intangible, whether or not accrued, caused by, arising out of, incurred in connection with or relating in any way to the ownership of the Purchased Assets or the operation of the Business now existing or arising at any time prior to, on or after the Closing Date as heretofore, currently or hereafter conducted. Without limiting the generality of the foregoing, the Assumed Liabilities shall include all obligations, responsibilities, liabilities, costs and expenses of Seller and/or any other member of the BP Group caused by, arising out of, incurred in connection with or relating in any way to any of the following, prior to, on or after the Closing Date: (A) the Business (including the Refinery, the Real Property, the Inventories and the Personal Property); (B) all of the agreements, contracts, collective bargaining agreements, leases, permits or similar instruments, including easements, rights-of-way and other rights of access, constituting part of the Purchased Assets; (C) the Permits; (D) except with respect to Hydrocarbon Inventories, all accounts payable and accrued liabilities relating to goods and/or services provided to the Business on or after the Closing Date; -10- (E) the Transferred Employees to the extent provided in Section 11; and (F) all actions, grievances, arbitrations, suits, liabilities, obligations, proceedings and investigations of, relating to or arising out of the Business or operations of the Business or any of the Purchased Assets, including those asserted under, relating to, arising out of or incurred in connection with Health, Safety and Environmental Laws; and (ii) subject to any rights to indemnification Buyer may have pursuant to Section 15, all obligations, responsibilities, liabilities, costs and expenses caused by, arising from, incurred in connection with or relating in any way to the ownership of the Purchased Assets or the operation of the Business under, relating to or otherwise required or incurred to achieve or maintain compliance with Health, Safety and Environmental Laws, as the same are in effect from time to time, irrespective of whether the events or conditions giving rise to such liabilities occurred prior to, on or after the Closing Date, including (A) any and all obligations, responsibilities, liabilities, costs and expenses caused by, arising from, incurred in connection with or relating in any way to the existence of asbestos and lead-based paint at, on or within the Business or the Purchased Assets, including any incidental contamination resulting therefrom (collectively, the "Asbestos-Related Liabilities"), (B) any and all obligations, responsibilities, liabilities, compliance costs and expenses (whether presently realized or projected) caused by, arising from, incurred in connection with or otherwise relating in any way to the matters disclosed in that certain URS report dated March 23, 2001, a copy of which previously has been provided to Buyer, the Confidential Information Memorandum or in any of the health, safety and environmental records or reports of the Business previously provided to Buyer (collectively, the "Disclosed Environmental Liabilities"), (C) any and all obligations, responsibilities, liabilities, compliance costs and expenses relating to governmental requirements including mandated clean-up, and (D) any and all obligations, responsibilities, liabilities, compliance costs and expenses incurred in connection with, arising as a result of or otherwise required to comply with those terms and conditions of the Project Sunshine Consent Decree. As used in this Agreement, "Project Sunshine Consent Decree" means that certain consent decree among the United States of America (including certain intervening state and local governments), BP Exploration and Oil Co., Amoco Oil Company and Atlantic Richfield Company, in Civil No. 2:96CV095 RL (N.D. IN), as the same may be amended, supplemented or revised from time to time. As used in this Agreement, "Health, Safety and Environmental Laws" means any and all past, present or future local, state, and federal laws, principles of common law, statutes, ordinances, regulations, rules, orders, permits, standards or requirements (including consent decrees, judicial decisions, judgments, injunctions and administrative orders issued or approved thereunder), together with all related amendments and implementing regulations and all common law, pertaining to or regulating pollution, -11- environmental protection, health and safety of persons, pipeline safety, natural resource damages, conservation of resources, wildlife, waste management, the use, storage, generation, production, treatment, emission, discharge, remediation, removal, disposal or transport or any other activity related to a toxic or hazardous substance, waste or material (including crude petroleum and its fractions or derivatives thereof), or any other environmental matter, including: the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et. seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et. seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et. seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et. seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et. seq.; the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Section 3009(f) et. seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et. seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Section 651 et. seq.; and the Hazardous Liquid Pipeline Safety Act, as amended, 49 U.S.C. Section 60101 et. seq. Buyer's obligations under this Section 4(a) shall not be subject to offset or reduction by reason of any actual or alleged breach by Seller of any representation, warranty or covenant contained in this Agreement or any agreement or document delivered in connection herewith or any right or alleged right to indemnification hereunder. (b) Excluded Liabilities. The liabilities and obligations of Seller and other members of the BP Group transferred to Buyer shall not include the following (collectively, the "Excluded Liabilities"): (i) any liability or obligation for Taxes (including deficiencies, interest and penalties relating thereto) accruing to or for any period ending on or prior to the Closing Date, except to the extent provided otherwise in Section 16; (ii) any liability or obligation for any expenses incurred in connection with the transactions contemplated by this Agreement; (iii) any brokerage or finder's fees payable by Seller or any other member of the BP Group in connection with the transactions contemplated by this Agreement; (iv) any liability or obligation accruing prior to the Closing Date for real property taxes and charges as prorated in accordance with Section 16(b); (v) any liability or obligation with respect to any accounts payable and exchange balances owed to a third party, in each case, determined in accordance with generally accepted accounting principles as in effect in the United States at the Closing Date (notwithstanding anything to the contrary contained in this Agreement, all accounts payable with respect to any Inventories shall be Excluded Liabilities); -12- (vi) any liability or obligation in respect of indebtedness for borrowed money, including the Environmental Control Bonds; (vii) except as otherwise provided in this Agreement, any liabilities or obligations relating to litigation commenced or threatened as of the Closing Date against Seller or any other member of the BP Group to the extent attributable solely to periods ending prior to the Closing Date, including those set forth on Schedule 6(k) attached hereto; provided, that Buyer shall provide Seller with reasonable access to (and permission to take copies of) all records and reasonable access to all relevant personnel of the Business in connection with the defense of any such claims in accordance with the provisions of Section 17 hereof; (viii) to the extent attributable solely to periods ending prior to the Closing Date, all liabilities or obligations with respect to third party personal injury or wrongful death claims, including those arising under Health, Safety and Environmental Laws, relating to the pre-Closing operation of the Business; provided that (i) this clause shall not be deemed to include any liability or obligation for property damage and (ii) Buyer shall provide Seller with reasonable access to (and permission to take copies of) all records and reasonable access to all relevant personnel of the Business in connection with the defense of any such claims in accordance with the provisions of Section 17 hereof; (ix) all liabilities or obligations relating to any violations by Seller or other members of the BP Group of antitrust laws prior to the Closing Date; (x) all liabilities or obligations arising under Health, Safety and Environmental Laws with respect to the disposal prior to the Closing Date by Seller or any member of the BP Group (or by a third-party at the express direction of Seller of any member of the BP Group) at any location other than the Purchased Assets of hazardous materials generated as a result of or in connection with the operation of the Business (the "Offsite Environmental Liabilities"); (xi) any responsibility for the payment of any criminal sanctions or civil fines or penalties imposed by a regulatory agency of any federal, state or local government against Seller or other members of the BP Group imposed at any time arising from the operation of the Purchased Assets prior to the Closing Date; provided that Buyer shall provide Seller with reasonable access to (and permission to take copies of) all records and reasonable access to all relevant personnel of the Business in connection with the defense of any such claims in accordance with Section 17 hereof; and (xii) any liability or obligation related to an Excluded Asset. -13- 5. CLOSING. (a) Subject to the parties' satisfaction or waiver of the conditions precedent set forth in Sections 12 and 13, the closing and consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m., Central Time, at the offices of Kirkland & Ellis at 200 East Randolph Drive, Chicago, Illinois, on a business day which is not later than the later of (i) five (5) business days after the expiration of the waiting period, or any extension thereof (without challenge), provided for in the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "H-S-R Act"), if a filing is required, or (ii) any later date on or prior to May 31, 2002 as the parties may otherwise agree. The date of the Closing is referred to herein as the "Closing Date." (b) On the Closing Date, Seller shall deliver to Buyer the following: (i) duly-executed limited or special warranty deeds for the Real Property, substantially in the form of Exhibit C attached hereto, conveying fee simple title to such Real Property subject to the Permitted Liens; (ii) appropriately executed instruments of sale, assignment, transfer and conveyance evidencing and effecting the sale and transfer to Buyer of the Purchased Assets (it being expressly understood by the parties hereto, however, that such instruments shall not require Seller or any other Person to make any additional representations, warranties or covenants, express or implied, not contained in this Agreement); (iii) a certified copy of the resolution(s) adopted by the Board of Directors of Seller authorizing the transactions contemplated by this Agreement and authorizing specified individuals to act on behalf of Seller in connection therewith; (iv) an incumbency certificate, duly executed by an authorized officer of Seller attesting to the due appointment and authorization of individuals signing this Agreement on behalf of Seller, any agreement contemplated hereby or any agreement related to the transactions contemplated hereby; (v) a current certificate of BP's good standing in Indiana and BP Products' good standing in Maryland and BP's and BP Products' qualification to do business and good standing in Virginia; and (vi) the affidavit referred to in Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended, (the "Code") in customary form. (c) On the Closing Date, Buyer shall deliver to Seller the following: (i) the payments specified in Section 3(c) hereof; -14- (ii) instruments of assumption evidencing and effecting the assumption by Buyer of the Assumed Liabilities and such other documents as are required by this Agreement; (iii) a certified copy of the resolutions adopted by the Boards of Directors of Buyer, authorizing the transactions contemplated by this Agreement and authorizing specified individuals to act on behalf of Buyer herewith; (iv) an incumbency certificate, duly executed by authorized officers of Buyer attesting to the due appointment and authorization of individuals signing this Agreement on behalf of Buyer, any agreement contemplated hereby or any agreement related to the transactions contemplated hereby; (v) current certificates of Buyer's good standing in the state of its incorporation and the Buyer's qualification to do business and good standing in Virginia; (vi) a modification to the Project Sunshine Consent Decree, in a form satisfactory to Seller and the United States of America and substantially similar to Exhibit F attached hereto, duly executed by an authorized officer of Buyer (provided that such modification shall be for the purpose of making Buyer a party thereto and shall not result in any substantive changes in the obligations that Buyer is assuming as compared to the obligations contained in the Project Sunshine Consent Decree relating to the Purchased Assets as of the Closing Date); (vii) evidence, in a form satisfactory to Seller, of Buyer's acceptance of the CBA (as defined in Section 11(k)); and (viii) the Novation Agreement substantially in the form of Exhibit E. (d) On the Closing Date, Buyer and Seller shall each deliver duly executed counterparts by the appropriate parties of the following: (i) the Technology Agreement substantially in the form of Exhibit B; (ii) subject to Section 10(c)(iii), the Transition Services Agreement substantially in the form of Exhibit D attached hereto; (iii) the Natural Gas Liquids Supply Agreement substantially in the form of Exhibit G-1; (iv) the Natural Gas Liquids Sales Agreement substantially in the form of Exhibit G-2; -15- (v) the Petroleum Coke Marketing Services Agreement substantially in the form of Exhibit G-3; (vi) the Term Petroleum Intermediates and Blendstocks Agreement substantially in the form of Exhibit G-4; (vii) the Term Petroleum Crude Oil Agreement substantially in the form of Exhibit G-5; (viii) the Term Petroleum Intermediates and Blackoils Agreement substantially in the form of Exhibit G-6; (ix) the Term Petroleum Product Agreement substantially in the form of Exhibit G-7; (x) the Product Purchase Agreement substantially in the form of Exhibit G-8; and (xi) the Railcar Lease Agreement substantially in the form of Exhibit H. (e) All of the transactions identified in this Section 5 shall occur simultaneously, and none shall be deemed completed until all are completed. Unless otherwise expressly provided for herein, all transfers of assets and liabilities, as well as all other actions related to the Closing, shall be deemed to have occurred at 12:01 a.m., Central Time, on the Closing Date. 6. SELLER'S REPRESENTATIONS AND WARRANTIES. Subject to the exceptions, disclaimers and other matters set forth in this Section 6 and in Section 8 below, the matters set forth on the Schedules to this Agreement and any other written disclosures made to Buyer at any time prior to the Closing Date, Seller hereby represents and warrants to Buyer as of the date of this Agreement and as of the Closing Date (except with respect to those representations and warranties that speak as to a particular date or time, which need only be true and correct as of such date or time) as set forth below. For purposes of this Agreement, "knowledge," when used in the phrase "Seller's knowledge" in this Agreement means, and shall be limited to, the actual knowledge (without independent investigation) of the manager of the Refinery and the individuals acting as his or her direct reports as of the date of this Agreement. Buyer understands that none of such individuals is making any representations or warranties to Buyer and that such individuals shall have no liability to Buyer in connection with the matters covered in this Section 6. (a) Organization and Good Standing. BP is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana. BP Products is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland. (b) Authority. Seller has the corporate power and authority to enter into this Agreement and the transactions contemplated hereby and to carry out its obligations hereunder. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly authorized and this Agreement has been duly executed and delivered by -16- Seller and constitutes a valid and binding agreement of Seller enforceable against Seller in accordance with its terms, except as such enforceability is limited by general principles of equity and applicable provisions of bankruptcy, insolvency, moratorium, reorganization or similar laws. (c) Consents. Other than with respect to (i) the H-S-R Act, (ii) obtaining the consents or waivers required in connection with certain agreements, contracts, licenses, leases, easements, rights-of-way and permits and (iii) Buyer's execution of a modification to the Project Sunshine Consent Decree and the filing thereof with the U.S. District Court upon Closing, in accordance with the terms and conditions of paragraph six of the Project Sunshine Consent Decree, no consent, approval of or by, or filing with or notice to any other individual, corporation, partnership, association, trust, limited liability company or any other entity or organization, including a government or political subdivision or agency, unit or instrumentality thereof (a "Person") is required with respect to Seller in connection with the execution, delivery or enforceability of this Agreement or the consummation of the transactions provided for hereby, except where the failure to obtain such consent or approval, make such filing or give such notice would not have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller. (d) No Breach. Subject to obtaining the consents and waivers required in connection with certain agreements, contracts, licenses, leases, easements, rights-of-way and permits and except for such matters as would not have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller, the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and the compliance by Seller with any of the provisions hereof does not and will not (i) violate or conflict with, or result in a breach of, any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in termination of, or accelerate the performance required by, or result in the creation of any lien or other encumbrance upon the Purchased Assets under any of the terms, conditions or provisions of the Certificate of Incorporation or By-Laws of Seller or under any material agreement, instrument or obligation to which Seller is a party, or by which the Purchased Assets are otherwise bound, or (ii) violate any order, injunction, judgment, decree or award, federal, state, local or foreign law, ordinance, statute, rule or regulation to which Seller is subject, or by which Seller or its assets or properties may be bound. (e) Real Property. (i) Title to the Real Property is owned in fee by Seller and, when transferred to Buyer, shall be good and marketable, free and clear of all liens and encumbrances, except for: (A) such items as are set forth on Schedule 6(e)(i) attached hereto or the other Schedules attached hereto; (B) mechanics', carriers', workmen's, repairmen's or other like liens arising or incurred in the ordinary course of business, liens arising under original purchase price conditional sales contracts and equipments leases with third parties entered into in the ordinary course of business, liens for taxes and other governmental charges which are not due and payable or which may thereafter be paid without penalty or which are being contested in good faith and liens relating to environmental or safety conditions; (C) other imperfections of title, restrictions or encumbrances, if any, which imperfections -17- of title, restrictions or encumbrances do not, individually or in the aggregate, materially adversely impair the continued use and operation of the assets to which they relate in the operation of the Business as currently conducted by Seller; (D) easements, covenants, conditions, rights-of-way, minor title exceptions and other similar restrictions; (E) any conditions that would be shown on an accurate survey or upon a personal inspection of the Real Property; (F) existing leases, licenses and similar agreements; (G) zoning, building, fire, health, environmental and pollution control laws, ordinances, rules and safety regulations and other similar restrictions; (H) the rights of the owners of outstanding oil, gas and mineral interests and/or their lessees, to explore for, drill, produce and develop said oil, gas and minerals owned by them in, on and under said lands, together with the right to use as much of the surface of said lands as is reasonably necessary to exercise their rights to explore for and extract said oil, gas and minerals from said lands; (I) the exposure restrictions contained in the deeds attached hereto as Exhibit C; and (J) acts done or suffered to be done by, and judgments against, Buyer and those claiming by, through or under Buyer (collectively, (A) through (J) are referred to herein as the "Permitted Liens"). (ii) Subject to the Disclosed Environmental Liabilities, to Seller's knowledge, all water, sewer, gas, steam, electric, telephone and drainage facilities and all other utilities necessary for the operation of the Real Property as it is currently operated by Seller are adequately available to service the Real Property. (iii) To Seller's knowledge, the Real Property has access to a public street adjoining the Real Property, and such access is not dependent on any land or other real property interest which is not included in the Real Property. (iv) There are no Permitted Liens that would have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller. (f) Brokers. Seller has not retained any broker or finder or incurred any liability or obligation for any brokerage fees, commissions, finder's fees or similar compensation with respect to this Agreement or the transactions contemplated hereby, except pursuant to an agreement with Rothschild Inc., for which Seller or another member of the BP Group will be solely responsible. (g) Machinery and Equipment. Other than with respect to items leased from third parties, Seller has, and as of the Closing Buyer will have, valid title to all major items of machinery and equipment included in the Purchased Assets free and clear of all liens and encumbrances, except for Permitted Liens. (h) Compliance With Laws. To Seller's knowledge, other than with respect to Health, Safety and Environmental Laws (which are addressed in Section 7), the Purchased Assets are in compliance in all material respects with all laws, governmental regulations, orders and decrees, as they are currently enforced with respect to the operation of the Business by Seller, except for violations, non-compliance or other matters, if any, which would not have a material adverse effect on the operation of the Business, taken as a whole, as it is currently operated by Seller. -18- (i) Permits. Seller possesses all Permits, licenses and governmental approvals necessary for the operation of the Business, taken as a whole, as it is currently operated by Seller, except (i) for Environmental Permits (which are addressed in Section 7) and (ii) for such Permits, licenses and other governmental approvals the failure to possess would not, individually or in the aggregate, have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller. (j) Intellectual Property. (i) BP Group-Owned Process Technology. Seller or another member of the BP Group has the right to use, and to license to Buyer pursuant to the Technology Agreement, the material BP Group-owned process technology that is used in and necessary for the operation of the Business as it is currently operated by Seller, except for any technology which would not have a material adverse effect on the operation of the Business, taken as a whole, as it is currently operated by Seller. (ii) Non-BP Group-Owned Process Technology. Schedule 1(i) attached hereto contains a true, correct and complete list of all material process technology (which does not include software and related intellectual property matters) not owned by the BP Group that is used in and necessary for the operation of the Business as it is currently operated by Seller. To Seller's knowledge, Seller has not received any notices of, and is not aware of any facts that indicate a likelihood of, any infringement by Seller of any of such non-BP Group-owned process technology rights due to the operation of the Business as it is currently operated by Seller. (k) Actions and Proceedings. Except for such matters as would not have a material adverse effect on the operation of the Business, taken as a whole, as it is currently operated by Seller, and except as set forth on the Schedules attached hereto: (i) there is no action, suit, arbitration proceeding or claim pending, or to Seller's knowledge, threatened against Seller and/or any other member of the BP Group involving or affecting the Purchased Assets, and, other than Permitted Liens, except as set forth in Section 7, there are no decrees, injunctions, liens, orders or judgments of or with any court or governmental department or agency outstanding against Seller and/or any other member of the BP Group relating to or affecting the Purchased Assets; (ii) no action, suit, arbitration or regulatory proceeding is pending, or to Seller's knowledge, threatened seeking to restrain or prohibit this Agreement or any agreement, instrument or transaction contemplated hereby, or to obtain damages, a discovery order or other relief in connection with this Agreement or the transactions contemplated hereby; and -19- (iii) there is no pending, or to Seller's knowledge, threatened condemnation or other governmental taking of any of the Real Property included in the Purchased Assets. (l) Collective Bargaining Agreements. Schedule 6(l) attached hereto sets forth each collective bargaining agreement, contract extension agreement, memorandum of agreement and letter of understanding by or to which any of the Union Employees (as defined in Section 11(a)) is covered or subject. (m) Assets. Except for (i) assets disposed of in the ordinary course of business, (ii) Excluded Assets, permits, licenses and other property rights, and (iii) assets set forth on Schedule 6(m), the Purchased Assets and the assets, properties and rights provided to Buyer pursuant to this Agreement and the other agreements contemplated hereby, include all material assets, other than the intellectual property assets and leases and licenses and other contracts that are not transferable, which are reasonably required to operate the Business immediately following the Closing Date substantially in the manner in which the Business is currently conducted by Seller, except for such assets the failure of which to include would not individually or in the aggregate, have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller. (n) Tangible Assets. The Purchased Assets are free from material defects, have been maintained substantially in accordance with normal industry practice, and are in substantially good operating condition and repair for their age (taking account of their nature, normal wear and tear and continued repair and replacement in accordance with Seller's past practice). 7. ENVIRONMENTAL MATTERS. (a) Environmental Representations and Warranties. Subject to the exceptions, disclaimers and other matters set forth in Section 6 above and Section 8 below, the matters set forth on the Schedules attached hereto, the Disclosed Environmental Liabilities and any other written disclosures made to Buyer at any time prior to the Closing Date, to Seller's knowledge, as of the date hereof and as of the Closing Date: (i) all Environmental Permits necessary for the operation of the Business as it is currently operated by Seller have been obtained and are in effect and, where applicable, applications for renewal thereof have been timely filed, except where the failure to obtain such Environmental Permits or have them in effect or file for such renewals would not, individually or in the aggregate, have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller; (ii) all environmental control equipment necessary for the operation of the Business as it is currently operated by Seller is in substantial compliance with Health, Safety and Environmental Laws, as they are currently enforced with respect to the operation of the Business by Seller, is installed at the Business, and such equipment is operating in a manner sufficient to achieve and maintain such compliance under normal operating conditions, except where the failure to be in such compliance would not have a -20- material adverse effect on the Business, taken as a whole, as it is currently operated by Seller; and (iii) there are no existing or known violations of Health, Safety and Environmental Laws, as they are currently enforced with respect to the operation of the Business by Seller, which, individually or in the aggregate, would have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller. (b) Limitation. The representations and warranties set forth in this Section 7 represent the sole and exclusive representations and warranties of Seller with respect to health, safety or environmental matters, including any matters arising under or relating to Health, Safety and Environmental Laws. 8. DISCLAIMERS. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE INSTRUMENTS, DOCUMENTS AND AGREEMENTS REFERRED TO HEREIN OR EXECUTED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY: (a) NEITHER SELLER NOR ANY OTHER MEMBER OF THE BP GROUP MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO ITSELF, THE BUSINESS, THE REFINERY, THE PURCHASED ASSETS, THE ASSUMED LIABILITIES OR ANY PORTION THEREOF, AND SELLER AND THE OTHER MEMBERS OF THE BP GROUP EXPRESSLY DISCLAIM ANY IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ORDINARY PURPOSE OR ANY REPRESENTATION OR WARRANTY AS TO VALUE; (b) THE PURCHASED ASSETS, INCLUDING THE BUSINESS AND ANY OTHER ASSETS TRANSFERRED TO BUYER PURSUANT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT ARE BEING TRANSFERRED "AS IS, WHERE IS"AND "WITH ALL FAULTS" AND BUYER SHALL RELY UPON ITS OWN EXAMINATION THEREOF; (c) NEITHER SELLER NOR ANY OTHER MEMBER OF THE BP GROUP MAKES ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE CONDITION OF THE BUSINESS, INCLUDING ANY OF THE PURCHASED ASSETS, THE MERCHANTABILITY OF THE BUSINESS, INCLUDING THE PURCHASED ASSETS, THE FITNESS OF ANY ASSETS FOR ANY PURPOSE OR THE ASSIGNABILITY, COMPLETENESS OR CONTIGUITY OF PIPELINE RIGHTS OF WAY, PERMITS, LICENSES AND OTHER PROPERTY RIGHTS, AND SELLER AND THE OTHER MEMBERS OF THE BP GROUP EXPRESSLY DISCLAIM ANY -21- AND ALL SUCH REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE; (d) BUYER EXPRESSLY ACKNOWLEDGES THAT NONE OF SELLER, ANY OTHER MEMBER OF THE BP GROUP OR ANY OTHER PERSON HAS MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, AS TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION REGARDING THE BUSINESS, THE PURCHASED ASSETS OR THE ASSUMED LIABILITIES, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE SCHEDULES HERETO, AND BUYER FURTHER AGREES THAT NONE OF SELLER, ANY OTHER MEMBER OF THE BP GROUP OR ANY OTHER PERSON SHALL HAVE OR BE SUBJECT TO ANY LIABILITY TO BUYER OR ANY OTHER PERSON RESULTING FROM THE DISTRIBUTION TO BUYER, OR BUYER'S USE OF, ANY SUCH INFORMATION, INCLUDING THE CONFIDENTIAL INFORMATION MEMORANDUM, DATED AS OF FEBRUARY 2001 (THE "OFFERING MEMORANDUM"), AND ANY INFORMATION, DOCUMENT OR MATERIAL MADE AVAILABLE TO BUYER IN CERTAIN "DATA ROOMS," MANAGEMENT PRESENTATIONS OR ANY OTHER FORM IN EXPECTATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT; AND (e) BUYER EXPRESSLY ACKNOWLEDGES THE DISCLAIMERS OF SELLER AND THE OTHER MEMBERS OF THE BP GROUP, INCLUDING (I) THOSE SET FORTH IN SECTIONS 8(a), 8(b), 8(c) AND 8(d) ABOVE AND (II) THAT THERE ARE UNCERTAINTIES INHERENT IN ANY ESTIMATES, PROJECTIONS AND OTHER FORECASTS AND PLANS PROVIDED BY SELLER AND OTHER MEMBERS OF THE BP GROUP TO BUYER, INCLUDING ANY SUCH INFORMATION CONTAINED IN THE OFFERING MEMORANDUM, THAT BUYER IS AWARE OF AND FAMILIAR WITH SUCH UNCERTAINTIES AND THAT BUYER TAKES FULL RESPONSIBILITY FOR MAKING ITS OWN EVALUATION OF THE ADEQUACY AND ACCURACY OF ANY SUCH ESTIMATES, PROJECTIONS AND OTHER FORECASTS AND PLANS (INCLUDING THE REASONABLENESS OF THE ASSUMPTIONS UNDERLYING SUCH ESTIMATES, PROJECTIONS AND FORECASTS) IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. ACCORDINGLY, NEITHER SELLER NOR ANY OTHER MEMBER OF THE BP GROUP MAKES ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO SUCH ESTIMATES, PROJECTIONS AND OTHER FORECASTS AND PLANS (INCLUDING THE REASONABLENESS OF THE ASSUMPTIONS UNDERLYING SUCH ESTIMATES, PROJECTIONS AND FORECASTS). BUYER ACKNOWLEDGES THAT IT HAS HAD SUFFICIENT OPPORTUNITY TO MAKE WHATEVER INVESTIGATION IT HAS DEEMED NECESSARY AND ADVISABLE FOR PURPOSES OF DETERMINING WHETHER OR NOT TO ENTER INTO THIS AGREEMENT. -22- 9. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby represents and warrants to Seller as of the date of this Agreement and as of the Closing Date (except with respect to those representations and warranties that speak as to a particular date or time, which need only be true and correct as of such date or time) as set forth below: (a) Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) Authority. Buyer has the corporate power and authority to enter into this Agreement and the transactions contemplated hereby and to carry out its obligations hereunder. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly authorized and executed by Buyer, and this Agreement constitutes a valid and binding agreement of Buyer enforceable against Buyer, in accordance with its terms, except as such enforceability is limited by general principles of equity and applicable provisions of bankruptcy, insolvency, moratorium, reorganization or similar laws. (c) Consents. Other than with respect to the H-S-R Act, no consent, approval of or by, or filing with or notice to any other Persons is required with respect to Buyer in connection with the execution, delivery or enforceability of this Agreement or the consummation of the transactions provided for hereby. (d) No Breach. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and the compliance by Buyer with any of the provisions hereof does not and will not: (i) violate or conflict with, or result in a breach of, any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in termination of, or accelerate the performance required by any of the terms, conditions or provisions of the Certificate of Incorporation or By-Laws or other organizational documents of Buyer or under any material agreement, instrument or obligation to which Buyer is a party or (ii) violate any order, injunction, judgment, decree or award, federal, state, local or foreign law, ordinance, statute, rule or regulation to which Buyer is subject, or by which Buyer or its assets or properties may be bound. (e) Litigation. No action, suit, arbitration or regulatory proceeding is pending or, to Buyer's knowledge, threatened seeking to restrain or prohibit this Agreement, or any agreement, instrument or transaction contemplated hereby, or to obtain damages, a discovery order or other relief in connection with this Agreement or the transactions contemplated hereby. (f) Brokers. Buyer has not retained any broker or finder or incurred any liability or obligation for any brokerage fees, commissions, finders' fees or similar compensation with respect to this Agreement or the transactions contemplated hereby, except pursuant to an arrangement with Bank of America, N.A. and its affiliates for which Buyer is solely responsible. (g) Availability of Funds. At Closing, Buyer will have cash, or cash equivalents, available to enable it to consummate the transactions contemplated by this Agreement, to operate -23- the Business for the reasonably foreseeable future and to meet the Business's financial obligations as such are presently known or reasonably anticipated. (h) No Knowledge of Misrepresentations or Omissions. Buyer has no knowledge that any representation or warranty of Seller in this Agreement or any agreement contemplated hereby is not true and correct in all material respects, and Buyer has no knowledge of any material errors in, or material omissions from, the Schedules to this Agreement or the schedules, exhibits or attachments to any agreement contemplated hereby. 10. COVENANTS. (a) Covenants of Seller. Seller covenants and agrees as follows: (i) Access and Information. Subject to the provisions of the letter agreement between Buyer and Seller with respect to confidentiality dated on or about December 18, 2000 (the "Confidentiality Agreement") and upon reasonable notice, Seller shall grant, or cause to be granted to, Buyer access during normal business hours throughout the period between the date of this Agreement and the Closing Date to the Business and the books and records and other information relating to the operations of the Business. During this period, Seller shall use all commercially reasonable efforts to furnish, or cause to be furnished to, Buyer and its representatives all data and information concerning the Business (the "Data") and concerning operations of the Business which may reasonably be requested by Buyer and shall use all commercially reasonable efforts to make available, or cause to be made available, such personnel of Seller as may reasonably be requested for the furnishing of such Data. During this period, Buyer shall not contact or communicate with any employees, customers, suppliers or distributors of the Business without Seller's prior written consent. Buyer shall indemnify and hold Seller and its affiliates harmless against any and all Losses suffered in connection with the exercise of Buyer's rights under this Section 10(a)(i). Notwithstanding any provision in this Agreement to the contrary, Buyer's obligations under this Section 10(a)(i) shall survive the termination of this Agreement and the consummation of the transactions contemplated hereby. (ii) Conduct of Business. Except as provided on the Schedules attached hereto, Seller shall: operate the Business in the ordinary course of business consistent with past practice or as described in the Offering Memorandum; use commercially reasonable efforts to maintain satisfactory relationships with employees, suppliers, distributors, customers, collective bargaining units and others having business relationships with the Business; use commercially reasonable efforts to maintain the Purchased Assets in reasonably good operating condition, normal wear and tear excepted; maintain its inventory of supplies, parts and other materials and inventories and keep its books of account records and files, in each case in the ordinary course of business consistent with past practice; refrain from (A) amending, modifying, waiving any rights under or terminating (or allowing to terminate) any material contract, except in the ordinary course of business, (B) disposing of, encumbering, selling or otherwise transferring any of the material assets -24- constituting Purchased Assets or other rights of the Business, except sales of inventory in the ordinary course of business, (C) commencing any new capital projects or making any additional commitments for capital expenditures relating to the Business in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate, except in connection with certain scheduled turnarounds, and except as reasonably required to comply with the Project Sunshine Consent Decree, or (D) granting or agreeing to grant any bonus to any employees of the Business, except for any bonus approved prior to the date hereof or made in the ordinary course of business, or enter into any contract of employment involving aggregate annual salary in excess of Two Hundred Thousand Dollars ($200,000), collective bargaining agreement or other labor contract with respect to any such employees outside the ordinary course of business; provided that Seller may take any action to which Buyer consents (which consent shall not be unreasonably withheld). (iii) Schedules. Prior to the Closing Date, Seller shall notify Buyer of additions or changes to the Schedules to this Agreement required to reflect events since the date of this Agreement or facts discovered by Seller after the date hereof, so as to cause Seller's representations and warranties contained herein (other than any which speak as to a particular date) to be true and correct in all material respects as of the Closing Date. Notices given by Seller pursuant to this Section 10(a)(iii) will be deemed to have amended the Schedules, to have qualified the representations and warranties contained in Sections 6 and 7, and to have corrected any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the fact, circumstance, event or development (with the result that no misrepresentation or breach shall be deemed to have occurred), in each case to the extent of the disclosure contained in such notice, including for purposes of Section 12(b). If such additions or changes would have a material adverse effect on the Business, taken as a whole, as it is currently operated by Seller, the parties shall negotiate in good faith to determine a reasonable adjustment to the Purchase Price to fully reflect any Losses actually incurred by Buyer resulting from such matters. (iv) Confidentiality. After the Closing, Seller shall maintain the confidentiality of all information, documents and materials relating exclusively to the Business, including all such materials which remain in the possession of Seller, except to the extent that disclosure of any such information is requested or required by law (by oral questions, interrogatories, requests for information or other documents in legal proceedings, subpoena, civil investigative demand or any other similar legal process) or legal or administrative process or authorized by Buyer or reasonably occurs in connection with disputes over the terms of this Agreement. The provisions of this Section 10(a)(iv) shall not apply to any information, documents or materials which are in the public domain or shall come into public domain, other than by reason of a breach by the Seller of its obligations hereunder. Furthermore, notwithstanding the foregoing, Seller shall be permitted to disclose any confidential information (i) to any other member of the BP Group or (ii) as required to operate Seller's ongoing business; provided such member shall comply with the terms of this Section 10(a)(iv). In addition, Seller shall be permitted to disclose this Agreement in order to satisfy its obligations under the Terminal Agreement. -25- (b) Covenants of Buyer. Buyer covenants and agrees as follows: (i) Confidentiality. (A) Buyer acknowledges that all information provided to any of it and its affiliates, directors, officers, employees, counsel, auditors, accountants, agents, advisors and other representatives by Seller and other members of the BP Group and their respective directors, officers, employees, counsel, auditors, accountants, agents, advisors and other representatives is subject to the terms of the Confidentiality Agreement, the terms of which are hereby incorporated herein by reference. Effective upon, and only upon, the Closing, the Confidentiality Agreement shall terminate only with respect to information provided to any of Buyer and its affiliates, directors, officers, employees, counsel, auditors, accountants, agents, advisors and other representatives that relates solely to the Business, the Purchased Assets and the Assumed Liabilities; provided that Buyer acknowledges that any and all information provided or made available to it and its affiliates, directors, officers, employees, counsel, auditors, accountants, agents, advisors and other representatives by or on behalf of Seller (other than information relating solely to the Purchased Assets and the Assumed Liabilities) shall remain subject to the terms and conditions of the Confidentiality Agreement on and after the Closing Date. (B) Buyer agrees that, from and after the Closing Date, Buyer shall, and shall cause its affiliates, directors, officers, employees, counsel, auditors, accountants, agents, advisors and other representatives to, keep the Seller Information confidential following the Closing Date, except to the extent that disclosure of any such Seller Information is requested or required by law (by oral questions, interrogatories, requests for information or other documentation in legal proceedings, subpoena, civil investigative demand or any other similar legal process) or legal or administrative process or authorized by Seller or reasonably occurs in connection with disputes over the terms of this Agreement. The provisions of this Section 10(b)(i)(B) shall not apply to any information, documents or materials which are in the public domain or shall come into the public domain, other than by reason of a breach by Buyer of its obligations hereunder or under the Confidentiality Agreement. Furthermore, notwithstanding the foregoing, Buyer shall be permitted to disclose the Seller -26- Information to any of its affiliates. In connection with the Transferred Employees, Buyer shall use commercially reasonable efforts, at Seller's request and at Buyer's expense, to enforce existing confidentiality agreements and rights requiring employees to keep trade secrets confidential. For purposes of this Agreement, "Seller Information" shall mean all information concerning Seller and/or any other member of the BP Group, other than information that relates exclusively to the Business, the Purchased Assets and the Assumed Liabilities and other than any such information that is available to the public on the Closing Date, or thereafter becomes available to the public, other than as a result of a breach of this Section 10(b)(i). (ii) Notification. From the date hereof through and including the Closing Date, Buyer shall promptly notify Seller if Buyer obtains knowledge that any representation or warranty of Seller in this Agreement or any agreement contemplated hereby or information set forth in the Schedules hereto is not true and correct in all material respects, or if Buyer obtains knowledge of any material errors in, or omissions from, the Schedules to this Agreement. (iii) Litigation. With respect to all litigation and other matters set forth on the Schedules attached hereto and any other matters that constitute Excluded Liabilities and for so long as Seller is contesting or defending such matter, Buyer shall cooperate in all respects with Seller and other members of the BP Group and their respective counsel in their efforts to conduct or resolve such litigation, including by making available to them such documents and witnesses as may be deemed necessary or useful therefor in Seller's sole but reasonable discretion. With respect to any dispute or litigation involving any terminated Employee seeking reinstatement, Buyer shall take such actions as are necessary for Seller to comply with the terms of any judgment, decision or order of any proper authority issued in connection with such dispute or litigation (including by offering to employ such former Employee) and shall treat any former Employee who is ordered to be reinstated as a Transferred Employee for all purposes hereunder. (iv) Title Policies. Buyer may procure, and shall pay the cost of the premium for commitments or policies from title insurance companies to provide owner's title insurance policies with respect to the portions of the Purchased Assets constituting real property, provided, however, that Buyer's ability or inability to obtain title insurance (and without regard to (i) any exceptions contained therein and (ii) any title insurance premium Buyer is required to pay in order to obtain such title insurance) on such real property for any reason shall not cause there to be an adjustment to the Purchase Price and shall not cause the Closing of the transactions contemplated by this Agreement to be delayed. (v) Removal of Seller Marks. Buyer agrees that, within three (3) months after the Closing Date, Buyer shall (i) remove, obliterate, cover or replace, as appropriate, all -27- signs, billboards, containers, drums, advertisements or other media containing any service marks, trade names, trade dress or other indicia of origin of Seller or any member of the BP Group, including the words "Amoco" and "Standard," any items that include the words "Amoco" or "Standard," the BP Group torch and oval design, the letters "BP," any items that include the word "BP," the phrase "BP Oil," the BP Group shield or the BP Group Helios logo or variants thereof located on or appurtenant to any of the Purchased Assets, including signs, billboards and advertisements or other media located at the Business and (ii) return to Seller, or at Seller's option, destroy (and certify such destruction to Seller) all items and materials, including stationery, letterhead and purchase orders, located at any of the Purchased Assets containing the above described marks. (vi) Project Sunshine Consent Decree. Buyer represents and warrants that it has received a copy of the Project Sunshine Consent Decree and that it has the financial and technical capability to assume the obligations set forth in the Project Sunshine Consent Decree with respect to the Purchased Assets. Buyer covenants and agrees that prior to or at the Closing it will execute and deliver a modification to the Project Sunshine Consent Decree, in substantially the form attached hereto as Exhibit F, or otherwise satisfactory to Seller and the United States of America, pursuant to which Buyer shall agree to be bound by the terms and conditions of the Project Sunshine Consent Decree applicable to the Purchased Assets, and Buyer further covenants and agrees that from and after the Closing Date it shall comply in all respects with those provisions of the Project Sunshine Consent Decree (including any amendments, supplements or revisions thereto) relating to the operation, maintenance, insurance, and use of the Refinery and the Business and assume all costs and expenses associated therewith, and Buyer shall be responsible and liable for all costs and expenses arising from or relating in any way to compliance with the Project Sunshine Consent Decree as it relates to the Business. Buyer further agrees that the provisions of this paragraph shall be binding upon (A) any successors or assigns of Buyer, (B) any transferees of all or any portion of the Business and (C) any grantee of rights of use and/or operation thereof. Prior to transferring any interest in the Business, Buyer shall deliver to Seller written evidence satisfactory to Seller that such transferee has agreed to assume and has the financial and technical capability to assume the obligations set forth in the Project Sunshine Consent Decree with respect to the Purchased Assets. (vii) Novation Agreement. Buyer covenants and agrees that on the Closing Date it will execute and deliver to Seller a novation agreement, substantially in the form of Exhibit E attached hereto, to be bound by the terms and conditions of, and become a party to, the Terminal Agreement. (viii) Conduct of Business. For the period during which Buyer is obligated under this Agreement to make Margin Payments, Buyer shall operate the Business in the ordinary course of business generally consistent with the manner in which a reasonably prudent petroleum refining industry operator would operate the Business. (c) Mutual Covenants. Buyer and Seller covenant and agree as follows: -28- (i) H-S-R. Buyer and Seller shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the H-S-R Act with respect to the transactions contemplated hereby, and Buyer and Seller shall bear the costs and expenses of their respective filings; provided that Buyer and Seller shall each pay 50% of the filing fee in connection therewith. Buyer and Seller shall use their respective reasonable best efforts to make such filings promptly (and in any event within ten (10) business days) following the date hereof, to respond promptly to any requests for additional information and documentary materials made by either of such agencies, to make any further filings that may be necessary, proper or advisable in connection therewith and to cause the waiting periods under the H-S-R Act to terminate or expire at the earliest possible date and to resist in good faith, at each of their respective cost and expense (including the institution or defense of legal proceedings), any assertion that the transactions contemplated hereby constitute a violation of the antitrust laws, all to the end of expediting consummation of the transactions contemplated hereby. Each of Buyer, on the one hand, and Seller, on the other, shall consult with the other prior to any meetings, by telephone or in person, with the staff of the applicable governmental authorities, and each of Buyer and Seller shall have the right to have a representative present at any such meeting. (ii) Assignments. (A) With respect to any agreement, contract, license, lease, easement, right-of-way or Permit which (1) is material to the operation of the Business as it is currently operated by Seller, (2) is intended to be assigned to Buyer hereunder and (3) requires consent for the assignment thereof to Buyer, Seller shall take such actions as are commercially reasonable and necessary, and Buyer shall cooperate fully with Seller in all commercially reasonable respects, to effect assignment thereof to Buyer as of the Closing Date. It is understood that such actions by Seller shall not include any requirement of Seller to expend money, commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party. In the event that Seller is unable to obtain the requisite approval for assignment of any such agreement, contract, license, lease, easement, right-of-way or Permit, or in the event such agreement, contract, license, lease, easement, right-of-way or Permit is required to be amended or supplemented and is not so amended or supplemented as of the Closing Date, and such assignment is reasonably necessary to conduct the Business in the ordinary course of business without giving rise to a material adverse effect on the Business, at the written request of Buyer on or before the Closing Date (except where such action would be unlawful or prohibited by such agreement, contract, license, lease, -29- easement, right-of-way or Permit), Seller shall (x) retain any such agreement, contract, license, lease, easement, right-of-way or Permit and shall enter into an arrangement with Buyer to provide Buyer with the benefits of such agreement, contract, license, lease, easement, right-of-way or Permit, provided, that Buyer shall perform Seller's obligations thereunder arising on or after the Closing Date (and indemnify Seller against Losses suffered in connection therewith) until such agreement, contract, license, lease, easement, right-of-way or Permit is assigned to Buyer or expires at the earliest opportunity in accordance with its terms, or is properly amended or supplemented, and (y) take all commercially reasonable and necessary actions required to assign to Buyer, or amend or supplement, any such agreement, contract, license, lease, easement, right-of-way or Permit as soon as practicable after the Closing Date. (B) Notwithstanding Seller's obligations pursuant to Section 10(c)(ii)(A), the assignment of any agreement, contract, license, lease, easement, right-of-way or Permit to be transferred to Buyer which requires consent for assignment, or amendment or supplement, may be effected after the Closing Date. Except as otherwise provided in this Agreement, the Purchase Price shall not be subject to adjustment, and the Closing of the transactions contemplated by this Agreement shall not be delayed, by reason of any inability to obtain consent for assignment of any agreement, contract, license, lease, easement, right-of-way or Permit or any such amendment or supplement. Buyer acknowledges that certain consents to the transactions contemplated by this Agreement may be required from parties to agreements, contracts, licenses, leases, easements, rights-of-way or Permits (written or otherwise) to which any of Seller or other member of the BP Group is a party, and such consents may not be obtained (provided that Seller has complied with its obligations under this Section 10(c)(ii)). Buyer agrees that Seller shall not have any liability whatsoever to Buyer arising out of or relating to the failure to obtain any consents that may have been or may be required in connection with the transactions contemplated by this Agreement or because of the default, acceleration or termination of any such agreement, contract, license, lease, easement, right-of-way or Permit as a result thereof (provided that Seller has complied with its obligations under this Section 10(c)(ii)). Buyer further agrees that no representation, warranty or covenant of Seller contained herein shall be breached or deemed breached and no condition of Buyer shall be deemed not to be satisfied as a result of the failure -30- to obtain any consent or as a result of any such default, acceleration or termination or any lawsuit, action, claim, proceeding or investigation commenced or threatened by or on behalf of any persons arising out of or relating to the failure to obtain any consent or any such default, acceleration or termination (provided that Seller has complied with its obligations under this Section 10(c)(ii)). (C) With respect to any agreement, contract, license, lease, easement, right-of-way or Permit that may not be properly assigned to Buyer because of the failure to obtain a required consent or that may not be operated or used by Seller for Buyer's benefit, Buyer shall indemnify, defend and hold harmless Seller and the other members of the BP Group from and against any liability that Seller or any other members of the BP Group may have in connection with such nontransferred agreements, contracts, licenses, leases, easements, rights-of-way or Permits as a result of the transactions contemplated by this Agreement; provided that, for the avoidance of doubt, it is expressly understood and agreed that in the event Seller is unable to provide Buyer the benefits of any such agreement, contract, license, lease, easement, right-of-way or Permit, Buyer shall not be required to indemnify Seller against Losses suffered in connection therewith until and to the extent Seller, with full cooperation from Buyer in all respects, is able to provide Buyer the benefit of any such agreement, contract, license, lease, easement, right-of-way or Permit. (iii) Transition Services Agreement. In the event Buyer and Seller agree that transition services will be necessary after the Closing, Buyer and Seller shall negotiate in good faith to execute and deliver at the Closing a Transition Services Agreement substantially in the form attached hereto as Exhibit D (the "Transition Services Agreement"). Promptly following the execution of this Agreement, representatives of Buyer and Seller shall meet to develop a transition plan which shall identify services, service periods (not to exceed six (6) months) and service charges to be provided pursuant to the terms and conditions of the Transition Services Agreement and which will, to the extent practicable, be completed prior to the Closing. (iv) Other Governmental Approvals. Buyer and Seller shall cooperate with each other and take all reasonable steps necessary to obtain authorization for the sale of the Business from all other applicable governmental authorities. (v) Other Actions. Buyer and Seller shall otherwise use their respective commercially reasonable efforts to cause the satisfaction of all conditions precedent in this -31- Section 10 and Sections 12 and 13 and the Closing to occur as soon as reasonably practicable after the date of this Agreement. (vi) Use of Certain Facilities. Buyer acknowledges that the environmental facilities listed on Schedule 10(c)(vi) (the "Environmental Facilities"), part of the Purchased Assets, were constructed and equipped using the proceeds from the sale of (A) $1,000,000 Industrial Development Authority of York County, Virginia Environmental Control Revenue Bonds (Amoco Oil Company Project), Series 1977 and (B) $2,800,000 Industrial Development Authority of York County, Virginia Pollution Control Revenue Bonds (Amoco Oil Company Project), Series 1977 (collectively, the "Environmental Control Bonds"). As set forth in Section 4(b)(vi), the Environmental Control Bonds are Excluded Liabilities. Buyer hereby covenants and agrees that from and after the Closing Date, it shall (1) use the Environmental Facilities in a manner so as to continue the tax-exempt status of the Environmental Control Bonds in accordance with Section 103(b) of the Internal Revenue Code of 1954, as amended, and in full compliance with the use requirements set forth in the agreements governing the Environmental Control Bonds and other tax certifications relating to the Environmental Control Bonds, and (2) comply with all applicable agreements securing the Environmental Control Bonds relating to the operation, maintenance, insurance, use, removal of liens, payment of taxes and keeping of records with respect to the Environmental Facilities. Prior to Closing, Seller shall furnish Buyer with copies of the agreements governing the Environmental Control Bonds and tax certifications relating to the Environmental Control Bonds. Buyer agrees that it shall take all actions necessary to ensure that the provisions of this Section 10(c)(vi) shall be binding upon (i) any successors and assigns of Buyer, (ii) any transferee of all or any portion of the Environmental Facilities, and (iii) any grantee of rights of use and/or operation thereof. Buyer further agrees that it will cooperate with Seller in any refunding of the Environmental Control Bonds by providing Seller with information reasonably requested by Seller related to any such refunding bonds on a tax-exempt basis. 11. EMPLOYEES. (a) Employees. Schedule 11(a) attached hereto contains a list of all employees of Seller or other members of the BP Group directly employed in the operation of the Business (collectively, the "Employees"), including employees who are receiving short-term disability benefits or are on family and medical, medical/long-term disability, administrative or military leave or any other type of leave that entitles the employee to reinstatement upon completion of the leave under the applicable leave policies of Seller or other members of the BP Group (collectively, "Leave"). Schedule 11(a) sets forth both Employees represented by Local 2-10 of the Paper, Allied-Industrial, Chemical and Energy Workers International Union (the "Union") and the Employee membership of the Union ("Union Employees") and Employees not represented by the Union ("Non-Union Employees"). Seller shall be entitled to update Schedule 11(a) as necessary at any time prior to Closing to reflect any and all employment changes. -32- (b) Employment Offers to Active Non-Union Employees and to All Union Employees. No later than ten (10) days after the date of this Agreement (and not later than five (5) days after any update of Schedule 11(a)), Buyer shall offer employment with Buyer, effective as of the Closing Date, to all active Non-Union Employees and to all Union Employees at the same or better salaries or wages, with similar duties and responsibilities, at the same location and on the same status (e.g., full-time or part-time) as provided by Seller or other members of the BP Group immediately prior to the Closing Date. All Employees who accept employment with Buyer pursuant to the offers described either in this Section 11(b) or in Section 11(c) are referred to herein as "Transferred Employees." Transferred Employees who are Union Employees are also referred to herein as "Union Transferred Employees," and Transferred Employees who are Non-Union Employees are also referred to herein as "Non-Union Transferred Employees." Buyer shall not reduce any Transferred Employee's initial salary or wages as an employee of Buyer during the 12-month period after the Closing Date. Buyer will give each active Non-Union Employee and each Union Employee no less than seven (7) days in which to accept or reject Buyer's employment offer. (c) Employment Offers to Non-Union Employees on Leave. In addition, no later than ten (10) days after the date of this Agreement, Buyer shall offer employment with Buyer to each Non-Union Employee who is on Leave as of the Closing Date, commencing at such time as such Non-Union Employee is ready to return to work, at the same or better salaries or wages, with similar duties and responsibilities, at the same location and on the same status (e.g., full-time or part-time) as provided by Seller or other members of the BP Group immediately prior to the commencement of such Non-Union Employee's Leave; provided, however, that such Non-Union Employee is ready to return to work within one hundred twenty (120) days after the Closing Date. Buyer will give each Non-Union Employee on Leave no less than seven (7) days in which to accept or reject Buyer's employment offer. (d) Transfer Time. All Transferred Employees shall become employees of Buyer as of 12:01 a.m., Central Time, on the Closing Date and except as otherwise provided herein, at such time, Buyer shall assume and be responsible for payment of all salaries and benefits and all other costs and liabilities relating to the Transferred Employees, except that with regard to a Non-Union Employee on Leave, such obligations shall not attach until the Non-Union Employee on Leave commences employment with Buyer. (e) Level of Employee Benefits Provided by Buyer. Buyer shall provide to all Non-Union Transferred Employees employee benefits in accordance with employee benefit plans (such as defined benefit plans, defined contribution plans and welfare benefit plans), programs, policies and pay practices (such as vacations, bonuses and short-term disability leaves) which shall be the same as or better than the benefits provided to substantially similar employees of Buyer and its affiliates. No later than the Closing Date, Seller will provide to Buyer the Transferred Employees' recognized credited service, and participation, vesting and, as applicable, benefit accrual periods of service amounts, with Seller or other members of the BP Group as of immediately prior to the Closing Date. -33- (f) Pension Plans. Buyer agrees that, effective as of the Closing Date, Buyer will sponsor a defined benefit pension plan ("Buyer Pension Plan"), as defined under Section 3(35) of the Employee Retirement Income Security Act of 1974, as amended, with respect to Transferred Employees who participate in the BP Retirement Accumulation Plan ("BP RAP") prior to the Closing Date. The Buyer Pension Plan will provide that (i) such Transferred Employees will be eligible to participate in the Buyer Pension Plan as of the Closing Date, and (ii) such Transferred Employees will be given service credit equal to the number of years of participation and vesting periods of service such Transferred Employees have under the BP RAP. The Buyer Pension Plan also will grant service for benefit accrual service equal to the number of years of benefit accrual service for those Transferred Employees who have an accrued benefit in the BP RAP and may provide that the age 65 single life annuity payable to Transferred Employees under the Buyer Pension Plan may be offset by the amount of the age 65 single life annuity payable to such Transferred Employees under the BP RAP. In no event shall the age 65 single life benefit accrued under the Buyer Pension Plan for Transferred Employees be less than the benefit such Transferred Employees would receive if only service with Buyer were recognized under the Buyer Pension Plan. The Buyer Pension Plan may include such other terms and provisions as shall be determined by Buyer in its sole discretion to the extent not inconsistent with this Section 11(f). Seller agrees to furnish on a timely basis such information with regard to benefits payable to Transferred Employees under the BP RAP and such other information as Buyer may from time to time, within one (1) year after the Closing Date, reasonably request for purposes of complying with this Section 11(f). (g) Defined Contribution Plans. Buyer agrees that, effective as of the Closing Date, Buyer's defined contribution plan that Transferred Employees participate in shall be amended to recognize such Transferred Employees' participation and vesting periods of service with Seller and other members of the BP Group for purposes of determining participation, vesting and the level of company contributions. (h) Welfare Benefits and Other Benefits and Policies. For each Transferred Employee who participates in any welfare benefit plan, or is subject to any policy or pay practice, of Buyer, both Buyer and the applicable welfare benefit, policy and pay practice (i) shall recognize the Transferred Employee's recognized credited service amounts with Seller and other members of the BP Group for all purposes including eligibility, vesting and benefit determination and accrual; (ii) shall not require a physical examination or other proof of insurability, and shall waive all coverage exclusions and limitations relating to waiting periods or pre-existing conditions, with respect to any of the Transferred Employees or any dependent covered by Seller's and other members of the BP Group's comparable welfare benefit plan, policy or pay practice in effect as of the Closing Date; and (iii) shall credit the expenses of the Transferred Employees which were credited toward deductibles or co-payments for the year in which the Closing occurs under the applicable welfare benefit plan of Seller or other members of the BP Group against satisfaction of any deductibles or co-payments for the year in which the Closing occurs under Buyer's medical welfare benefit plan for the Transferred Employees. -34- (i) Vacation. Seller shall be responsible for paying the Transferred Employees for any vacation due as of the Closing Date under the applicable vacation policy of Seller or other members of the BP Group (the "Seller Vacation Policy"). Buyer will provide Transferred Employees who, based upon the recognized credited service amounts of such Transferred Employees with Seller or other members of the BP Group, were eligible for a greater amount of annual vacation under the Seller Vacation Policy than they are under Buyer's vacation policy even after Buyer recognizes such Transferred Employees' credited service amounts, with their Seller annual vacation amount. Between the Closing Date and the end of the year in which the Closing occurs, Buyer shall permit all Transferred Employees to take the same number of days of vacation on an unpaid basis as they would have been eligible to take immediately prior to the Closing Date under the Seller Vacation Policy based upon the recognized credited service amounts of such Transferred Employees with Seller or other members of the BP Group. (j) Severance. Buyer shall establish a severance policy substantially similar to the 2001 BP Severance Benefits Plan (the "BP Severance Plan") with respect to any Non-Union Transferred Employee who has actions taken against such Non-Union Transferred Employee within twelve (12) months after the Closing Date that would make the Non-Union Transferred Employee eligible for severance benefits under the involuntary terminations section of the BP Severance Plan. Buyer's severance policy established under this Section 11(j) shall recognize the Non-Union Transferred Employees' recognized credited service amounts with Seller or other members of the BP Group. (k) Buyer's Adoption of Collective Bargaining Agreement. Buyer will recognize the Union as the exclusive representative of the Union Transferred Employees and will adopt all collective bargaining agreements between Seller and the Union and all existing contract extension agreements, memoranda of agreement, letters of understanding and similar agreements and instruments (collectively, the "CBA"), except that Buyer is not required to continue the existing employee benefit plans provided for under any applicable provisions of the CBA. If Buyer does not continue said existing employee benefit plans, Buyer will comply with the terms of the Letter of Understanding-Successorship attached hereto as Schedule 11(k) relating to establishing and implementing an alternate package of benefit plans and shall indemnify the Seller Indemnified Parties against any Losses caused by, arising from, incurred in connection with or relating in any way thereto. (l) WARN Act. Buyer represents and warrants to, and covenants with, Seller that there will be no major employment losses as a consequence of the transactions contemplated by this Agreement that might trigger obligations under the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101 et. seq., or under any similar provision of any federal, state, regional, foreign or local law, rule or regulation (collectively, "WARN Obligations"). To the extent that any WARN Obligations might arise as a consequence of the transactions contemplated by this Agreement, Buyer shall be responsible for, and shall indemnify the Seller Indemnified Parties against any Losses caused by, arising from, incurred in connection with or relating in any way to, any WARN Obligations arising as a result of any employment losses occurring on or after the Closing Date. For ninety (90) days following the Closing Date, Buyer shall not engage in any mass -35- layoff, plant closing or other action that might trigger WARN Obligations of Seller or any other member of the BP Group. (m) Service Credit. From and after the Closing Date, the Transferred Employees shall be given credit for their service recognized by Seller or other members of the BP Group prior to the Closing Date for all purposes, including eligibility, vesting and benefit determination and accrual under all applicable plans and programs of Buyer as well as for purposes of determining any vacation, severance or other related benefits to be provided pursuant to the manner described above. (n) Benefits Miscellaneous. Notwithstanding the foregoing, Buyer shall not be liable for any obligations arising out of participation by Transferred Employees in the Employee Benefit Plans of Seller. 12. BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to close under this Agreement is subject to the fulfillment on or prior to the Closing Date of each of the following conditions (except to the extent that Buyer shall have hereafter agreed in writing to waive one or more of such conditions). (a) Compliance with Agreement. Seller shall have performed and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Seller prior to the Closing Date. (b) Representations and Warranties. The representations and warranties of Seller made in this Agreement (as amended by Seller in accordance with Section 10(a)(iii)) shall be true and correct in all material respects as of the date hereof and on and as of the Closing Date, as though made on and as of the Closing Date, except for representations and warranties that speak as of a specific date or time (which need only be true and correct as of such date or time). Seller shall have performed or complied in all material respects with the obligations and covenants required by this Agreement to be performed or complied with by Buyer by the time of the Closing. (c) Litigation. There shall not be any judicial restraining order or injunction, preliminary or otherwise, in effect prohibiting the Closing of the transactions contemplated by this Agreement. There shall not be pending or threatened any litigation or proceeding instituted by any federal, state or foreign governmental agency to restrain, prohibit or otherwise interfere with or obtain substantial monetary damages in connection with the consummation of the transactions contemplated by this Agreement, or operation of the Business by Buyer after the Closing Date. (d) Governmental Consents. The applicable waiting period under the H-S-R Act and any extension thereof shall have terminated or expired, without a challenge to the transactions contemplated by this Agreement, and the transactions contemplated by this Agreement shall have been authorized by applicable governmental authorities. -36- 13. SELLER'S OBLIGATION TO CLOSE. Seller's obligation to close under this Agreement is subject to the fulfillment on or prior to the Closing Date of each of the following conditions (except to the extent that Seller shall have hereafter agreed in writing to waive one or more of such conditions). (a) Compliance with Agreement. Buyer shall have performed and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Buyer prior to the Closing Date. (b) Representations and Warranties. The representations and warranties of Buyer made in this Agreement shall be true and correct in all material respects as of the date hereof and on and as of the Closing Date, as though made on and as of the Closing Date, except for representations and warranties that speak as of a specific date or time (which need only be true and correct as of such date or time). Buyer shall have performed or complied in all material respects with the obligations and covenants required by this Agreement to be performed or complied with by Buyer by the time of the Closing. (c) Litigation. There shall not be any judicial restraining order or injunction, preliminary or otherwise, in effect prohibiting the Closing of the transactions contemplated by this Agreement. There shall not be pending or threatened any litigation or proceeding instituted by any federal, state or foreign governmental agency to restrain, prohibit or otherwise interfere with or obtain substantial monetary damages in connection with the consummation of the transactions contemplated by this Agreement, or the operation of the Business by Buyer after the Closing Date. (d) Governmental Consents. The applicable waiting period under the H-S-R Act and any extension thereof shall have terminated or expired, without a challenge to the transactions contemplated by this Agreement, and the transactions contemplated by this Agreement shall have been authorized by applicable governmental authorities. (e) Right of First Refusal. Seller shall be satisfied, in its sole discretion, that (i) VEPCO has consented to the transactions contemplated by this Agreement or has waived or elected not to exercise rights it may have with respect to the transactions contemplated by this Agreement in accordance with the terms and provisions of the Terminal Agreement or (ii) Seller has complied fully with its obligations under the Terminal Agreement. 14. FURTHER ASSURANCES. From time to time, as and when reasonably requested by any party hereto, each party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions (subject to the limitations set forth in Section 10(c)(ii)), which documents, instruments or actions are consistent with, and customary and necessary for, the consummation of the transactions contemplated by this Agreement. 15. INDEMNIFICATION. -37- (a) Buyer's Indemnification of Seller. Except as otherwise provided herein and subject to the provisions of this Section 15, from and after the Closing Date, Buyer shall indemnify, defend, save and hold harmless, Seller, the other members of the BP Group, and their respective directors, officers, employees, shareholders, partners, counsel, auditors, accountants, agents, advisors and other representatives and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "Seller Indemnified Parties"), from and against any and all Losses of any kind which are caused by, arise from, are incurred in connection with or relate in any way to: (i) the ownership of the Purchased Assets, including the Refinery and all of the other Purchased Assets, and the operation of the Refinery on and after the Closing Date, including those Losses arising under, any foreign, federal, state or local laws or regulations, or any contract, warranty, tort or other theory of law; (ii) Buyer's modification of any technology, software, know-how or proprietary information transferred or licensed to Buyer pursuant to the Technology Agreement; (iii) (A) Buyer's breach of or failure to perform any covenant or agreement in this Agreement requiring performance by Buyer on or after the Closing Date (including any discontinuance, suspension or modification of any compensation or employee benefit plan or program maintained by Buyer as contemplated by Section 11); or (B) Buyer's breach of any representation or warranty in this Agreement which survives the Closing; or (iv) the Assumed Liabilities; provided, however, that Buyer shall not have any liability under clause (iii) above for any breach of a representation or warranty contained in this Agreement or the other agreements contemplated hereby if Seller had knowledge of such breach at the time of Closing and failed to notify Buyer of such breach. (b) Seller's Indemnification of Buyer. Except as otherwise provided herein and subject to the provisions of this Section 15, from and after the Closing Date, Seller shall indemnify, defend, save and hold harmless, Buyer, its affiliates and their respective directors, officers, employees, shareholders, partners, counsel, auditors, accountants, agents, advisors and other representatives and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "Buyer Indemnified Parties") from and against any and all Losses of any kind which are caused by, arise from, are incurred in connection with or relate in any way to: (i) the Excluded Assets or the Excluded Liabilities (other than any environmental matters covered by Section 15(c)(ii) below) (provided, however, that with respect to the Excluded Liabilities, the provisions of Sections 15(i) through (l) will not apply to indemnity claims by Buyer relating to Sections 4(b)(i) through (vi) and 4(b)(ix) through (xii) of this Agreement); -38- (ii) (A) Seller's breach of or failure to perform any covenant or agreement in this Agreement requiring performance by Seller on or after the Closing Date; or (B) Seller's breach of any representation or warranty in this Agreement which survives the Closing; (iii) any failure by Seller to comply with the provisions, if any, of state or local bulk sales laws; and (iv) subject to the limitations set forth in Section 15(l), property damage caused by, or any environmental remediation required due to a violation of the Health, Safety and Environmental Laws during the pre-Closing operation of the Business by Seller or other members of the BP Group ("Remediation Losses"); provided, however, that Seller shall not have any liability under clause (ii) above for any breach of a representation or warranty contained in this Agreement or the other agreements contemplated hereby if Buyer had knowledge of such breach at the time of Closing and failed to notify Seller of such breach in accordance with Section 10(b)(ii), and no Losses caused by, arising from, incurred in connection with or related in any way thereto shall be aggregated for purposes of Section 15(j). (c) Environmental Indemnifications. Buyer and Seller shall provide the environmental indemnifications specified below: (i) Seller shall indemnify, defend, save and hold harmless the Buyer Indemnified Parties from and against any and all Losses of any kind which are caused by, arise from, are incurred in connection with or relate in any way to (A) a breach of Seller's representations and warranties in Section 7 or (B) the Excluded Liabilities described in Section 4(b)(x)(provided, however, that the provisions of Sections 15(i) through 15(l) will not apply to indemnity claims by Buyer relating to Section 4(b)(x) of this Agreement); and (ii) Except as otherwise provided herein, Buyer shall assume responsibility for, and shall indemnify, defend, save and hold harmless, the Seller Indemnified Parties from and against (A) any and all Losses of any kind which are caused by, arise from, are incurred in connection with or relate in any way to, the ownership of the Purchased Assets or the operation of the Business, under, relating to or otherwise required or incurred to achieve or maintain compliance with Health, Safety and Environmental Laws, as the same are in effect from time to time, irrespective of whether the events giving rise to such liabilities occurred prior to, on or after the Closing Date, including any and all Losses of any kind which are caused by, arise from, are incurred in connection with or relate in any way to Asbestos-Related Liabilities, the Disclosed Environmental Liabilities or the Project Sunshine Consent Decree and (B) any and all Losses that are caused by or result or arise from changes in, modifications to or amendments of Health, Safety and Environmental Laws that were in effect prior to the Closing Date or promulgated, made or enacted on or after the Closing Date; -39- provided, however, that Seller shall not have any liability under clause (i) above for any breach of a representation or warranty contained in this Agreement or the other agreements contemplated hereby if Buyer had knowledge of such breach at the time of Closing and failed to notify Seller of such breach in accordance with Section 10(b)(ii), and no Losses caused by, arising from, incurred in connection with or related in any way thereto shall be aggregated for purposes of Section 15(j). (d) Exclusive Remedy. Any claim or cause of action based on, arising out of or relating in any way to any of the transactions contemplated under this Agreement (including all Exhibits and Schedules attached hereto or referenced herein) must be brought by either Buyer or Seller in accordance with the provisions and limitations of this Agreement, whether such claim arises out of any contract, tort or otherwise. Except as otherwise provided in this Agreement, the parties hereby waive to the fullest extent permitted under applicable law, any and all rights, claims and causes of action they may have against one another relating to the subject matter of this Agreement and the other agreements contemplated hereby arising under or based on any federal, state, provincial, local or foreign statute, law, ordinance, rule or regulation or otherwise, including such rights, claims and causes of action Buyer may have against Seller under CERCLA, breaches of statutory or implied warranties or otherwise, nuisance or other tort actions, and common law rights of contribution. Without limiting the generality of the foregoing, Buyer understands and agrees that the rights accorded under this Section 15 are its sole and exclusive remedy against Seller or any other member of the BP Group with respect to any matters relating to Health, Safety and Environmental Laws. Buyer hereby waives any right to seek contribution or other recovery from Seller or any other member of the BP Group under such Health, Safety and Environmental Laws, and Buyer hereby releases Seller and the other members of the BP Group from any claims, demands or causes of action that Buyer has or may have in the future against Seller and/or the other members of the BP Group under Health, Safety and Environmental Laws. Buyer further acknowledges and agrees that, (A) other than the representations and warranties of Seller specifically contained in this Agreement, there are no representations or warranties of Seller, any other member of the BP Group or their respective directors, officers, employees, shareholders, partners, counsel, auditors, accountants, agents, advisors or other representatives or any other Person either express or implied, with respect to any of them, the Business, the Purchased Assets or the Assumed Liabilities and (B) it shall have no claim or right to indemnification with respect to any information, documents or materials furnished by Seller, any other member of the BP Group or their respective directors, officers, employees, shareholders, partners, counsel, auditors, accountants, agents, advisors or other representatives or any other Person or any of their officers, directors, employees, shareholders, partners, counsel, auditors, accountants, agents, advisors or other representatives, including the Offering Memorandum and any information, documents or material made available to Buyer in certain "data rooms," management presentations or any other form in expectation of the transactions contemplated by this Agreement. (e) Procedures Relating to Indemnification Among Buyer and Seller. Following the discovery of any facts or conditions which could reasonably be expected to give rise to a Loss or Losses for which indemnification is provided under this Agreement, the party seeking indemnification (the "Indemnified Party") shall, as promptly as reasonably possible thereafter, -40- provide written notice to the party from whom indemnification is sought (the "Indemnifying Party"), setting forth the specific facts and circumstances, in reasonable detail, relating to such Loss or Losses and the amount of Loss or Losses (or a reasonable, good-faith estimate thereof if the actual amount is not known or not capable of reasonable calculation) ("Indemnification Notice"); provided, however, that failure to give such Indemnification Notice on a timely basis shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure. Notwithstanding the foregoing: (i) a Buyer Indemnified Party shall not be entitled to make a claim against Seller under Section 15(b)(ii) unless and until (A) Buyer shall have provided Seller written notice of such default; and (B) Seller shall have failed to cure such default within sixty (60) days after Seller's receipt of Buyer's notice; and (ii) a Seller Indemnified Party shall not be entitled to make a claim against Buyer under Section 15(a)(iii) unless and until (A) Seller shall have provided Buyer written notice of default; and (B) Buyer shall have failed to cure such default within sixty (60) days after Buyer's receipt of Seller's notice. (f) Procedures Relating to Indemnification for Third Party Claims. (i) In order for an Indemnified Party to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand made by any Person against the Indemnified Party (a "Third Party Claim"), such Indemnified Party must provide an Indemnification Notice to the Indemnifying Party of the Third Party Claim as promptly as reasonably possible after receipt by such Indemnified Party of notice of the Third Party Claim. Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, within five (5) business days after the Indemnified Party's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim; provided, however, that failure to provide an Indemnification Notice, or deliver copies of all notices and documents, in a timely manner shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. (ii) If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges its obligation to indemnify the Indemnified Party therefor, to assume the defense thereof with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party. Notwithstanding any acknowledgment made pursuant to the immediately preceding sentence, the Indemnifying Party shall continue to be entitled to assert any limitation on its indemnification responsibility contained in Sections 15(j) and 15(k). Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. If the Indemnifying Party assumes such defense, the Indemnified Party shall have -41- the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood, however, that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party for any period during which the Indemnifying Party has not assumed the defense thereof. If the Indemnifying Party chooses to defend any Third Party Claim, all the parties hereto shall cooperate in the defense or prosecution of such Third Party Claim. Such cooperation shall include the retention and (upon the Indemnifying Party's request) the provision to the Indemnifying Party of records and information which are reasonably relevant to such Third Party Claim and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the Indemnifying Party shall have assumed the defense of a Third Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, or consent to the entry of any judgment with respect to such Third Party Claim without the Indemnifying Party's prior written consent (which consent shall not be unreasonably withheld). (g) Losses Net of Insurance and Taxes. The amount of any and all Losses under this Section 15 and elsewhere under this Agreement shall be determined net of any amounts recovered or recoverable by the Indemnified Party under insurance policies, indemnities or other reimbursement arrangements with respect to such Losses. Each party hereby waives, or will procure the waiver of, any subrogation rights that its insurer may have with respect to any indemnifiable Losses. The amount of any and all Losses shall be reduced by the amount of any net reduction in cash Tax payable by the Indemnified Party with respect to such Losses through and including the Tax year in which the indemnification payment is made. Any indemnity payment under this Agreement shall be treated as an adjustment to the Purchase Price for tax purposes. (h) Attorneys' Fees. In connection with any litigation arising out of this Agreement or to enforce any indemnification claim pursuant to this Agreement, the prevailing party shall be entitled to recover from the nonprevailing party its reasonable attorneys' fees and costs, on appeal or otherwise. (i) Time Limitation. Except as otherwise provided herein, any claim by any Buyer Indemnified Party for indemnity arising under this Agreement, including pursuant to Sections 15(b) and 15(c), shall be brought within two (2) years after the Closing Date. A claim shall be deemed to have been brought only upon delivery of a proper Indemnification Notice to the other party at the notice address set forth in Section 20. Any claim required to be made within such two (2) year period not so timely made shall be forever barred. (j) Monetary Limitation. Buyer Indemnified Parties shall have no claim under Section 15(b)(i)-(iii) of this Agreement against Seller or any other member of the BP Group for any Losses unless and until the aggregate of all such Losses incurred or sustained by the Buyer Indemnified Parties exceeds Four Million Dollars ($4,000,000) and then only for the excess over Four Million Dollars ($4,000,000) (the "Threshold"); provided that Losses amounting to less than Two Hundred -42- Fifty Thousand Dollars ($250,000) in the aggregate arising out of the same occurrence or matter shall not be aggregated with other Losses for purposes of determining whether and when the Threshold has been reached. After the Threshold has been reached, Seller shall have no obligation to indemnify the Buyer Indemnified Parties under this Agreement with respect to such matters for any Losses amounting to less than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate arising out of the same occurrence or matter. For purposes of this Section 15(j), Losses shall exclude Remediation Losses, which are treated separately in Section 15(l). (k) Limitation of Liability. Seller's aggregate liability for Indemnification pursuant to this Agreement, including Section 15(b) and (c), shall in no event exceed an amount equal to Thirty-Five Million Dollars ($35,000,000). (l) Environmental Remediation Monetary Limitation. Notwithstanding any other provision of this Agreement, none of the Buyer Indemnified Parties shall have any claim under Section 15(b)(iv) of this Agreement against Seller or any other member of the BP Group for any Remediation Losses unless and until the aggregate of all such Remediation Losses incurred or sustained by the Buyer Indemnified Parties exceeds Five Million Dollars ($5,000,000), and then only for the excess over Five Million Dollars ($5,000,000) (the "First Threshold"). After the First Threshold has been reached, Buyer Indemnified Parties shall only have a claim under this Agreement against Seller for fifty percent (50%) of the excess of any Remediation Losses incurred or sustained by the Buyer Indemnified Parties over the First Threshold unless and until the aggregate of all such Remediation Losses incurred or sustained by the Buyer Indemnified Parties exceeds Ten Million Dollars ($10,000,000) (the "Second Threshold"). Thereafter, subject to Sections 15(j) and 15(k), Buyer Indemnified Parties shall have a claim under this Agreement against Seller for 100% of the excess of Remediation Losses over the Second Threshold. Notwithstanding the foregoing, Remediation Losses amounting to less than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate arising out of the same occurrence or matter shall not be aggregated with any other Remediation Losses for purposes of determining whether and when the First Threshold or the Second Threshold has been reached. After the First Threshold or Second Threshold has been reached, Seller shall have no obligation to indemnify the Buyer Indemnified Parties under this Agreement with respect to such matters for any Remediation Losses amounting to less than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate arising out of the same occurrence or matter. (m) Mitigation. Each party hereto shall take all reasonable steps and use all commercially reasonable efforts to mitigate any and all Losses. (n) Losses. As used in this Agreement, "Losses" means any and all costs, claims, losses, liabilities, obligations (including corrective and remedial obligations), damages and expenses (including reasonable legal fees and expenses but excluding any liability relating to consequential damages, lost profits or punitive damages). -43- 16. TAXES (a) Except as provided in this Section 16, Buyer shall be liable for and pay all Taxes, utility charges or apportionments which arise as a result of this Agreement or the consummation of the transactions contemplated hereby or as a result of any purchase, sale, rental, lease, storage, use, consumption or operation of the Purchased Assets by Buyer. (b) General and special real estate and other ad valorem taxes and assessments and other state or local taxes, fees, charges and assessments in respect of real property on the basis of the fiscal year in which the Closing occurs shall be prorated between Buyer and Seller as of 12:01 a.m., Central Time, on the Closing Date. If the Closing Date shall occur before the tax rate or assessment is fixed for such fiscal year, the apportionment of such taxes and payments at the Closing shall be based upon the most recently ascertainable tax bills; provided, that Buyer and Seller shall recalculate and re-prorate said taxes and payments and make the necessary cash adjustments promptly upon the issuance, and on the basis, of the actual tax bills received for the fiscal year in which the Closing occurs and the amount of any payments in lieu of tax made with respect to any such fiscal year. (c) Personal property taxes, if any, on the basis of the fiscal year in which the Closing occurs shall be prorated between Buyer and Seller as of 12:01 a.m., Central Time, on the Closing Date. If the Closing Date shall occur before the tax rate or assessment is fixed for such fiscal year, the apportionment of such taxes at the Closing shall be based upon a reasonable estimate mutually agreed upon by Buyer and Seller; provided, that Buyer and Seller shall recalculate and re-prorate said taxes and make the necessary cash adjustments promptly upon the issuance of, and on the basis of, the actual tax bills received for such fiscal year. 17. RECORDS/LITIGATION ASSISTANCE. (a) For a period of seven (7) years following the Closing Date, Buyer shall provide to Seller and other members of the BP Group (and their counsel, auditors, accountants, agents, advisors or other representatives) reasonable access to and permission to take from the Business copies of any books, records or accounts relating to the Business through and including the Closing Date; and Buyer shall not destroy or dispose of any such books, records and accounts for a period of at least seven (7) years after the Closing Date without first offering to surrender to Seller such books, records and accounts which Buyer may intend to destroy or dispose of. Seller agrees that it will consult with Buyer in advance of taking any such actions following the Closing Date with a view towards establishing a mutually agreeable plan for such visits so that these actions will not unreasonably interfere with the normal operation of the Business. (b) After the Closing Date, each party shall provide such assistance as the other party may from time to time reasonably request in connection with the preparation of tax returns required to be filed, any audit or other examination by any taxing authority, any judicial or administrative proceeding relating to liability for taxes, or any claim for refund in respect of such Taxes or in connection with any litigation and proceedings or liabilities related to the Business, including making -44- available employees for interviews, litigation preparation and testimony. The requesting party shall reimburse the assisting party for the out-of-pocket costs incurred by the assisting party. (c) If Buyer, as a result of the transactions contemplated by this Agreement, at any time within twelve (12) months after the Closing Date, is required to file with the Securities and Exchange Commission financial statements relating to the Business, Seller shall provide such assistance as Buyer may reasonably request in connection with the preparation of such financial statements, including providing to Buyer Seller's books, records or accounts relating to the Business and relevant personnel relating to the Business and access to Seller's independent auditors from the date hereof through and including the Closing Date and for a period of twelve (12) months thereafter; provided that Seller shall not be required to take any action that would cause it to incur any additional costs, expenses, fees or liabilities as a result of or in any way relating to, the provision of such assistance. 18. TERMINATION RIGHTS. (a) This Agreement may be terminated at any time prior to the Closing Date as follows and in no other manner: (i) by mutual written consent of Buyer and Seller; (ii) by Buyer, if any of the conditions set forth in Section 12 shall have become incapable of fulfillment, and shall not have been waived by Buyer (provided, however, that Buyer is not in material breach of its representations, warranties, covenants or agreements contained in this Agreement); (iii) by Seller, if any of the conditions set forth in Section 13 shall have become incapable of fulfillment, and shall not have been waived by Seller (provided, however, that Seller is not in material breach of its representations, warranties, covenants or agreements contained in this Agreement); (iv) by Seller, if the Closing does not occur on or prior to May 31, 2002; (v) by Buyer, if a Deposit Return Event occurs; or (vi) by Buyer, if the Closing does not occur on or prior to May 31, 2002; provided, however, that in the event that all conditions of Section 12 other than termination or expiration of the waiting period under the H-S-R Act are satisfied, then Buyer may not terminate under this clause (vi) until September 30, 2002. (b) In the event of termination by Buyer or Seller pursuant to this Section 18, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated, without further action by any party. If the transactions contemplated by this Agreement are terminated as provided herein: -45- (i) Buyer shall return to Seller all documents and copies and other materials received from, or on behalf of, Seller relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof; and (ii) all confidential information received by Buyer with respect to the Purchased Assets, the Assumed Liabilities and the Business shall be treated in accordance with the terms and conditions of the Confidentiality Agreement, which shall remain in full force and effect notwithstanding the termination of this Agreement. (c) If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this Section 18, this Agreement shall become void and of no further force and effect, except for the provisions of: (i) Section 10(b)(i) relating to the obligation of Buyer to keep confidential certain information and data obtained by it; (ii) Section 22 relating to publicity; (iii) Section 10(a)(i) relating to indemnification in connection with the matters contemplated thereby; (iv) Section 27 relating to certain expenses; (v) Sections 6(f) and 9(f) relating to finder's fees and broker's fees; and (vi) this Section 18. Nothing in this Section 18 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or to impair the right of any party to compel specific performance by another party of its obligations under this Agreement. 19. SPECIFIC PERFORMANCE. Each party hereto acknowledges and agrees that each other party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each party hereto agrees that each other party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties hereto and the matter (subject to the provisions set forth in Section 21 below), in addition to any other remedy to which they may be entitled, at law or in equity. -46- 20. NOTICES. (a) All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by prepaid telex or telecopy, or sent, postage prepaid, by registered, certified or express mail, or reputable overnight courier service and shall be deemed given when so delivered by hand, telexed or telecopied, or if mailed, five (5) days after mailing (one (1) business day in the case of express mail or overnight courier service), as follows: If to Buyer: Giant Industries, Inc. 23733 North Scottsdale Road Scottsdale, AZ 85255 Attn: Kim Bullerdick, Vice President, General Counsel and Secretary Telecopy:____________________________ with a copy to: _____________________________________ _____________________________________ _____________________________________ Attn: ______________________________ Telecopy:____________________________ If to Seller: BP Corporation North America Inc. 200 East Randolph Drive Chicago, IL 60601 Attn: Assistant General Counsel - Corporate Telecopy: (312) 856-4091 BP Products North America Inc. 200 East Randolph Drive Chicago, IL 60601 Attn: Richard J. Battaglia Telecopy: (312) 856-4091 (b) Any party may change the address to which such communications are to be directed to it by giving written notice to the other in the manner in paragraph (a) above. 21. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and the obligations of the parties hereunder shall be governed by and construed and enforced in accordance -47- with the substantive and procedural laws of the State of Illinois, without regard to rules on choice of law. Any action to enforce the terms hereof may be properly venued in, and shall be brought in, the federal or state courts located in Cook County in the State of Illinois on a non-exclusive basis. Each party hereto agrees that it shall submit to the jurisdiction of such courts for purposes of actions to enforce the terms of this Agreement. 22. PUBLICITY. Buyer and Seller agree that, from the date hereof through and including the Closing Date, no public release or announcement concerning the transactions contemplated hereby shall be issued or made by any party hereto (including any member of the BP Group) without the prior consent of each other party (which consent shall not be unreasonably withheld), except (a) as such release or announcement may be required by law, prior contractual obligations or the rules or regulations of any securities exchange, whether in the United States, United Kingdom or elsewhere, (or in the opinion of counsel such release or announcement is appropriate or desirable under or in light of such contractual obligations, laws and regulations), in which case the party making the release or announcement shall allow each other party reasonable time to comment on such release or announcement in advance of such issuance, and (b) that any member of the BP Group, including Seller, may make such an announcement to its employees. Notwithstanding the foregoing, Buyer and Seller shall cooperate to prepare a joint press release to be issued on the Closing Date and, upon the request of either Buyer or Seller, at the time of the signing of this Agreement. Buyer and Seller agree to keep the terms of this Agreement confidential, except to the extent required by applicable law or prior contractual obligation or for financial reporting purposes and except that the parties may disclose such terms to their respective (and in the case of Seller, the BP Group's) counsel, auditors, accountants, agents, advisors and other representatives as necessary in connection with the ordinary conduct of their respective businesses (so long as such Persons agree to keep the terms of this Agreement confidential). 23. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. Except for Section 10(b)(viii), the covenants and representations and warranties in this Agreement and in any other document delivered in connection herewith shall survive the Closing solely for purposes of Sections 15(a), 15(b) and 15(c). The covenants in Section 10(b)(viii) shall terminate on the expiration of the Margin Payment Period. The representations and warranties in this Agreement shall terminate at the close of business on the second anniversary of the Closing Date; provided, however, that the representations and warranties provided in Section 6(e)(i) and (ii) with respect to the Real Property shall not survive and shall terminate at the Closing. 24. ENTIRE AGREEMENT. This Agreement, the attached Schedules and Exhibits and the agreements referred to herein or executed simultaneously herewith, set forth the entire agreement and understanding of the parties in respect to the transactions contemplated hereby and thereby and supersede all prior agreements, arrangements and undertakings, whether written or oral, relating to the subject matter hereof (other than the Confidentiality Agreement which shall continue in effect). No representation, promise, inducement or statement of intention, whether written or oral, has been made by any party which is not embodied in or superseded by this Agreement or the Confidentiality Agreement or in the documents referred to herein, and no party shall be bound by or liable for any alleged representation, promise, inducement or statement of intention not so set forth whether in the Offering Memorandum, in certain "data rooms," management presentations or any other form in expectation of the transactions contemplated by -48- this Agreement. Except as otherwise specifically provided in this Agreement, no conditions, usage of trade, course of dealing or performance, understanding or agreement purporting to modify, vary, explain or supplement the terms or conditions of this Agreement will be binding unless hereafter made in writing and signed by the party to be bound, and no modification will be effected by the acknowledgment or acceptance of documents containing terms or conditions at variance with or in addition to those set forth in this Agreement, except as otherwise specifically agreed to by the parties in writing. 25. ASSIGNMENT. This Agreement and any rights and obligations hereunder shall not be assignable or transferable by Buyer or Seller (including by operation of law in connection with a merger or sale of stock, or sale of substantially all the assets, of Buyer or Seller) without the prior written consent of the other party (provided that Buyer shall not require the consent of Seller to transfer its rights and obligations hereunder to a wholly owned subsidiary of Buyer, as long as Buyer first fully guarantees such subsidiary's performance of all of Buyer's obligations under this Agreement and under all of the agreements that are exhibits hereto) and any purported assignment without such consent shall be void and without effect; provided, however, that in the event Buyer wishes to assign or transfer its rights and obligations prior to expiration of the Margin Payment Period and Seller consents to such transfer (or, in the event that the consent of Seller is not required to effect such transfer, Buyer provides notice to Seller of such proposed transfer), Buyer shall be permitted to transfer its rights and obligations under this Agreement only if it (i) absolutely, unconditionally and irrevocably guarantees the prompt, complete and full performance of the obligations of transferee to make Margin Payments as set forth in Section 3(e) of this Agreement, (ii) agrees that exercise by Seller of any right pursuant to the Agreement shall not preclude the concurrent or subsequent exercise of any other right or remedy, at law or in equity, against Buyer or any transferee, (iii) agrees that Seller shall not be required to institute suit or exhaust its remedies against a transferee in order to enforce the performance by Buyer of the obligations of the transferee to make the Margin Payments, and (iv) agrees that such guarantee shall be a guarantee of payment as well as a guarantee of performance. Notwithstanding the foregoing, Seller may assign or transfer any or all of its rights hereunder to any qualified intermediary in order to complete an exchange of like-kind property under Section 1031 of the Code and, at the request of Seller, Buyer shall execute such agreements and other documents as may be necessary, in the reasonable opinion of Seller's counsel, to complete and otherwise effectuate Seller's exchange of properties in accordance with said Section 1031 of the Code and the regulations thereunder; provided that Buyer shall not be required to take any action that would cause it to incur any additional costs, expenses, fees or liabilities as a result of or connected with the exchange. 26. AMENDMENT AND WAIVER. This Agreement may be amended, modified, superseded or canceled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties hereto, or, in the case of a waiver, by or on behalf of the party waiving compliance. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any party of any condition, or of any breach of any term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant representation or warranty. No course of dealing between or among any Persons having any interest in this Agreement shall be deemed effective to modify, amend or -49- discharge any part of this Agreement or any rights or obligations of any Person under or by reason of this Agreement. 27. EXPENSES. Whether or not the transactions contemplated hereby are consummated, and except as otherwise specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including legal, due diligence, accounting and investment banking fees and expenses, shall be paid by the party incurring such costs or expenses. 28. HEADINGS. The section and paragraph headings contained in this Agreement are for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. 29. COUNTERPARTS. This Agreement may be executed simultaneously in one or more counterparts (including by means of telecopied signature pages), all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party. 30. INTERPRETATION. Unless the context requires otherwise: (a) this Agreement includes this Asset Purchase Agreement and any other agreement entered into by Buyer and Seller on the Closing Date or in connection with the transactions contemplated hereby; (b) the singular shall include the plural and the plural shall include the singular and any gender shall include all other genders, all as the meaning and the context of the Agreement shall require; (c) references to Sections and paragraphs refer to sections and paragraphs, respectively, of this Agreement; (d) references to Exhibits and Schedules are to exhibits and schedules attached to this Agreement, each of which is hereby incorporated and made a part of this Agreement for all purposes as if set forth in full herein; (e) the words "including," "include," "includes" and all variants thereof mean "including, without limitation;" and (f) all references to "Dollars" and "dollars" in this Agreement are to United States dollars. 31. NO STRICT CONSTRUCTION. Notwithstanding the fact that this Agreement has been drafted or prepared by one of the parties, Buyer and Seller confirm that both they and their respective counsel have reviewed, negotiated and adopted this Agreement as the joint agreement and understanding of the parties, and the language used in this Agreement shall be deemed to be the language chosen by the -50- parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any Person. 32. SCHEDULES. The disclosures in the Schedules hereto (including any disclosures made in amendments made pursuant to Section 10(a)(iii)) are to be taken as relating to the representations and warranties of Seller as a whole. Matters listed once on the Schedules shall be deemed disclosed with reference to all sections of the Schedules and all of Sections 6 and 7 of this Agreement. The inclusion of information in the Schedules hereto shall not be construed as an admission that such information is material to the Business, the Purchased Assets, the Assumed Liabilities or Seller. In addition, matters reflected in the Schedules are not necessarily limited to matters required by this Agreement to be reflected in such Schedules. Such additional matters are set forth for informational purposes only and do not necessarily include other matters of a similar nature. Prior to the Closing, Seller shall have the right at all times to supplement, modify or update the Schedules hereto; provided, however, that any such supplements, modifications or updates shall be subject to the provisions of Section 10(a)(iii). The Schedules are incorporated herein by reference and made a part hereof. 33. REPRESENTATION BY COUNSEL; INTERPRETATION. Buyer and Seller acknowledge that each of them has been represented by counsel in connection with this Agreement and the transactions contemplated hereby. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. 34. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid and effective under applicable law, but if any provision of this Agreement or the application of any such provision to any Person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 35. BULK TRANSFER LAWS. Buyer hereby waive compliances by Seller with the provisions of any so-called bulk transfer laws of any jurisdiction in connection with the purchase and sale of the Purchased Assets. Seller shall indemnify and hold Buyer harmless from any Losses which Buyer may incur due to failure to so comply in accordance with Section 15. 36. NO THIRD PARTY BENEFICIARIES. Except as provided with respect to indemnification as set forth in Section 15 and elsewhere in this Agreement, nothing in this Agreement shall confer any rights upon any Person other than the parties hereto and their respective heirs, successors and permitted assigns. 37. DEFINITION OF AFFILIATE. As used herein, the term "affiliate" shall have the meaning set forth in Rule 405 promulgated under the Securities Act of 1933, as amended. * * * * * -51- IN WITNESS WHEREOF, the parties have duly executed this instrument as of the day and year first above written. BP CORPORATION NORTH AMERICA INC. By: /s/ Neil R. Morris ------------------------------- Name: Neil R. Morris Title: Attorney-in-Fact BP PRODUCTS NORTH AMERICA INC. By: /s/ Neil R. Morris ------------------------------- Name: Neil R. Morris Title: Attorney-in-Fact GIANT INDUSTRIES, INC. By: /s/ Fredric L. Holliger ------------------------------- Name: Fredric L. Holliger Title: Executive Vice President and Chief Operating Officer Signature Page to Asset Purchase Agreement EX-3.21 4 p66366ex3-21.txt EX-3.21 Exhibit 3.21 CERTIFICATE OF INCORPORATION OF GIANT YORKTOWN, INC. 1. The name of the Corporation is Giant Yorktown, Inc. (the "Corporation"). 2. The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. 3. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the "DGCL"). 4. The total number of shares which the Corporation will have authority to issue is 500,000 shares of common stock, par value $ 1.00 per share. 5. The name and mailing address of the incorporator is Kim H. Bullerdick at 23733 N. Scottsdale Road, Scottsdale, Arizona 85255. The powers of the incorporator shall terminate upon the filing of this Certificate of Incorporation. 6. The initial Directors of the Corporation and their addresses are as follows: James E. Acridge Fredric L. Holliger Morgan M. Gust 23733 N. Scottsdale Road Scottsdale, Arizona 85255 7. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors shall have the power to make, alter, amend, change, add to or repeal the bylaws of the Corporation. 8. Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide. 9. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute. 10. A director of the Corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that the elimination or limitation of liability is prohibited under the DGCL as in effect when such liability is determined. No amendment or repeal of this provision shall deprive a director of the benefits hereof with respect to any act or omission occurring prior to such amendment or repeal. 11. The Corporation shall, to the fullest extent permitted by Section 145 of the DGCL, as amended from time to time, or any successor section, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding and any appeal therefrom. Indemnification may include payment by the Corporation of expenses in defending an action or proceeding in advance of the final disposition of such action or proceeding upon receipt of an undertaking by the person indemnified to repay such payment if it is ultimately determined that such person is not entitled to indemnification under this Article, which undertaking may be accepted without reference to the financial ability of such person to make such repayments. The Corporation shall not indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person unless the initiation thereof was approved by the Board of Directors of the Corporation. The indemnification rights provided in this Article 11 (i) shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any law, agreement or vote of stockholders or disinterested directors or otherwise, and (ii) shall inure to the benefit of the heirs, executors and administrators of such persons. The Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article 11. 12. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors and/or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation, as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case 2 may be, and also on this Corporation. 13. Immediately after the filing of this Certificate of Incorporation with the Delaware Secretary of State, the undersigned incorporator shall resign and thereafter the affairs of the Corporation shall be managed by the directors named herein and their successors. IN WITNESS WHEREOF, the undersigned incorporator has caused this Certificate of Incorporation to be duly executed as of the 5th day of March, 2002. /s/ Kim H. Bullerdick ------------------------------------ Kim H. Bullerdick, Incorporator 3 EX-3.22 5 p66366ex3-22.txt EX-3.22 Exhibit 3.22 BYLAWS OF GIANT YORKTOWN, INC. (HEREINAFTER CALLED THE "CORPORATION") ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such other places both within and outside of the State of Delaware as the Board of Directors may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or outside of the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect Directors in accordance with Section 1 of Article III of these Bylaws, and transact such other business as may properly be brought before the meeting. Written notice of the Annual Meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten (10) (unless a longer period is required by law) nor more than sixty (60) days before the date of the meeting. Section 3. Special Meetings. Unless otherwise prescribed by law or by the Certificate of Incorporation, as the same may be amended from time to time, Special Meetings of Stockholders may be called only by the Chairman of the Board, if there is one, the President, the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption) or by the owner or owners, at the time of such call for a Special Meeting, of ten percent (10%), or more, of the issued and outstanding shares of common stock of the Corporation. Written notice of a Special Meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten (10) (unless a longer period is required by law) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. Business transacted at all Special Meetings shall be confined to the objects stated in the call. Section 4. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, as the same may be amended from time to time, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. Section 5. Voting. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, as the same may be amended from time to time, (i) any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat, and (ii) each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 6. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. Section 7. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 6 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. Section 8. Election Inspectors. Prior to any meeting of the stockholders, the Board of Directors shall appoint one (1) or more inspectors who shall ascertain the number of shares 2 outstanding and the voting power of each; determine the shares represented at a meeting and the validity of proxies and ballots; count all votes and ballots; determine and retain for a reasonable time period a record of the disposition of any challenges made to any determination by the inspectors; certify the determination of the number of shares represented at the meeting, and the count of all votes and ballots; and perform such other duties and actions as may be requested by the Board of Directors or required by law. No such election inspector need be a stockholder of the Corporation. Section 9. Organization and Conduct of Meetings. Each meeting of the stockholders shall be called to order and thereafter chaired by the Chairman of the Board of Directors if there is one; or, if not, or if the Chairman of the Board is absent or so requests, then by the President; or if the Chairman of the Board and the President are unavailable, such other officer of the Corporation or such stockholder as may be appointed by the Board of Directors. The Corporation's Secretary shall act as secretary of each meeting of the stockholders; in the Secretary's absence, the chairman of the meeting may appoint any person (whether a stockholder or not) to act as secretary for the meeting. Absent a showing of bad faith on his part, and subject to any state law restrictions or requirements, the chairman of a meeting shall, among other things, have absolute authority to fix the period of time allowed for the registration of stockholders and the filing of proxies, to determine the order of business to be conducted at such meeting and to establish reasonable rules for expediting the business of the meeting (including any informal, or question and answer portions thereof). Section 10. Action by Written Consent. Any action required or permitted to be taken by the stockholders of the Corporation may be effected either at an Annual or Special Meeting of the stockholders of the Corporation or by unanimous written consent of the stockholders. ARTICLE III DIRECTORS Section 1. Number and Election of Directors. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, who shall serve one-year terms, consisting of not less than one (1) nor more than nine (9) directors, the exact number of directors to be determined from time to time by resolution adopted by the affirmative vote of a majority of the directors then in office. A director shall hold office until the next Annual Meeting and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Directors of the Corporation may be removed with or without cause by the affirmative vote of a majority of the votes entitled to be cast by the holders of all the then issued and outstanding shares of common stock of the Corporation. Section 2. Vacancies. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. 3 Section 3. Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws, as the same may be amended from time to time, directed or required to be exercised or done by the stockholders. Section 4. Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either outside of or within the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman, if there is one, the President or any majority of the entire Board of Directors. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone, electronic facsimile or telegram on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Section 5. Quorum. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, as the same may be amended from time to time, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 6. Actions of Board. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, as the same may be amended from time to time, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 7. Meetings by Means of Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, as the same may be amended from time to time, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment through which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 of this Article III shall constitute presence in person at such meeting. Section 8. Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one (1) or more committees, each committee to consist of two (2) or more of the directors of the Corporation. The Board of Directors may 4 designate directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required. The Board shall have the power at any time to change the members of any such committee, to fill vacancies and to discharge any such committee. Section 9. Compensation. Directors shall be reimbursed by the Corporation for their reasonable out-of-pocket expenses incurred in connection with their attendance at Board meetings, and shall receive such other compensation as determined by the Board of Directors from time to time by majority vote. Section 10. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV OFFICERS Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall, at a minimum, include a President and a Secretary. The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors (who must be a director), a Treasurer, an Executive Vice President and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, 5 unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws, as the same may be amended from to time. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation. Section 2. Election and Compensation. The Board of Directors, at its first meeting held after each Annual Meeting of Stockholders, shall elect the officers of the Corporation, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries and any bonuses or other compensation of all officers of the Corporation shall be fixed by the Board of Directors. No officer shall be prevented from receiving a salary by reason of the fact that such officer is also a director of the Corporation. Section 3. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President, and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. Section 4. Chairman of the Board of Directors. The Chairman of the Board of Directors, if there is one, shall preside at all meetings of the stockholders and of the Board of Directors. Except where by law the signature of the President is required, the Chairman of the Board of Directors shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors. Section 5. President. The President shall, subject to the control of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these Bylaws, the Board of Directors, the Chairman of the Board of Directors, or the President. The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws, the Chairman of the Board of Directors or by the Board of Directors. 6 Section 6. Vice Presidents. At the request of the President or in his absence or in the event of his inability or refusal to act (and if there be no Chairman of the Board of Directors), the Vice President or the Vice Presidents if there are more than one (in the order designated by the Board of Directors) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors from time to time may prescribe. If there is no Chairman of the Board of Directors and no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board of Directors or President, under whose supervision he shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there is no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there is one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 8. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or, from time to time, when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. 7 Section 9. Assistant Secretaries. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there are any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board of Directors, the President, any Vice President, if there are any appointed, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 10. Assistant Treasurers. Assistant Treasurers, if there are any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board of Directors, the President, any Vice President, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 11. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. ARTICLE V STOCK Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the President or any Vice President and (ii) by the Secretary or Treasurer of the Corporation, certifying the number of shares owned by him in the Corporation. Section 2. Signatures. Where a certificate is countersigned by (i) a transfer agent other than the Corporation or its employee, or (ii) a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The President or Secretary may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the 8 certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall be issued. Section 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 6. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VI NOTICES Section 1. Notices. Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws, as the same may be amended from time to time, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by electronic facsimile, telegram, telex or cable. Section 2. Waivers of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws, as the same may be amended from time to time, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be 9 deemed equivalent thereto. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the Delaware General Corporation Law the provisions of the Certificate of Incorporation, as the same may be amended from time to time, if any, may be declared by a decision of a majority of the entire Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock of the Corporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors, in its absolute discretion, may modify or abolish any such reserve. Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 5. Gender. All words used in any gender in these Bylaws shall extend to and include all genders. ARTICLE VIII INDEMNIFICATION Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than Those by or in the Right of the Corporation. Subject to Sections 3, 4 and 5 of this Article VIII, the Corporation shall indemnify, defend and hold harmless any officer or director of the Corporation (an "Actor") who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such Actor is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent (including a manager) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (each, an "Enterprise"), against all expenses (including attorneys' fees), costs, judgments, fines and amounts paid in settlement actually and reasonably incurred by such Actor in connection with such action, suit or 10 proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Sections 3, 4 and 5 of this Article VIII, the Corporation shall indemnify, defend and hold harmless any Actor who is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such Actor is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent (including a manager) of another Enterprise against all expenses (including attorneys' fees), costs, judgments, fines and amounts paid in settlement actually and reasonably incurred by such Actor in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such Actor shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such Actor is fairly and reasonably entitled to indemnity for such amounts which the Court of Chancery or such other court shall deem proper. Section 3. Advance of Expenses, Costs, Judgments, Fines, Etc. All expenses (including attorneys' fees), costs, judgments, fines and amounts paid in settlement actually and reasonably incurred by an Actor in connection with the defense or settlement of any threatened or pending action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, any threatened or pending action, suit or proceeding by or in the right of the Corporation to procure a judgment in its favor), by reason of the fact that such Actor is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent (including a manager) of another Enterprise, shall be paid by the Corporation to or on behalf of the Actor in advance of the final disposition of such action, suit or proceeding, based on written requests for payment submitted from time to time by such Actor to the Corporation; provided that as a condition to any such advance, there shall first be delivered to the Corporation an undertaking by or on behalf of such Actor to repay the amounts advanced in accordance with Section 4 of this Article VIII. Advances under this Section 3 shall be mandatory, and no determination of the Board of Directors (including, without limitation, a determination of whether an Actor is then entitled to indemnity payments under Section 1 or 2 of this Article VIII) shall be required as a condition to such advances. Payments by the Corporation pursuant to this Section 3 of this Article VIII shall be due and payable not later than five business days following submission by an Actor of any request for payment made in accordance with the terms hereof. Section 4. Repayment of Advances. If advances are made by the Corporation to or for the benefit of an Actor pursuant to Section 3 of this Article VIII, and if a final adjudication is made by a court of competent jurisdiction by judgment or order that such Actor was not entitled to indemnity for such amounts under Section 1 or Section 2 of this Article VIII, as the case may be, then within thirty (30) days following such adjudication, the Actor shall reimburse the Corporation 11 for the portion of any such advances which did not qualify for indemnity, as may be directed by the court. A determination that an Actor was not entitled to indemnity under Section 1 of this Article VIII shall be based solely on a finding that the Actor failed to act in good faith or in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, in the case of any criminal action or proceeding, that the Actor had reasonable cause to believe that his conduct was unlawful. A determination that an Actor was not entitled to indemnity under Section 2 of this Article VIII shall be based solely on a finding that the Actor failed to act in good faith or in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or on a finding that the Actor was liable to the Corporation in the action or suit at issue and that in view of all of the circumstances of the case, the Actor was not fairly and reasonably entitled to indemnity. For purposes of this Article VIII, an adjudication shall become final on the date on which no further appeals may be taken from such judgment, order or conviction. Section 5. Actions by Corporation With Respect to Indemnification. If an Actor has not requested and received advances to Section 3 of this Article VIII with respect to a threatened, pending or completed action, suit or proceeding, the Actor may submit a written claim for indemnification to the Corporation pursuant to this Section 5 of this Article VIII. Unless ordered by a court (and subject to the Corporation's obligation to make advances in accordance with Section 3 of this Article VIII), indemnification pursuant to this Article VIII shall be made by the Corporation only as authorized in the specific case, upon a determination that indemnification of the Actor is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or even if there are, and such directors so direct, by independent legal counsel in a written opinion, or (iv) by the stockholders. To the extent, however, that an Actor has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees), costs and other obligations or amounts actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. Nothing in this Section 5 of this Article VIII shall be construed as a limitation on an Actor's right to receive, or on the Corporation's obligation to make, advances in the manner described in Section 3 of this Article VIII, and in the event of a request for such advances, the provisions of Sections 3 and 4 of this Article VIII, rather than the provisions of this Section 5 of this Article VIII, shall apply. Section 6. Good Faith Defined. For purposes of any determination required under this Article VIII, an Actor shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another Enterprise, or on information supplied to him by the officers of the Corporation or another Enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another Enterprise or on information or records given or reports made to the Corporation or another Enterprise by an independent certified public accountant or by an appraiser or other expert selected by the 12 Corporation or another Enterprise. The provisions of this Section 6 of this Article VIII shall not be deemed to be exclusive or to limit in any way the circumstances in which an Actor may be deemed to have met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that an Actor did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 7. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 5 of this Article VIII, and notwithstanding the absence of any determination thereunder, any Actor may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under Section 5 of this Article VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that an Actor seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 7 of this Article VIII shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the Actor seeking indemnification shall also be entitled to be paid the expense of prosecuting such application. Section 8. Nonexclusivity of Indemnification and Advancement of Amounts. The indemnification and advancement of amounts to Actors as provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to an Actor seeking indemnification or advancement of amounts may be entitled under any Bylaw, agreement, contract, vote of stock holders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in the Actor's official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the Actors specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or Section 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the Delaware General Corporation Law, or otherwise. Section 9. Insurance. The Corporation may purchase and maintain insurance on behalf of any Actor against any liability asserted against him and incurred by him in any his capacity as an officer or director of the Corporation or as a director, officer, employee or agent (including a manager) of another Entity at the request of the Corporation, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII. Section 10. Survival of Indemnification and Related Obligations. The indemnification 13 and advancement of amounts provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to an Actor who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 11. Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 7 of this Article VIII), but subject in all events to the Corporation's obligation to make advances pursuant to Section 3 of this Article VIII, the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. Section 12. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of amounts to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation. ARTICLE IX MISCELLANEOUS Section 1. Amendment of Bylaws. Except as otherwise provided in the Certificate of Incorporation, these Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted by the stockholders or by the Board of Directors; provided, however, that notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such meeting of stockholders or Board of Directors, as the case may be. Except as otherwise provided in the Certificate of Incorporation, all such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office. CERTIFICATE OF ADOPTION The undersigned Secretary hereby certifies that the foregoing Bylaws were adopted by the Board of Directors of Giant Yorktown, Inc. pursuant to a written consent of the Board of Directors dated March 5, 2002. /s/ Kim H. Bullerdick ---------------------------------- Kim H. Bullerdick, Secretary 14 EX-10.1 6 p66366ex10-1.txt EX-10.1 Exhibit 10.1 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of December 19, 2001 among GIANT INDUSTRIES, INC., THE FINANCIAL INSTITUTIONS PARTIES HERETO and BANK OF AMERICA, N.A., as Administrative Agent and as Letter of Credit Issuing Bank BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager TABLE OF CONTENTS

4.07 Substitution of Lenders............................................ 35 4.08 Survival........................................................... 35 ARTICLE V CONDITIONS PRECEDENT......................................... 35 5.01 Conditions of Initial Credit Extensions............................ 35 (b) Resolutions; Incumbency Organization Documents................... 35 (c) Certificate (Organization, Qualification and Good Standing)...... 36 (d) Legal Opinions................................................... 36 (e) Payment of Fees.................................................. 36 (f) Certificate (Representations and Warranties, Etc.)............... 36 (g) Certificate (Repurchased Shares)................................. 36 (h) Certificate (Borrowing Case Certificate)......................... 36 (i) Collateral Documents............................................. 36 (j) Other Documents.................................................. 37 5.02 Conditions to All Credit Extensions................................ 37 (a) Notice, Application.............................................. 37 (b) Continuation of Representations and Warranties................... 37 (c) No Existing Default.............................................. 37 (d) No Material Adverse Effect....................................... 37 (e) No Future Advance Notice......................................... 37 ARTICLE VI REPRESENTATIONS AND WARRANTIES............................... 38 6.01 Corporate Existence and Power...................................... 38 6.02 Corporate Authorization; No Contravention.......................... 38 6.03 Governmental Authorization......................................... 38 6.04 Binding Effect..................................................... 38 6.05 Litigation......................................................... 38 6.06 No Default......................................................... 38 6.07 ERISA Compliance................................................... 39 6.08 Use of Proceeds; Margin Regulations................................ 39 6.09 Title to Properties................................................ 39 6.10 Taxes.............................................................. 39 6.11 Financial Condition................................................ 40 6.12 Environmental Matters.............................................. 40 6.13 Regulated Entities................................................. 40 6.14 No Burdensome Restrictions......................................... 40 6.15 Copyrights, Patents, Trademarks and Licenses, etc.................. 40 6.16 Subsidiaries....................................................... 40 6.17 Insurance.......................................................... 41 6.18 Full Disclosure.................................................... 41 6.19 Solvency........................................................... 41 6.20 Labor Relations.................................................... 41 6.21 Collateral Documents............................................... 41 6.22 Purchase, Redemption and Acquisition of Shares..................... 41 ARTICLE VII AFFIRMATIVE COVENANTS...................................... 42 7.01 Financial Statements............................................... 42 7.02 Certificates; Other Information.................................... 42 7.03 Notices............................................................ 43

- ii - 7.04 Preservation of Corporate Existence, Etc........................... 43 7.05 Maintenance of Property............................................ 44 7.06 Insurance.......................................................... 44 7.07 Payment of Obligations............................................. 44 7.08 Compliance with Laws............................................... 44 7.09 Compliance with ERISA.............................................. 44 7.10 Inspection of Property and Books and Records....................... 45 7.11 Environmental Laws................................................. 45 7.12 New Subsidiary Guarantors; New Subsidiary Security Agreements...... 45 7.13 Use of Proceeds.................................................... 46 7.14 Subordinated Indebtedness.......................................... 46 7.15 Further Assurances................................................. 46 ARTICLE VIII NEGATIVE COVENANTS......................................... 46 8.01 Limitation on Liens................................................ 46 8.02 Disposition of Assets.............................................. 47 8.03 Consolidations and Mergers......................................... 48 8.04 Loans and Investments.............................................. 48 8.05 Limitation on Subsidiary Indebtedness.............................. 49 8.06 Transactions with Affiliates....................................... 49 8.07 Use of Proceeds.................................................... 49 8.08 Contingent Obligations............................................. 49 8.09 Restricted Payments................................................ 50 8.10 Subsidiary Dividends............................................... 50 8.11 Subordinated Notes................................................. 51 8.12 Minimum Consolidated Net Worth..................................... 51 8.13 Minimum Interest Coverage Ratio.................................... 51 8.14 Maximum Capitalization Ratio....................................... 51 8.15 ERISA.............................................................. 51 8.16 Change in Business................................................. 51 8.17 Accounting Changes................................................. 51 ARTICLE IX EVENTS OF DEFAULT............................................ 51 9.01 Event of Default................................................... 51 (a) Non-Payment...................................................... 51 (b) Representation or Warranty....................................... 52 (c) Specific Defaults................................................ 52 (d) Other Defaults................................................... 52 (e) Cross-Default.................................................... 52 (f) Insolvency; Voluntary Proceedings................................ 52 (g) Involuntary Proceedings.......................................... 52 (h) ERISA............................................................ 53 (i) Monetary Judgments............................................... 53 (j) Change of Control................................................ 53 (k) Loss of Permit................................................... 53 (l) Adverse Change................................................... 53 (m) Guaranty Default................................................. 53 (n) Invalidity of Subordination Provisions........................... 53

- iii - (o) Prepayment of Subordinated Notes................................. 53 (p) Collateral....................................................... 54 9.02 Remedies........................................................... 54 9.03 Rights Not Exclusive............................................... 54 ARTICLE X THE AGENT.................................................... 55 10.01 Appointment and Authorization.................................... 55 10.02 Delegation of Duties............................................. 55 10.03 Liability of Administrative Agent................................ 55 10.04 Reliance by Administrative Agent................................. 56 10.05 Notice of Default................................................ 56 10.06 Credit Decision.................................................. 56 10.07 Indemnification.................................................. 57 10.08 Administrative Agent in Individual Capacity...................... 57 10.09 Successor Administrative Agent................................... 57 10.10 Withholding Tax.................................................. 58 10.11 Collateral Matters............................................... 59 ARTICLE XI MISCELLANEOUS................................................ 60 11.01 Amendments and Waivers........................................... 60 11.02 Notices.......................................................... 61 11.03 No Waiver; Cumulative Remedies................................... 61 11.04 Costs and Expenses............................................... 61 11.05 Indemnity........................................................ 62 11.06 Payments Set Aside............................................... 63 11.07 Successors and Assigns........................................... 63 11.08 Assignments, Participations, etc................................. 63 11.09 Confidentiality.................................................. 65 11.10 Set-off.......................................................... 65 11.11 Interest......................................................... 65 11.12 Indemnity and Subrogation........................................ 66 11.13 Automatic Debits of Fees......................................... 67 11.14 Notification of Addresses, Lending Offices, Etc.................. 67 11.15 Counterparts..................................................... 67 11.16 Severability..................................................... 67 11.17 No Third Parties Benefitted...................................... 67 11.18 GOVERNING LAW.................................................... 67 11.19 WAIVER OF JURY TRIAL............................................. 68 11.20 Assignment....................................................... 68 11.21 Entire Agreement................................................. 68

- iv - SCHEDULES Schedule 1.01 Preferred Eligible Account Obligors Schedule 2.01 Commitments Schedule 2.02 Pricing Chart Schedule 3.03 Existing Letters of Credit Schedule 6.11 Undisclosed Liabilities Schedule 6.16 Subsidiaries and Minority Interests Schedule 8.01 Permitted Liens Schedule 8.04 Permitted Loans and Investments Schedule 8.05 Certain Permitted Indebtedness Schedule 8.08 Certain 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-1 Form of Legal Opinion of Company's Counsel Exhibit D-2 Form of Legal Opinion of Company's Special Counsel Exhibit E Form of Assignment and Acceptance Exhibit F Form of Note Exhibit G Form of Amended and Restated Guaranty Agreement Exhibit H Form of Borrowing Base Report Exhibit I-1 Form of Amended and Restated Security Agreement (Parent) Exhibit I-2 Form of Amended and Restated Security Agreement (Subsidiary) - v - AMENDED AND RESTATED CREDIT AGREEMENT This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of December 19, 2001, among GIANT INDUSTRIES, INC., a Delaware corporation (the "COMPANY"), the several financial institutions from time to time parties to this Agreement (collectively, the "LENDERS"; individually, a "LENDER"), and BANK OF AMERICA, N.A. (Successor by merger to Bank of America National Trust and Savings Association), as administrative agent for the Lenders and as Letter of Credit Issuing Bank. WHEREAS, the Company, as borrower, Bank of America, as administrative agent and as a lender, and certain other agents and lenders are parties to that certain Credit Agreement dated as of December 23, 1998, as amended by that certain First Amendment to Credit Agreement dated as of December 17, 1999 (the "EXISTING CREDIT AGREEMENT"); and WHEREAS, the Company has requested, and the Administrative Agent and the Lenders have agreed, to amend and restate the Existing Credit Agreement and to refinance, rearrange, and extend the obligations and indebtedness outstanding thereunder, all subject to the terms and conditions set forth below. 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. "ADMINISTRATIVE AGENT" means Bank of America, N.A. in its capacity as agent for the Lenders hereunder, and any successor agent arising under SECTION 10.09. "ADMINISTRATIVE AGENT'S PAYMENT OFFICE" means the address for payments set forth on SCHEDULE 11.02 hereto in relation to the Administrative Agent, or such other address as the Administrative Agent may from time to time specify. "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-RELATED PERSONS" means Bank of America and any successor Administrative 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, the Arranger) and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "AGREEMENT" means this Amended and Restated Credit Agreement, as renewed, extended, amended or restated from time to time. "ALBUQUERQUE TERMINAL" means the terminal owned by Giant Mid-Continent, Inc. and operated by Giant Industries Arizona, Inc., located in or near Albuquerque, New Mexico. "APPLICABLE MARGIN" means with respect to Base Rate Loans and Offshore Rate Loans, respectively, the specified percent per annum therefor set forth in SCHEDULE 2.02 corresponding to the applicable pricing level determined in accordance therewith. "ARIZONA" means Giant Industries Arizona, Inc., an Arizona corporation. "ARRANGER" means Banc of America Securities LLC, in its capacity as sole lead arranger and sole book manager. "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 OF AMERICA" means Bank of America, N.A., a national banking association. "BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 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 Bank of America as its "prime rate." (The "prime rate" is a rate set by Bank of America based upon various factors, including Bank of America'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 Bank of America 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 REFINERY" means the refinery owned by San Juan Refining Company, and operated by Giant Industries Arizona, Inc., located in or near Farmington, New Mexico. "BNY INDENTURE" means that certain Indenture dated August 26, 1997, between the Company, as Issuer, The Bank of New York, as Trustee, and others evidenced by the BNY Subordinated Notes. - 2 - "BNY SUBORDINATED NOTES" means the $150,000,000 9% Senior Subordinated Notes due 2007 issued by the Company under the BNY Indenture. "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 Lenders 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 Administrative 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 are authorized or required by law to close under the Laws of, or are in fact closed in Dallas, Texas or such other state where the Administrative Agent's office for payments may be located, 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" means a capital lease as determined 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 Administrative Agent, for the benefit of the Administrative Agent, the Issuing Bank and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the Issuing Bank (which documents are hereby consented to by the Lenders). Derivatives of such term shall have corresponding meanings. - 3 - "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" means the refinery owned and operated by Giant Industries Arizona, Inc. located in or 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 Lenders (or, in the case of SUBSECTION 5.01(F), waived by the Person entitled to receive such payment). "CODE" means the Internal Revenue Code of 1986, and regulations promulgated thereunder. "COLLATERAL" means all property and interests in property and proceeds thereof now owned or hereafter acquired by the Company or any Guarantor and their respective Subsidiaries in or upon which a Lien now or hereafter exists in favor of the Lenders, or the Administrative Agent on behalf of the Lenders, whether under this Agreement or under any other documents executed by any such Person and delivered to the Administrative Agent or the Lenders. - 4 - "COLLATERAL DOCUMENTS" means, collectively, (a) the Security Agreement, and all other security agreements, mortgages, deeds of trust, patent and trademark assignments, lease assignments, guarantees and other similar agreements executed by the Company or any Subsidiary or any Guarantor for the benefit of the Lenders now or hereafter delivered to the Lenders or the Administrative Agent pursuant to or in connection with the transactions contemplated hereby, and all financing statements (or comparable documents now or hereafter filed in accordance with the Uniform Commercial Code or comparable law) against the Company or any Subsidiary or any Guarantor as debtor in favor of the Lenders or the Administrative Agent for the benefit of the Lenders as secured party, and (b) any amendments, supplements, modifications, renewals, replacements, consolidations, substitutions and extensions of any of the foregoing. "COMMITMENT" as to each Bank has the meaning specified in SECTION 2.01. "COMMITMENT FEE" has the meaning set forth in SUBSECTION 2.09(b). "COMMODITY SWAP" means any commodity swap, commodity option or commodity forward contract (including any option to enter into any of the foregoing). "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, and (e) any interest income to the extent not included in the determination of such Consolidated Net Income for the relevant period. "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 (other than trade payables incurred in the ordinary course of business on ordinary terms), (b) obligations under Capital Leases and other "off-balance sheet" leases (including Synthetic Leases), excluding operating leases (other than Synthetic Leases) incurred in the ordinary course of business, capitalized as though they all were capital leases, (c) obligations to redeem or purchase any stock or other equity security of the Company or a Subsidiary, and (d) any guaranty obligations in respect of any of the foregoing. "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 and all imputed interest with respect to Capital Leases 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 (other than Commodity Swaps) 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. - 5 - "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 TANGIBLE NET WORTH" means Consolidated Net Worth, minus the net book value of all assets of the Company and its Consolidated Subsidiaries (after deducting any reserves applicable thereto) which would be shown as intangible assets on a consolidated balance sheet of the Company and its Consolidated Subsidiaries prepared as of such time in accordance with GAAP. "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 (including the Existing Letters of Credit). "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. - 6 - "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 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 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 RECEIVABLE" 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 Account 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; (v) all Receivables that are payable by their terms more than 30 days from the respective invoice dates therefor; (vi) any Receivable in which the Lenders do not have a valid and perfected first priority security interest; (vii) any Receivable of a Subsidiary with respect to which any event described in SUBSECTION 9.01(F) or (G) shall have occurred and be continuing; (viii) Accounts with respect to which the account debtor is not a Person resident in the United States; (ix) Accounts with respect to which goods have been placed on consignment, guaranteed sale or other terms by reason of which the payment by the account debtor may be conditional; (x) accounts not denominated in United States dollars; (xi) Accounts with respect to which an invoice has not been sent prior to the date of any Borrowing Base Report in which such Account is included for purposes of calculation of the Borrowing Base; and (xii) Accounts that are otherwise identified as unsatisfactory to the Administrative Agent or the Majority Lenders using reasonable business judgment. "ELIGIBLE ASSIGNEE" means (a) a Lender, (b) an Affiliate of a Lender, and (c) any Person (other than a natural Person) approved by the Administrative Agent and by the Issuing Bank. "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 (excluding (a) any and all Feedstocks, Intermediate Products and Refined Products in which the Lenders do not have a valid and perfected first priority security interest, subject only to Permitted Liens, (b) any and all Feedstocks, Intermediate Products and Refined Products located on leased premises (other than Refined Product at leased service stations and travel centers operated by the Company or one of its Subsidiaries), or held by a bailee or - 7 - otherwise subject to any third party interest, with respect to which any landlord's waiver or other third party agreement requested by Secured Party or the Majority Lenders shall not have been furnished, and (c) Feedstocks, Intermediate Products and Refined Products of any Subsidiary with respect to which any event described in SUBSECTION 9.01(f) or (g) shall have occurred and be continuing), owned by the Company and its Subsidiaries (other than "inactive" Subsidiaries) in field production tanks, storage tanks and lines (including line fills but excluding basic sediment and water and slop oil), stored at the Bloomfield Refinery, the Ciniza Refinery, the Company's or its Subsidiaries' bulk plants, service stations and travel centers (excluding cardlocks), the Albuquerque Terminal, the Flagstaff Terminal and other Refined Products terminals owned or leased by the Company or its Subsidiaries, or at such other locations as may be approved from time to time by the Majority Lenders, provided, however, that such Feedstocks, Intermediate Products and Refined Products are not obsolete, unsalable, damaged or otherwise unfit for sale or further processing in the ordinary course of business or otherwise unsatisfactory to the Administrative Agent or the Majority Lenders using reasonable business judgment. "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, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, and safety. "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 material 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, as amended, and regulations promulgated thereunder. - 8 - "EXECUTION DATE" means the date specified on the cover page hereof. "EXISTING LETTERS OF CREDIT" means the letters of credit described in SCHEDULE 3.03. "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 per annum (rounded upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by the Administrative 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 or Ciniza Refineries. "FLAGSTAFF TERMINAL" means the terminal in or near Flagstaff, Arizona, owned by Giant Mid-Continent, Inc. and operated by Giant Industries Arizona, Inc. "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 (a) as of the date of Closing each of Giant Industries Arizona, Inc., an Arizona corporation, Giant Four Corners, Inc., an Arizona corporation, San Juan Refining Company, a New Mexico corporation, Giant Mid-Continent, Inc., an Arizona corporation, Giant Stop-N-Go of New Mexico, Inc., a New Mexico corporation, and Phoenix Fuel Co., Inc., an Arizona corporation and (b) any other Subsidiary of the Company which is required to execute a Guaranty under SECTION 7.12. - 9 - "GUARANTY" means collectively each of the Amended and Restated Guarantees substantially in the form of EXHIBIT G hereto executed by each of the Guarantors in favor of the Administrative Agent and the Lenders, as they may be amended, supplemented or otherwise modified from time to time, and any other guaranty agreements delivered pursuant to this Agreement. "GUARANTY OBLIGATION" has the meaning specified in the definition of "Contingent Obligation." "HAZARDOUS MATERIALS" means all those substances that are regulated by, or which may form the basis of liability under, any Environmental Law, including any substance identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum derived substance or waste. "HIGHEST LAWFUL RATE" means, as of a particular date, the maximum nonusurious interest rate that may under applicable federal and state law then be contracted for, charged or received by the Lenders 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 and other "off-balance sheet" leases (including Synthetic Leases), excluding operating leases (other than Synthetic Leases) incurred in the ordinary course of business; (g) all net obligations with respect to Swap Contracts (other than Commodity Swaps); (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. "INDENTURES" means the BNY Indenture and the NBD Indenture. "INDEPENDENT AUDITOR" has the meaning specified in SUBSECTION 7.01(a). "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 - 10 - 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, 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 an 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 shall extend beyond the Termination Date. "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 incorporate the Existing Letters of Credit into this Agreement, or 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, in its capacity as issuer of one or more Letters of Credit hereunder and as the issuer of Existing Letters of Credit, together with any successor replacement letter of credit issuer pursuant to SECTION 10.09. "L/C ADVANCE" means each Lender'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, or for amendment of, Letters of Credit as shall at any time be in use at the Issuing Bank. - 11 - "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 Revolving Loans under SUBSECTION 3.03(c). "L/C COMMITMENT" means the commitment of the Issuing Bank to Issue, and the commitment of the Lenders severally to participate in, Letters of Credit (including the Existing Letters of Credit) from time to time Issued or outstanding under ARTICLE III, in an aggregate amount not to exceed on any date the lesser of (a) the amount of $50,000,000 and (b) the combined Commitments, as the same may be reduced as a result of a reduction in the Commitments pursuant to SECTION 2.05; provided that the L/C Commitment is a part of the combined Commitments, rather than a separate, independent commitment. "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. "LENDER" has the meaning specified in the introductory clause hereto. References to the "Lenders" shall include Bank of America, including in its capacity as Issuing Bank; for purposes of clarification only, to the extent that Bank of America may have any rights or obligations in addition to those of the Lenders due to its status as Issuing Bank, its status as such will be specifically referenced. "LENDING OFFICE" means, as to any Lender, the office or offices of such Lender 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 Lender may from time to time notify the Company and the Administrative Agent. "LETTERS OF CREDIT" means the Existing Letters of Credit and any standby letters of credit Issued by the Issuing Bank pursuant to ARTICLE III. "LEVERAGE RATIO" means, as of any date, the ratio of Consolidated Funded Indebtedness, as of the last day of the fiscal quarter most recently then ended, to Consolidated EBITDA, for the four fiscal quarters most recently then ended. "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 Lender to the Company under ARTICLE II or ARTICLE III in the form of a Revolving Loan or L/C Advance. - 12 - "LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, the Collateral Documents, the Fee Letter, the L/C-Related Documents, and all other documents contemplated hereby and executed in favor of the Administrative Agent or any Lender. "MAJORITY LENDERS" means at any time Lenders 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, Lenders then having at least 66-2/3% of the Commitments. "MARGIN STOCK" means "margin stock" as such term is defined in Regulation 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, liabilities, capitalization or financial condition of the Company and its Subsidiaries taken as a whole; (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 (i) the legality, validity, binding effect or enforceability against the Company or any Significant Subsidiary of any Loan Document or (ii) the perfection or priority of any Lien granted under any of the Collateral Documents. "MATERIAL LEASE" means any lease of real or personal property (other than Capital Leases) as to which the sum of the rental and other obligations required to be paid during the relevant period exceeds $2,500,000. "MATERIAL RENTS" means, with respect to any period, the sum of the rental and other obligations required to be paid during such period by the Company or any Subsidiary as lessee under all Material Leases. "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 29, 1993, between the Company, as Issuer, NBD Bank, National Association now known as Bank One Trust Company, N.A. ("NBD BANK"), 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. "NOTE" means a promissory note executed by the Company in favor of a Lender pursuant to SECTION 2.02 (B) or SECTION 11.08(C), in substantially the form of EXHIBIT F. "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. - 13 - "OBLIGATIONS" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Company or any Guarantor to any Lender, any Affiliate of a Lender, the Administrative 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, provided that all references to the "Obligations" in the Collateral Documents and in SECTIONS 2.13 and 11.10 shall, in addition to the foregoing, also include all present and future indebtedness, liabilities and obligations now or hereafter owed to any Lender or any Affiliate of a Lender arising from, by virtue of or pursuant to any Specified Swap Contracts by the Company or any Subsidiary of the Company. "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 Administrative 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 Lender) 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, for such Interest Period: (a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Offshore Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such - 14 - Interest Period would be offered by Bank of America's London Branch to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day 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. "EXISTING CREDIT AGREEMENT" is defined in the recitals hereof. "OTHER TAXES" means any present or future stamp, court 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, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Documents, excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender's net income by (i) any jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Administrative Agent, as the case may be, is organized or maintains a Lending Office or (ii) any jurisdiction (or political subdivision thereof) in which such Lender or the Administrative Agent, as the case may be, is "doing business" (unless it would not be deemed to be "doing business" in such jurisdiction absent the transactions contemplated hereby). "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, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. "PHOENIX" means Phoenix Fuel Co., Inc., an Arizona corporation. "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 - 15 - 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 any Person (a) from which the Eligible Accounts Receivables are 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's and S&P, respectively, or (b) that is major international oil or other company rated "A2/A" or better by Moody's and S&P, respectively, or a Wholly Owned Subsidiary of such company whose obligations are guaranteed by such company, and is identified by the Company on SCHEDULE 1.01 hereof, as may be amended from time to time with the approval of the Majority Lenders. "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 Lender 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 Lenders. "RECEIVABLES" shall mean, as to the Company or any of its Subsidiaries (other than "inactive" Subsidiaries), all accounts receivable, whether billed or unbilled, arising out of the sale of inventory in the ordinary course of business. "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, including without limitation Environmental Laws. "RESPONSIBLE OFFICER" means the officers of the Company with the following titles (i) president, (ii) executive vice president, (iii) vice president and treasurer. (iv) vice president and financial officer, (v) vice president and controller, and (vi) vice president and accounting officer of the Company. "REVOLVING LOAN" has the meaning specified in SECTION 2.01. "RISK PARTICIPATION FEE" has the meaning set forth in SUBSECTION 3.08(a). - 16 - "S&P" means Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc., a New York corporation. "SAN JUAN" means San Juan Refining Company, a New Mexico corporation. "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. "SECURITY AGREEMENT" means collectively each of the Amended and Restated Pledge, Assignment and Security Agreements or Pledge, Assignment and Security Agreements, as applicable, substantially in the form of EXHIBIT I hereto executed by the Company and certain Subsidiaries in favor of the Administrative Agent and the Lenders, as they may be amended, supplemented or otherwise modified from time to time, and any other security agreements now or hereafter delivered pursuant to this Agreement. "SIGNIFICANT SUBSIDIARY" means (a) Arizona, (b) San Juan, (c) Phoenix, or (d) any other Subsidiary of the Company having total assets at or immediately prior to the time in question with a book value of $10,000,000 or more. "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. "SPECIFIED SWAP CONTRACTS" means all Swap Contracts made or entered into at any time, or in effect at any time, whether directly or indirectly, and whether as a result of assignment or transfer or otherwise, between the Company or any Subsidiary of the Company and any Swap Provider, which Swap Contract is or was intended by the Company to have been entered into, in part or entirely, for purposes of mitigating interest rate or currency exchange risk relating to any liabilities owed or credit facilities in effect and not for the purposes of financing, speculation or taking a "market view" (which intent shall conclusively be deemed to exist if the Company so represents to the Swap Provider in writing) and as to which the final scheduled payment by the Company or its Subsidiary is not later than the Termination Date. "SUBORDINATED NOTES" means (i) the NBD Subordinated Notes issued under the NBD Indenture, (ii) the BNY Subordinated Notes issued under the BNY Indenture and (iii) such other notes as may be issued from time to time by the Company after the Execution Date which have been subordinated on terms and conditions satisfactory to the Administrative Agent and the Majority Lenders, in their sole discretion, to all other Indebtedness of the Company to the Administrative Agent and the Lenders, whether now existing or hereafter incurred. Notes shall not be considered "Subordinated Notes" unless and until the Administrative Agent shall have received copies of the documentation evidencing or relating to such notes evidencing the terms and conditions of subordination required by the Administrative Agent and the Majority Lenders. "SUBSIDIARY" of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, - 17 - membership interests 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. "SUPPLEMENTAL GUARANTY" means an agreement, in substantially the form attached to the Guaranty, pursuant to which the Person executing the same elects to become a Guarantor for purposes of the Credit Agreement and agrees to perform all of the obligations of a Guarantor under, and to be bound in all respects by the terms of, the Guaranty, as if said Person were a signatory party thereto. "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). "SWAP PROVIDER" means any Lender or any Affiliate of any Lender that is at the time of determination party to a Swap Contract with the Company or any Subsidiary of the Company. "SYNTHETIC LEASE" means a financing arrangement that is treated as a lease for financial accounting purposes and as a loan for tax purposes. For the purposes hereof, the FFCA Lease (as defined in SCHEDULE 8.05) shall be deemed and treated herein as a "Synthetic Lease," notwithstanding its nature or treatment for financial accounting, tax or other purposes. "TAXES" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender's net income by (i) any jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Administrative Agent, as the case may be, is organized or maintains a Lending Office or (ii) any jurisdiction (or political subdivision thereof) in which such Lender or the Administrative Agent, as the case may be, is "doing business" (unless it would not be deemed to be "doing business" in such jurisdiction absent the transactions contemplated hereby). "TERMINATION DATE" means the earlier of (a) November 14, 2003 or (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. "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 mean 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 - 18 - 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, (a) 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 (b) 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 Administrative Agent, the Company and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or the Administrative Agent merely because of the Administrative Agent's or Lenders' 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. Each Lender severally agrees, on the terms and conditions set forth herein, to make Loans to the Company (each such loan, a "REVOLVING LOAN") from time to time on any Business Day during the period from the Closing Date to the Termination Date, in an aggregate amount not to exceed at any time outstanding the lesser of the following: (i) the amount set forth on SCHEDULE 2.01 (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 Lender's "COMMITMENT") and (ii) the Lender's Pro Rata Share of the current Borrowing Base; provided, however, that, after giving effect to any Borrowing of Revolving Loans, the Effective Amount of all outstanding Revolving Loans, together with the Effective Amount of all L/C Obligations, shall not at any time exceed the combined Commitments of all of the - 19 - Lenders. Within the limits of each Lender's Commitment, and subject to the other terms and conditions of this Agreement, the Company may borrow under this SECTION 2.01, prepay under SECTION 2.06 and reborrow under this SECTION 2.01. 2.02 Loan Accounts. (a) The Loans made by each Lender shall be evidenced by one or more loan accounts or records maintained by such Lender in the ordinary course of business. The loan accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) Upon the request of any Lender made through the Administrative Agent, the Loans made by such Lender may be evidenced by one or more Notes, instead of or in addition to loan accounts. Each such Lender shall endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Lender is irrevocably authorized by the Company to endorse its Note(s) and each Lender's record shall be conclusive absent manifest error; provided, however, that the failure of a Lender to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Lender. 2.03 Procedure for Borrowing. (a) Each Borrowing of Revolving Loans shall be made upon the Company's irrevocable written notice delivered to the Administrative Agent in the form of a Notice of Borrowing (which notice must be received by the Administrative Agent prior to 10:00 a.m. (Dallas, Texas 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 Administrative Agent will promptly notify each Lender of its receipt of any Notice of Borrowing and of the amount of such Lender's Pro Rata Share of that Borrowing. (c) Each Lender will make the amount of its Pro Rata Share of each Borrowing available to the Administrative Agent for the account of the Company at the Administrative Agent's Payment Office by 12:00 noon (Dallas, Texas time) on the Borrowing Date requested by the Company in funds immediately available to the Administrative Agent. The proceeds of all such Loans will then be made available to the Company by the Administrative Agent by wire transfer in accordance with written instructions provided to the Administrative Agent by the Company of like funds as received by the Administrative Agent. (d) After giving effect to any Borrowing, there may not be more than seven (7) different Interest Periods in effect. - 20 - 2.04 Conversion and Continuation Elections. (a) The Company may, upon irrevocable written notice to the Administrative 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 Administrative Agent not later than 10:00 a.m. (Dallas, Texas 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 continued; (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 Administrative Agent will promptly notify each Lender of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Administrative Agent will promptly notify each Lender 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 Lender. (e) Unless the Majority Lenders 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 Termination or Reduction of Commitments. (a) Voluntary Termination or Reduction. The Company may, upon not less than five Business Days' prior notice to the Administrative Agent, terminate the Commitments, or permanently reduce the Commitments (and, correspondingly, as applicable, the L/C Commitment) by an aggregate minimum amount of $2,000,000.00 or any multiple of $1,000,000.00 in excess thereof; unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, (i) the Effective Amount of all Revolving Loans and L/C Obligations together would exceed the amount of the combined Commitments then in effect, or (ii) the Effective Amount of all L/C Obligations then outstanding would - 21 - exceed the amount of the L/C Commitment then in effect. Once reduced in accordance with this subsection, the Commitments may not be increased. (b) Additional Provisions. Each reduction in aggregate Commitments pursuant to paragraph (a) above shall be applied to each Lender according to its Pro Rata Share. All accrued Commitment Fees on the amount of the Commitments so terminated or reduced, Letter of Credit Fees, and Fronting Fees to, but not including, the effective date of any reduction or termination of Commitments, shall be paid by the Company 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 Administrative 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 Lender, 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 Administrative Agent will promptly notify each Lender of its receipt of any such notice, and of such Lender'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 Termination Date and shall be equal to the sum of (i) eighty percent (80%) of Eligible Refinery Hydrocarbon Inventory (except for Eligible Refinery Hydrocarbon Inventory at the Company's and its Subsidiaries' service stations and travel centers), plus (ii) fifty percent (50%) of Eligible Refinery Hydrocarbon Inventory 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 Eligible Account Obligors other than Preferred Eligible Account Obligors. (b) If on any date the Effective Amount of all Revolving Loans and the Effective Amount of all L/C Obligations together exceed the Borrowing Base, the Company shall, without notice or demand, prepay the outstanding principal amount of the 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 L/C Obligations together exceed the Borrowing Base, the Company shall immediately Cash Collateralize on such date the outstanding Letters of Credit in an amount equal to the amount by which the Effective Amount of the L/C Obligations exceeds the Borrowing Base. 2.08 Repayment. (a) Principal. The Company shall repay to the Lenders the aggregate principal amount of Loans outstanding on the Termination Date. (b) Interest. (i) Subject to CLAUSE (iii) of this SUBSECTION 2.08(b), 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) the Offshore Rate or the Base Rate, as the case may be, as selected by the Company or otherwise applicable to - 22 - such Revolving Loan in accordance with the terms and provisions hereof (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 Highest Lawful Rate. (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 Administrative Agent at the request or with the consent of the Majority Lenders. (iii) Notwithstanding CLAUSE (i) of this SUBSECTION 2.08(b), 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 per annum rate equal to the rate set forth in CLAUSE (i) of this SUBSECTION 2.08(b) plus two percent (2%) per annum. 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 Administrative Agent for the Administrative Agent's own account, as required by the letter agreement ("FEE LETTER") between the Company and the Arranger and Administrative Agent dated November 14, 2001. (b) Commitment Fees. The Company shall pay to the Administrative Agent for the account of each Lender a commitment fee (the "COMMITMENT FEE") on the average daily unused portion of such Lender'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 Administrative Agent, equal to the percent per annum set forth in SCHEDULE 2.02 corresponding to the applicable pricing level determined in accordance therewith. 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 Execution Date to the Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each quarter commencing on December 31, 2001 through the Termination Date, with the final payment to be made on the Termination Date; provided that, in connection with any reduction or termination of Commitments under SECTION 2.05, 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 Fee 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 Bank of America'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. - 23 - (b) Each determination of an interest rate by the Administrative Agent shall be conclusive and binding on the Company and the Lenders 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 condition or deduction for any defense, set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Administrative Agent for the account of the Lenders at the Administrative Agent's Payment Office, and shall be made in dollars and in immediately available funds, no later than 11:00 a.m. (Dallas, Texas time) on the date specified herein. The Administrative Agent will promptly distribute to each Lender 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 Administrative Agent later than 11:00 a.m. (Dallas, Texas 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 Administrative Agent receives notice from the Company prior to the date on which any payment is due to the Lenders that the Company will not make such payment in full as and when required, the Administrative Agent may assume that the Company has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company has not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid. 2.12 Payments by the Lenders to the Administrative Agent. (a) Unless the Administrative Agent receives notice from a Lender on or prior to the Execution Date or, with respect to any Borrowing after the Execution Date, at least one Business Day prior to the date of such Borrowing, that such Lender will not make available as and when required hereunder to the Administrative Agent for the account of the Company the amount of that Lender's Pro Rata Share of the Borrowing, the Administrative Agent may assume that each Lender has made such amount available to the Administrative Agent in immediately available funds on the Borrowing Date and the Administrative 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 Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to the Company such amount, that Lender shall on the Business Day following such Borrowing Date make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Administrative Agent submitted to any Lender 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 Administrative Agent shall constitute such Lender's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Administrative Agent on the Business Day following the Borrowing Date, the Administrative Agent will notify the Company of such failure to fund and, upon demand by the Administrative Agent, the Company shall pay such amount to the Administrative Agent for the Administrative Agent's account, together with interest thereon for each day - 24 - 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 Lender to make any Loan on any Borrowing Date shall not relieve any other Lender of any obligation hereunder to make a Loan on such Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on any Borrowing Date. 2.13 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Lender 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 Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender 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 Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to SECTION 11.10) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation. The Administrative 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 Lenders following any such purchases or repayments. 2.14 Security and Guaranty. (a) All obligations of the Company and the Guarantors under this Agreement, the Notes, the Guaranty and all other Loan Documents shall be secured, pro rata with the Specified Swap Contracts, in accordance with the Collateral Documents. The Company agrees that, at any time upon the request of the Administrative Agent (acting pursuant to the instructions of the Majority Lenders), it shall, and shall cause each of its Subsidiaries to, enter into a cash collateral agreement in form and substance satisfactory to the Administrative Agent and the Majority Lenders, pursuant to which all proceeds of accounts and other collateral shall be deposited directly, and, at the election of the Majority Lenders, all account debtors shall be directed to make payments directly, to the Administrative Agent, the proceeds deposited to such account, following receipt of good funds, to be credited to the Company's general operating account with the Administrative Agent in the absence of any Default or Event of Default. (b) All obligations of the Company under this Agreement, each of the Notes and all other Loan Documents shall be unconditionally guaranteed by the Guarantors pursuant to the Guaranty. 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, in reliance upon the agreements of the other Lenders set forth in this SECTION 3.01, (A) from time to time on any Business Day during the period from the Execution Date to the Termination Date to issue Letters of - 25 - 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 Lenders 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 Lender 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"), after giving effect to such Issuance, (1) the Effective Amount of all L/C Obligations plus the Effective Amount of all Revolving Loans would exceed the lesser of (x) the combined Commitments and (y) the Borrowing Base, or (2) the Effective Amount of the L/C Obligations would exceed the L/C Commitment. 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 Execution Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Execution Date and which the Issuing Bank in good faith deems material to it; (ii) the Issuing Bank has received written notice from any Lender, the Administrative 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 Lenders have approved such expiry date in writing, or (B) after the Termination Date, unless the Company has agreed to Cash Collateralize such Letter of Credit in accordance with SECTION 3.07; (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; (vii) if such Letter of Credit is issued to support workmen's compensation liabilities and the face amount is more than $1,000,000; or (viii) the issuance of such Letter of Credit would violate one or more of the Issuing Bank's policies. 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 Administrative 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 Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of the L/C Application or L/C Amendment Application from - 26 - the Company and, if the Administrative Agent has not received such copy, the Issuing Bank will provide the Administrative 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 Administrative 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 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 Administrative 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 Administrative Agent will promptly notify the Lenders 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 Lenders 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 Administrative Agent at the direction of the Majority Lenders), 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 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 Administrative 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 Letters of Credit, Risk Participations, Drawings and Reimbursements. (a) On and after the Execution Date, the Existing 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 - 27 - Agreement. Each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank on the Execution Date a participation in each such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) such Lender'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 SECTION 2.01 and SUBSECTION 2.09(b), the Existing Letters of Credit shall be deemed to utilize pro rata the Commitment of each Lender. (b) Immediately upon the Issuance of each Letter of Credit, each Lender 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 Lender, times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. For purposes of SECTION 2.01, each Issuance of a Letter of Credit shall be deemed to utilize the Commitment of each Lender 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. (Dallas, Texas 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. (Dallas, Texas time) on the Honor Date, the Issuing Bank will promptly notify the Administrative Agent and the Administrative Agent will promptly notify each Lender thereof, and the Company shall be deemed to have requested that Base Rate Loans be made by the Lenders to be disbursed on the Honor Date under such Letter of Credit, subject to the amount of the unutilized portion of the Commitments and subject to the conditions set forth in ARTICLE V. Any notice given by the Issuing Bank or the Administrative 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 Lender shall upon any notice pursuant to SUBSECTION 3.03(c) make available to the Administrative 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 Lenders shall (subject to SUBSECTION 3.03(e)) each be deemed to have made a Revolving Loan consisting of a Base Rate Loan to the Company in that amount. If any Lender so notified fails to make available to the Administrative Agent for the account of the Issuing Bank the amount of such Lender's Pro Rata Share of the amount of the drawing by no later than 12:00 noon (Dallas, Texas time) on the Honor Date, then interest shall accrue on such Lender's obligation to make such payment, from the Honor Date to the date such Lender makes such payment, at a rate per annum equal to the Federal Funds Rate in effect from time to time during such period. The Administrative Agent will promptly give notice to each Lender of the occurrence of the Honor Date, but failure of the Administrative Agent to give any such notice on the Honor Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligations under this SECTION 3.03. (e) With respect to any unreimbursed drawing that is not converted into 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 ARTICLE V 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 Lender'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 - 28 - Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this SECTION 3.03. (f) Each Lender's obligation in accordance with this Agreement to make the 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 Lender 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 Lender's obligation to make Revolving Loans under this SECTION 3.03 is subject to the conditions set forth in ARTICLE V. 3.04 Repayment of Participations. (a) When the Administrative Agent receives (and only if the Administrative 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 Lender has paid the Administrative Agent for the account of the Issuing Bank for such Lender's participation in the Letter of Credit pursuant to SECTION 3.03 or (ii) in payment of interest thereon, the Administrative Agent will pay to each Lender, in the same funds as those received by the Administrative Agent for the account of the Issuing Bank, the amount of such Lender'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 Lender that did not so pay the Administrative Agent for the account of the Issuing Bank. (b) If the Administrative 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 Administrative 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 Lender shall, on demand of the Administrative Agent, forthwith return to the Administrative Agent or the Issuing Bank the amount of its Pro Rata Share of any amounts so returned by the Administrative Agent or the Issuing Bank plus interest thereon from the date such demand is made to the date such amounts are returned by such Lender to the Administrative 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 Lender 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 Lender for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders (including the Majority Lenders, 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 - 29 - 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 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. (a) The Company shall immediately Cash Collateralize the L/C Obligations in an amount equal to the L/C Obligations upon the occurrence of either of the following: (i) upon the request of the Administrative Agent, 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 (ii) upon the occurrence - 30 - of the circumstances described in SUBSECTION 2.07(b) requiring the Company to Cash Collateralize Letters of Credit. (b) If, on the Termination Date, any one or more Letters of Credit for any reason remain outstanding and partially or wholly undrawn, then the Company shall on such date Cash Collateralize the L/C Obligations in an amount equal to 110% of the L/C Obligations. 3.08 Letter of Credit Fees. (a) The Company shall pay to the Administrative Agent for the account of each of the Lenders a letter of credit fee (the "RISK PARTICIPATION FEE") with respect to the Letters of Credit equal to (i) the percent per annum therefor specified in SCHEDULE 2.02 corresponding to the applicable pricing level determined in accordance therewith multiplied by (ii) 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 as calculated by the Administrative Agent. Such Risk Participation Fee 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 Execution Date, through the Termination Date (or such later date upon which the outstanding Letters of Credit shall expire), with the final payment to be made on the Termination Date (or such later expiration date). (b) The Company shall pay to the Administrative 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 Administrative Agent, acting upon instructions of the Majority Lenders, deposit in an account (the "CASH COLLATERAL ACCOUNT") held by the Administrative Agent, for the benefit of the Lenders, an amount in cash equal to the Letter of Credit Obligations as of such date. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the Obligations. The Administrative 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 Administrative Agent or any Affiliate of the Administrative 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 Administrative 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 Lenders, be applied to satisfy the Obligations (pro rata with any obligations to the Swap Providers under Specified Swap Contracts then due and payable, in accordance with the Security Agreement). - 31 - (b) As security for the payment of all Obligations, the Company hereby grants, conveys, assigns, pledges, sets over and transfers to the Administrative Agent, and creates in the Administrative 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 Administrative 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 Administrative 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 Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the Issuing Bank and the Company when a Letter of Credit is issued (including any such agreement applicable to Existing Letters of Credit), (a) the rules of the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit, and (b) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the "ICC") at the time of issuance (including the ICC decision published by the Commission on Banking Technique and Practice on April 6, 1998 regarding the European single currency (euro)) shall apply to each commercial Letter of Credit. ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY 4.01 Taxes. (a) Any and all payments by the Company to each Lender or the Administrative 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 Lender and the Administrative 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 Lender or the Administrative 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 Lender or the Administrative 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 Lender or the Administrative 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 Lender or the Administrative 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 Lender or the Administrative Agent for the account of such Lender, at the time interest is paid, all additional amounts which the respective Lender specifies as necessary to preserve the after-tax yield the Lender would have received if such Taxes or Other Taxes had not been imposed. - 32 - (d) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent. (e) If the Company is required to pay additional amounts to any Lender or the Administrative Agent pursuant to SUBSECTION (c) of this Section, then upon written request of the Company such Lender 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 Lender is not otherwise disadvantageous to such Lender. 4.02 Illegality. (a) If any Lender 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 Lender or its applicable Lending Office to make Offshore Rate Loans, then, on notice thereof by the Lender to the Company through the Administrative Agent, any obligation of that Lender to make Offshore Rate Loans shall be suspended until the Lender notifies the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If a Lender 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 Lender (with a copy to the Administrative Agent), prepay in full such Offshore Rate Loans of that Lender 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 Lender may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Lender 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 Lender, in the amount of such repayment, a Base Rate Loan. (c) If the obligation of any Lender to make or maintain Offshore Rate Loans has been so terminated or suspended, all Loans which would otherwise be made by the Lender as Offshore Rate Loans shall be instead Base Rate Loans. (d) Before giving any notice to the Administrative Agent under this Section, the affected Lender 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 Lender, be illegal or otherwise disadvantageous to the Lender. 4.03 Increased Costs and Reduction of Return. (a) If any Lender 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 Lender 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 Lender 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 Administrative Agent), pay to the - 33 - Administrative Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs. (b) If any Lender 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 Lender (or its Lending Office) or any corporation controlling the Lender with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Lender or any corporation controlling the Lender and (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy and such Lender'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 Lender to the Company through the Administrative Agent, the Company shall pay to the Lender, from time to time as specified by the Lender, additional amounts sufficient to compensate the Lender for such increase. 4.04 Funding Losses. The Company shall reimburse each Lender and hold each Lender harmless from any loss, cost or expense which the Lender 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 of anticipated profits and any 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. The Company shall also pay customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Company to the Lenders under this Section and under SUBSECTION 4.03(a), each Offshore Rate Loan made by a Lender (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 Administrative Agent 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 2.08(b)(i) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, the Administrative Agent will promptly so notify the Company and each Lender. Thereafter, the obligation of the Lenders to make or maintain Offshore Rate Loans hereunder shall be suspended until the Administrative Agent upon the instruction of the Majority Lenders 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 Lenders 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. - 34 - 4.06 Certificates of Lenders. Any Lender claiming reimbursement or compensation under this ARTICLE IV shall deliver to the Company (with a copy to the Administrative Agent) a certificate setting forth in reasonable detail the amount payable to the Lender hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. 4.07 Substitution of Lenders. Upon the receipt by the Company from any Lender (an "AFFECTED LENDER") of a notice of illegality under SECTION 4.02 or a claim for compensation under SECTION 4.03, or the Company being or becoming liable with respect to payments hereunder to any Lender (also an "AFFECTED LENDER") for any Taxes pursuant to SECTION 4.01 assessed at a rate in excess of the rate of any such Taxes for which it is liable with respect to payments to any other Lender hereunder, the Company may: (i) request the Affected Lender to use its best efforts to obtain a replacement bank or financial institution satisfactory to the Administrative Agent (a "REPLACEMENT LENDER") to acquire and assume all or a ratable part of all of such Affected Lender's Loans and Commitment, and, if such Affected Lender or any Affiliate thereof is a Swap Provider, all specified Swap Contracts of such Affected Lender and its Affiliates; (ii) request one more of the other Lenders to acquire and assume all or part of such Affected Lender's Loans and Commitment, and, if such Affected Lender or any Affiliate thereof is a Swap Provider, all specified Swap Contracts of such Affected Lender and its Affiliates, but none of the Lenders shall have any obligation to do so; or (iii) designate a Replacement Lender satisfactory to the Administrative Agent. Any such designation of a Replacement Lender under CLAUSE (I) or (III) shall be subject to the prior written consent of the Administrative 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 Lender 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 that the Administrative Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Administrative Agent and each Lender, and in sufficient copies for each Lender: (a) Credit Agreement, Notes, Guaranty, and Perfection Certificate. This Agreement, the Notes, and the Guaranty executed by each party thereto, and a certificate in such form and detail as the Administrative Agent may require as to matters relating to the Collateral; (b) 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 Notes, the Guaranties 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, or a certificate of the Secretary or Assistant Secretary certifying that such articles and bylaws have not been amended since delivered to the Administrative Agent pursuant to the Existing Credit Agreement; - 35 - (c) Certificate (Organization, Qualification and Good Standing). A certificate signed by a Responsible Officer, dated as of the Execution Date, identifying those states in which the ownership, lease or operation of property or the conduct of its business requires the Company and each of the Guarantors, respectively, to be qualified or licensed to do business as a foreign corporation, and attaching thereto, with respect to the Company and each of the Guarantors, respectively, certificates of the Secretary of State (and/or similar applicable Governmental Authority) of its state of incorporation or organization and each such state where it is so required to be qualified or licensed to do business as a foreign corporation, certifying as of a recent date each such Person's existence or qualification, as applicable, and good standing in each such jurisdictions; (d) Legal Opinions. Copies of (i) a favorable opinion of Kim Bullerdick, Counsel to the Company, addressed to the Administrative Agent and the Lenders, substantially in the form of EXHIBIT D-1; and (ii) a favorable opinion of Fennemore Craig, P.C., special counsel to the Company, addressed to the Administrative Agent and the Lenders, substantially in the form of EXHIBIT D-2; (e) 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 Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute the Administrative 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 Administrative Agent); including any such costs, fees and expenses arising under or referenced in SECTIONS 2.09 and 11.04; (f) 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 December 31, 2000, no event or circumstance that has resulted or would reasonably be expected to result in a Material Adverse Effect; (g) Certificate (Repurchased Shares). A certificate signed by a Responsible Officer, dated as of the Closing Date, setting forth the number of shares of the Company's stock that the Company has purchased, redeemed or otherwise acquired since November 23, 1998. (h) Certificate (Borrowing Base Certificate). A copy of the most recent Borrowing Base Certificate, certified by a Responsible Officer. (i) Collateral Documents. The Collateral Documents, executed by the Company and by each Subsidiary (other than Navajo Convenient Stores Co., LLC) that has assets or conducts business, in appropriate form for recording, where necessary, together with: (i) such Lien and judgment searches as the Administrative Agent shall have requested, and such termination statements or other documents as may be necessary to confirm that the Collateral is subject to no other Liens (other than Permitted Liens) in favor of any Persons; (ii) funds sufficient to pay any filing or recording tax or fee in connection with any and all UCC-1 financing statements; - 36 - (iii) evidence that the Administrative Agent has been named as loss payee under all policies of casualty insurance pertaining to the Collateral; (iv) such consents, estoppels, subordination agreements and other documents and instruments executed by landlords and other Persons party to material contracts relating to any Collateral as to which the Administrative Agent shall be granted a Lien for the benefit of the Lenders, as requested by the Administrative Agent or any Lender; and (v) evidence that all other actions necessary or, in the opinion of the Administrative Agent or the Lenders, desirable to perfect and protect the first priority Lien created by the Collateral Documents, and to enhance the Administrative Agent's ability to preserve and protect its interests in and access to the Collateral, have been taken; and (j) Other Documents. Such other approvals, opinions, documents or materials as the Administrative Agent or any Lender may request. 5.02 Conditions to All Credit Extensions. The obligation of each Lender 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 Administrative Agent shall have received a timely Notice of Borrowing or a timely Notice of Conversion/Continuation, as applicable, or, in the case of any Issuance of any Letter of Credit, the Issuing Bank and the Administrative 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, Issuance Date or Conversion/Continuation Date with the same effect as if made on and as of such Borrowing Date, Issuance 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); (c) No Existing Default. No Default or Event of Default shall exist or shall result from such Credit Extension or continuation or conversion; (d) No Material Adverse Effect. No event or circumstance shall have occurred that has resulted or would reasonably be expected to result in a Material Adverse Effect; and (e) No Future Advance Notice. Neither the Administrative Agent nor any Lender shall have received any notice that any Collateral Document will no longer secure on a first priority basis future advances or future Loans to be made or extended under this Agreement. 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. - 37 - ARTICLE VI REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Administrative Agent and each Lender 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 (b), (c) and (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 material 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. 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: (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (b) 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 or from the grant or perfection of the Liens of the Administrative Agent and the Lenders on the Collateral. Neither the Company nor any Material - 38 - 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. (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. Margin Stock does not constitute more than 25% of the value of the consolidated assets of the Company and its Subsidiaries, and the Company does not have any present intention that Margin Stock will constitute more than 25% of the value of such assets. 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. 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 - 39 - 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 September 30, 2001, 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 in all material respects 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) show all material Indebtedness and other liabilities, direct or contingent, of the Company and its consolidated Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Contingent Obligations. Since December 31, 2000, 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 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 any provision of the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or any state public utilities code, or of 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. 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, would reasonably be expected to have a Material Adverse Effect. 6.16 Subsidiaries. As of the Execution 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. - 40 - 6.17 Insurance. 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 Lenders prior to the Execution 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. The Company and its Subsidiaries, taken as a whole, and the Company, individually, and each of the Guarantors, individually, is Solvent. 6.20 Labor Relations. There is (a) no significant unfair labor practice complaint pending against the Company or any of its Subsidiaries or, to the knowledge of the Company, threatened against any of them, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Company or any of its Subsidiaries or, to the knowledge of the Company, threatened against any of them, (b) no significant strike, labor dispute, slowdown or stoppage pending against the Company or any of its Subsidiaries or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries and (c) to the knowledge of the Company, no union representation question existing with respect to the employees of the Company or any of its Subsidiaries and, to the knowledge of the Company, no union organizing activities are taking place, except (with respect to any matter specified in CLAUSE (a), (b) or (c) above, either individually or in the aggregate) such as could not reasonably be expected to have a Material Adverse Effect. 6.21 Collateral Documents. (a) The provisions of each of the Collateral Documents are effective to create in favor of the Administrative Agent for the benefit of the Lenders, a legal, valid and enforceable first priority security interest in all right, title and interest of the Company and its Subsidiaries in the collateral described therein; and financing statements have been filed in the offices in all of the jurisdictions listed in the schedule to the Security Agreement. (b) All representations and warranties of the Company and any of its Subsidiaries party thereto contained in the Collateral Documents are true and correct in all material respects. 6.22 Purchase, Redemption and Acquisition of Shares. Since September 30, 2001, the Company has purchased, redeemed or otherwise acquired 400,000 shares of its common stock. - 41 - ARTICLE VII AFFIRMATIVE COVENANTS So long as any Lender 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 Lenders 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 Administrative Agent, with sufficient copies for each Lender: (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 such financial statements shall be accompanied by the opinion of a nationally recognized independent public accounting firm (the "INDEPENDENT AUDITOR"), which opinion shall state that such consolidated financial statements present fairly in all material respects the financial position and results of operations of the Company and its Consolidated Subsidiaries for the periods indicated in conformity with GAAP applied on a basis consistent with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of the Company's or any Subsidiary's records; 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 and its Consolidated Subsidiaries. 7.02 Certificates; Other Information. The Company shall furnish to the Administrative Agent, with sufficient copies for each Lender: (a) As soon as available, but not later than 24 days after the close of each month until the 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; and (d) promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary as the Administrative Agent, at the request of any Lender, may from time to time reasonably request. - 42 - 7.03 Notices. The Company shall promptly notify the Administrative 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 Administrative Agent and each Lender 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; (e) of the entry by the Company or any of its Subsidiaries into any Specified Swap Contract, specifying the identity of the Swap Provider, the notional amount, the nature of the Specified Swap Contract and such other information as the Administrative Agent reasonably may request; (f) of the occurrence of any default, event of default, termination event or other event under any Specified Swap Contract that after the giving of notice, passage of time or both, would permit either counterparty to such Specified Swap Contract to terminate early any or all trades relating to such contract, and the liability, if any, of the Company or Subsidiary, as applicable, in the event thereof; (g) upon the request from time to time of the Administrative Agent, the Swap Termination Values, together with a description of the method by which such values were determined, relating to any then outstanding Swap Contracts to which the Company or any of its Subsidiaries is party; and (h) 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 shall, and shall cause each of its Material Subsidiaries to: - 43 - (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 shall, and shall cause each of its Material Subsidiaries to, 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. In addition to any other insurance requirements set forth in the Security Documents, the Company shall, and shall cause each of its 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 shall, and shall cause each of its Material Subsidiaries to, 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 shall, and shall cause each of its 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 - 44 - 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 shall, and shall cause each of its 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 Administrative Agent or any Lender 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 Administrative Agent or any Lender 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 shall, and shall cause each of its 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; New Subsidiary Security Agreements. (a) If, at any time after the date of this Agreement, there exists any Subsidiary organized under the laws of any state in the United States of America that (i) has total assets with a book value of $2,000,000 or more or (ii) executes a guaranty agreement with respect to the Indentures or any other indebtedness for borrowed money, then the Company shall cause each such Subsidiary to do the following: (x) execute and deliver to the Administrative Agent a Supplemental Guaranty and (y) furnish the Administrative Agent with a written opinion of counsel for each such Subsidiary Guarantor in substantially the form set forth in EXHIBITS D-1 and D-2; in each case with such revisions as may be reasonably requested by the Administrative Agent or the Majority Lenders. (b) The Company also shall cause each Person that becomes a Subsidiary after the date of this Agreement (excluding any Subsidiary that has no assets and conducts no business, but including any "inactive" Subsidiary that resumes active business at any time after the date of this Agreement) to (i) execute and deliver to the Administrative Agent a Security Agreement in substantially the form of EXHIBIT I in favor of the Administrative Agent, the Lenders and the other Swap Providers, together with such financing statements and other documents and instruments related thereto as the Administrative Agent or the Majority Lenders may require; (ii) take all other actions necessary or, in the opinion of the Administrative Agent or the Majority Lenders, desirable to perfect and protect the first priority Lien created by the Collateral Documents, and to enhance the Administrative Agent's ability to preserve and protect its interests in and access to the Collateral; and (iii) furnish the Administrative Agent with a written opinion of counsel for each such Person in substantially the form set forth in EXHIBITS D-1 and D-2; in each case with such revisions as may be reasonably requested by the Administrative Agent or the Majority Lenders. (c) Notwithstanding subsections (a) and (b) of this SECTION 7.12, as long as Navajo Convenient Stores Co., LLC has total assets with a book value of less than $5,000,000, Navajo Convenient Stores Co., LLC shall not be required to execute a Supplemental Guaranty nor execute a Security Agreement. - 45 - 7.13 Use of Proceeds. The Company shall use the proceeds of the Revolving Loans (a) to refinance existing indebtedness under the Existing Credit Agreement, (b) to make capital contributions and loans to the Guarantors for working capital expenditures, (c) for the issuance of standby letters of credit pursuant to ARTICLE III hereof in the ordinary course of business and (d) for Acquisitions otherwise permitted in accordance with the terms hereof; provided that the aggregate amount of proceeds used to finance Acquisitions during the term hereof shall not exceed $10,000,000. 7.14 Subordinated Indebtedness. The Company shall maintain at least $150,000,000 in Subordinated Notes outstanding at all times throughout the term hereof. 7.15 Further Assurances. Promptly upon request by the Administrative Agent or the Majority Lenders, the Company shall (and shall cause any of its Subsidiaries to) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all such further acts, deeds, conveyances, security agreements, mortgages, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments the Administrative Agent or such Lenders, as the case may be, may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement or any other Loan Document, (ii) to subject to the Liens created by any of the Collateral Documents any of the properties, rights or interests covered by any of the Collateral Documents, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Administrative Agent and Lenders the rights granted or now or hereafter intended to be granted to the Lenders under any Loan Document or under any other document executed in connection therewith. ARTICLE VIII NEGATIVE COVENANTS So long as any Lender 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 Lenders waive compliance in writing: 8.01 Limitation on Liens. The Company shall not, and shall not permit any of its 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 (collectively, "PERMITTED LIENS"): (a) any Lien (other than a Lien on the Collateral) existing on property of the Company or any Subsidiary on the Execution 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 non-consensual statutory Liens (including statutory liens in favor of mineral interest owners, securing only amounts due for the purchase price, state royalty and taxes in respect of product severed from a production unit in New Mexico in which such interest owner owns an interest) arising in the - 46 - 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 and other than Liens on the Collateral) 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 (other than Liens on the Collateral) on the property of the Company, any Guarantor or any Subsidiary of any 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 not exceeding $3,000,000 in the aggregate, 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 with respect to real property 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 (other than Liens on the Collateral) 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) dominion 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 (other than Liens on the Collateral) 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 has attached prior to acquisition of such property or 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 (other than Liens on the Collateral) 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 shall not, and shall not permit any of its 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; - 47 - (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 assets under an arrangement in the ordinary course of business whereby the Company or any Subsidiary would then or thereafter lease as lessee such assets under a Synthetic Lease; provided that (i) at the time of such Disposition, no Event of Default shall exist or shall result from such Disposition, (ii) the aggregate book value of all such assets disposed of pursuant to this SUBSECTION 8.02(e) does not exceed $52,500,000 and (iii) the net proceeds of such Disposition are used by the Company to repay Loans then outstanding; and (f) Dispositions of assets 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 the fiscal year ending December 31, 2001, the aggregate book value of such assets shall not exceed in the fiscal year the aggregate amount of $7,000,000, and with respect to Dispositions of such assets by the Company and its Subsidiaries in any fiscal year ending after December 31, 2001, 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 shall not, and shall not permit any of its Material Subsidiaries to, 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 that is not a Wholly-Owned 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 shall not purchase or acquire, or permit any of its 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; - 48 - (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, and investments by the Company or any Guarantor or any of its or their Subsidiaries in any of the Company's 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; (e) extensions of credit described in SCHEDULE 8.04 attached hereto, through and including the maturity date thereof, but not any renewals or extensions thereof except as otherwise may be specified in SCHEDULE 8.04; and (f) investments by the Company and its Subsidiaries not otherwise permitted in SUBSECTIONS 8.04(a) through (e), which do not exceed $1,000,000 in the aggregate at any time outstanding. 8.05 Limitation on Subsidiary Indebtedness. Neither the Guarantors nor any other Subsidiary of the Company 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 described on SCHEDULE 8.05. 8.06 Transactions with Affiliates. The Company shall not, and shall not permit any of its 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. 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. 8.08 Contingent Obligations. The Company shall not, and shall not permit any of its 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; - 49 - (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) Contingent Obligations of the Company and its Subsidiaries existing as of the Execution Date and listed in SCHEDULE 8.08; (e) 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; (f) this Agreement and the Guaranties; and (g) the guaranties described in SCHEDULE 8.05. 8.09 Restricted Payments. The Company shall not, and shall not permit any of its 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: (a) any Subsidiary may declare and make Restricted Payments to the Company or any Wholly-Owned Subsidiary; (b) the Company may 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) the Company may purchase, redeem or otherwise acquire shares of its common stock to the extent permitted by the terms of the NBD Subordinated Indenture, provided, however, that the number of shares purchased, redeemed or otherwise acquired by the Company during the period beginning on December 23, 1998 through the term of this Agreement may not exceed 1,000,000 shares in the aggregate (excluding for purposes of such calculation (i) 400,000 shares repurchased from James Acridge in October 2001, (ii) 129,466 shares repurchased from James Acridge in August 2000, (iii) 1,169,414 shares repurchased from the Company's shareholders pursuant to a tender offer which closed in February 2000, and (iv) 440,000 shares repurchased from James Acridge in August 1999. 8.10 Subsidiary Dividends. The Company will not, and it will not permit any of its 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 (a) 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, (b) make loans or advances to the Company or (c) 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). - 50 - 8.11 Subordinated Notes. The Company shall not, and shall not permit any Subsidiary to: (a) amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms of the Indentures, the Subordinated Notes or the guarantees executed in connection therewith, other than (i) 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, (ii) amendments pursuant to Section 9.01(1) and (2) of the NBD Indenture and (iii) such other amendments and modifications acceptable to the Majority Lenders; or (b) 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 (c) make any prepayment or redeem in whole or in part the Subordinated Notes. 8.12 Minimum Consolidated Tangible Net Worth. From and after the Execution Date, the Company will maintain at all times Consolidated Tangible Net Worth in an amount not less than the sum of (i) $96,000,000, plus (ii) 50% of Consolidated Net Income computed on a cumulative basis for the period beginning October 1, 1999 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) 75% 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 September 30, 1998. 8.13 Minimum Interest Coverage Ratio. The Company shall not permit (as of the end of any fiscal quarter) the ratio of (a) Consolidated EBITDA (plus Material Rents) for the four consecutive fiscal quarters most recently then ended to (b) Consolidated Interest Expense (plus Material Rents) for the four consecutive fiscal quarters most recently then ended to be less than 2.25 to 1.00. 8.14 Maximum Capitalization Ratio. From and after the Execution Date, the Company shall not permit the Capitalization Ratio to be greater than 70% at any time. 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 - 51 - (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 (i) fails to perform or observe any term, covenant or agreement contained in ARTICLE VIII, and (A) such default shall continue unremedied for a period of 15 days after the occurrence thereof or (B) the Company shall fail to deliver to the Administrative Agent and the Lenders satisfactory certification and evidence of the remedy thereof within 15 days after the occurrence thereof, or (ii) fails to perform or observe any term, covenant or agreement contained in SECTION 7.03(a); 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 Administrative Agent or any Lender; or (e) Cross-Default. The Company or any Subsidiary (i) fails to make any payment in respect of any Indebtedness, Contingent Obligation or Commodity Swap 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, or any Specified Swap Contract (whatever the amount), 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, Contingent Obligation or Commodity Swap 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, or any Specified Swap Contract (whatever the amount), 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, Specified Swap Contract or Commodity Swap to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation, Specified Swap Contract or Commodity Swap to become payable or cash collateral in respect thereof to be demanded; or (iii) any Indebtedness, Contingent Obligation or Commodity Swap of the Company or any Subsidiary in excess of $3,000,000, or any Specified Swap Contract (whatever the amount), shall be declared due and payable prior to its stated maturity or cash collateral is demanded in respect of such Contingent Obligations, Specified Swap Contracts or Commodity Swaps; 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 Material 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 Material Subsidiary's properties, and any such proceeding or petition shall not be - 52 - 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 Material 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 Material 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 final judgments, final 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 any of the Indentures or Subordinated Notes are for any reason revoked or invalidated, the Trustee under either of the Indentures, any successor trustee thereto or any other Person contests in any material respect the validity or enforceability thereof, or the Indebtedness hereunder 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; or - 53 - (p) Collateral. (i) any provision of any Collateral Document shall for any reason cease to be valid and binding on or enforceable against the Company or any Subsidiary party thereto or the Company or any Subsidiary shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or (ii) any Collateral Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason cease to be a perfected and first priority security interest. 9.02 Remedies. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Majority Lenders, (a) declare the commitment of each Lender 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 Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in SUBSECTION (f) or (g) of SECTION 9.01 (in the case of CLAUSE (i) of SUBSECTION (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Lender 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 Administrative Agent, the Issuing Bank or any Lender 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. - 54 - ARTICLE X THE ADMINISTRATIVE AGENT 10.01 Appointment and Authorization. (a) Each Lender hereby irrevocably (subject to SECTION 10.09) appoints, designates and authorizes the Administrative 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 Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, 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 Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement or any other Loan Document with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) The Issuing Bank shall act on behalf of the Lenders 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 Administrative Agent may agree at the request of the Majority Lenders 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 Administrative 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 "Administrative 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 Administrative 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 Administrative 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 Administrative 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 Lenders 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 Administrative Agent under or in connection with, this Agreement or any other Loan Document, or for the value of or title to any Collateral, 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 Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or - 55 - 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 Administrative Agent. (a) The Administrative 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 Administrative Agent. The Administrative 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 Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders 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 Administrative 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 Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in SECTION 5.01, each Lender that has made available to the Administrative 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 Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender as a condition precedent to such initial Credit Extension or subsequent Credit Extension, as applicable. 10.05 Notice of Default. The Administrative 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 Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender 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 Administrative Agent will notify the Lenders of its receipt of any such notice. Subject to SUBSECTION 10.04(a), the Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Lenders in accordance with ARTICLE IX; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative 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 Lenders. 10.06 Credit Decision. Each Lender 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 Lender. Each Lender represents to the Administrative 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, the value of and title to any Collateral 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 Lender also - 56 - 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 Lenders by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Lender 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 Lenders 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, 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 Lender 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 Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative 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 Administrative Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the termination of the Commitments, the repayment of all Obligations hereunder and the resignation or replacement of the Administrative Agent. 10.08 Administrative Agent in Individual Capacity. Bank of America 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 Bank of America were not the Administrative Agent or the Issuing Bank hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America 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, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent. 10.09 Successor Administrative Agent. The Administrative Agent may, and at the request of the Majority Lenders shall, resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders, a successor agent from among the Lenders. 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 Administrative Agent and the term "Administrative Agent" shall mean such successor agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the - 57 - 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 Administrative Agent under this Agreement. If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Majority Lenders appoint a successor agent as provided for above. Notwithstanding the foregoing, however, for so long as Bank of America is the Issuing Bank, then Bank of America may not be removed as the Administrative Agent at the request of the Majority Lenders 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 Lender is a "foreign corporation, partnership or trust" within the meaning of the Code and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Lender agrees with and in favor of the Administrative Agent, to deliver to the Administrative Agent: (i) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, two properly completed and executed copies of 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 Lender 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 Lender, 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 Lender and in each succeeding taxable year of such Lender 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 Lender agrees to promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form 1001 and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Lender, such Lender agrees to notify the Administrative Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company to such Lender. To the extent of such percentage amount, the Administrative Agent will treat such Lender's IRS Form 1001 as no longer valid. (c) If any Lender claiming exemption from United States withholding tax by filing IRS Form 4224 with the Administrative Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. - 58 - (d) If any Lender is entitled to a reduction in the applicable withholding tax, the Administrative Agent may withhold from any interest payment to such Lender 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 Administrative Agent, then the Administrative Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (e) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Administrative Agent. 10.11 Collateral Matters. (a) The Administrative Agent is authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral or the Collateral Documents which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Collateral Documents. (b) The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Lien granted to or held by the Administrative Agent upon any Collateral (i) upon termination of the Commitments and payment in full of all Loans and all other Obligations known to the Administrative Agent and payable under this Agreement or any other Loan Document; (ii) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder; (iii) constituting property in which the Company or any Subsidiary owned no interest at the time the Lien was granted or at any time thereafter; (iv) constituting property leased to the Company or any Subsidiary under a lease which has expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by the Company or such Subsidiary to be, renewed or extended; (v) consisting of an instrument evidencing Indebtedness or other debt instrument, if the indebtedness evidenced thereby has been paid in full; or (vi) if approved, authorized or ratified in writing by the Majority Lenders or all the Lenders, as the case may be, as provided in SUBSECTION 11.01(F). Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agent's authority to release particular types or items of Collateral pursuant to this SUBSECTION 10.11(b), provided that the absence of any such confirmation for whatever reason shall not affect the Administrative Agent's rights under this SECTION 10.11. (c) Each Lender agrees with and in favor of each other (which agreement shall not be for the benefit of the Company or any Subsidiary) that the Company's obligation to such Lender under this Agreement and the other Loan Documents is not and shall not be secured by any real property collateral now or hereafter acquired by such Lender. (d) Upon the occurrence and continuance of an Event of Default, Lenders agree to promptly confer in order that Majority Lenders or Lenders, as the case may be, may agree upon a course of action for the enforcement of the rights of Lenders; and Administrative Agent shall be entitled to - 59 - refrain from taking any action (without incurring any liability to any Person for so refraining) unless and until Administrative Agent shall have received instructions from Majority Lenders. All rights of action under the Loan Documents and all rights to the Collateral, if any, hereunder may be enforced by Administrative Agent and any suit or proceeding instituted by Administrative Agent in furtherance of such enforcement shall be brought in its name as Administrative Agent without the necessity of joining as plaintiffs or defendants any other Lender, and the recovery of any judgment shall be for the benefit of Lenders subject to the expenses of Administrative Agent. In actions with respect to any property of Borrower, Administrative Agent is acting for the ratable benefit of each Lender. Any and all agreements to subordinate (whether made heretofore or hereafter) other indebtedness or obligations of Borrower to the Obligations shall be construed as being for the ratable benefit of each Lender. 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 Lenders (or by the Administrative Agent at the written request of the Majority Lenders) and the Company and acknowledged by the Administrative 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 Lenders and the Company and acknowledged by the Administrative Agent, do any of the following: (a) increase or extend the Commitment of any Lender (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 Lenders (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 Lenders 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 Lenders; or (f) discharge any Guarantor, or, except as otherwise provided in SECTION 10.11(b), release any portion of the Collateral, except as otherwise may be provided in the Collateral Documents or except where the consent of the Majority Lenders only is specifically provided for; 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 Lenders or all the Lenders, 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 Administrative Agent in addition to the Majority Lenders or all the Lenders, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan - 60 - 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, consents, approvals, waivers 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 Administrative 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 Administrative 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 Administrative 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 Administrative Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Administrative Agent and the Lenders 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 Administrative Agent and the Lenders shall not have any liability to the Company or other Person on account of any action taken or not taken by the Administrative Agent or the Lenders 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 Administrative Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent and the Lenders 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 Administrative Agent or any Lender, 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 Administrative Agent, and the Issuing Bank within five Business Days after demand (subject to SUBSECTION 5.01(f)) for all reasonable costs and expenses incurred by the Administrative 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, - 61 - including Attorney Costs incurred by the Administrative Agent and the Issuing Bank with respect thereto; and (b) pay or reimburse the Administrative Agent, the Arranger and each Lender within five Business Days after demand (subject to SUBSECTION 5.01(f)) 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. (a) Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify, defend and hold the Agent-Related Persons, and each Lender 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 Administrative Agent or replacement of any Lender) 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 (excluding, however, any action arising solely among the Lenders in their capacities as Lenders), whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"); 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. (b) (i) The Company shall indemnify, defend and hold harmless each Indemnified Person, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including Attorney Costs and the allocated cost of internal environmental audit or review services), which may be incurred by or asserted against such Indemnified Person in connection with or arising out of any pending or threatened investigation, litigation or proceeding, or any action taken by any Person, with respect to any Environmental Claim. No action taken by legal counsel chosen by the Administrative Agent or any Lender in defending against any such investigation, litigation or proceeding or requested remedial, removal or response action shall vitiate or any way impair the Company's obligation and duty hereunder to indemnify and hold harmless the Administrative Agent and each Lender. (ii) In no event shall any site visit, observation, or testing by the Administrative Agent or any Lender (or any contractee of the Administrative Agent or any Lender) be deemed a representation or warranty that Hazardous Materials are or are not present in, on, or under, any site, or that there has been or shall be compliance with any Environmental Law. Neither the Company nor any other Person is entitled to rely on any site visit, observation, or testing by the Administrative Agent or any Lender. Neither the Administrative Agent nor any Lender owes any duty of care to protect the Company or any other Person against, or to inform the Company or any other party of, any Hazardous Materials or any other adverse condition affecting any site or property. Neither the Administrative Agent nor any Lender shall be obligated to disclose to the Company or any other Person any report or findings made as a - 62 - result of, or in connection with, any site visit, observation, or testing by the Administrative Agent or any Lender. Indemnified Parties hereby reserve the right, and the Company hereby expressly authorizes any Indemnified Party, to make available to any party (including any governmental agency or authority) any and all reports, whether prepared by any Indemnified Party or prepared by the Company and provided to any Indemnified Party (collectively, "ENVIRONMENTAL Reports") that any Indemnified Party may have with respect to the property owned or used by the Company or any of its Subsidiaries, to the extent required in accordance with any Requirement of Law or by any Governmental Authority. (c) THE INDEMNIFICATION OBLIGATIONS OF THE COMPANY CONTAINED IN THIS AGREEMENT SHALL APPLY 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. The agreements in this SECTION 11.05 shall survive payment of all other Obligations. 11.06 Payments Set Aside. To the extent that the Company makes a payment to the Administrative Agent or the Lenders, or the Administrative Agent or the Lenders 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 Administrative Agent or such Lender 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 Lender severally agrees to pay to the Administrative Agent upon demand its pro rata share of any amount so recovered from or repaid by the Administrative Agent. 11.07 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, 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 Administrative Agent and each Lender (and any attempted assignment or transfer by the Company without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnified Persons) any legal or equitable right, remedy or claim under or by reason of this Agreement. 11.08 Assignments, Participations, etc. (a) Any Lender (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 Administrative Agent, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Company or the Administrative Agent shall be required in connection with any assignment and delegation by the Lender to an Eligible Assignee that is an Affiliate of such Lender) (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 Lender hereunder, in a minimum amount of $10,000,000; provided, however, that (i) the Company and the Administrative Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (A) 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 Administrative Agent by such Lender and the Assignee; (B) such Lender and its Assignee shall have delivered to the Company and the Administrative Agent an Assignment and - 63 - Acceptance in the form of EXHIBIT E ("ASSIGNMENT AND ACCEPTANCE") together with any Note or Notes subject to such assignment and (C) the assignor Lender or Assignee has paid to the Administrative Agent a processing fee in the amount of $3,500.00, and (ii) if the assignor Lender or any of its Affiliates is a Swap Provider with respect to any Specified Swap Contract, such Lender shall not assign all of its interest in the Loans and the Commitments to an Assignee unless such Assignee, or an Affiliate of such Assignee, shall also assume all rights and obligations of such assignor Lender or Affiliate with respect to such Specified Swap Contracts, with the consent of the Company. (b) From and after the date that the Administrative Agent notifies the assignor Lender that it has received (and provided its consent with respect to) 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 Lender under the Loan Documents, and (ii) the assignor Lender 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 Administrative 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 Administrative Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and, if the assignor Lender has retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Loans retained by the assignor Lender (such Notes to be in exchange for, but not in payment of, the Notes held by such Lender). 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 Lender pro tanto. (d) Any Lender 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 Lender and the other interests of that Lender (the "ORIGINATING LENDER") hereunder and under the other Loan Documents; provided, however, that (i) the originating Lender's obligations under this Agreement shall remain unchanged, the originating Lender shall remain a Lender for all purposes hereof and the other Loan Documents to which such originating Lender 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 Lender shall remain solely responsible for the performance of such obligations, (iii) the Company, the Issuing Bank and the Administrative Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender 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 Lenders 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 Lender in respect of such participation being those set forth in the agreement creating or evidencing such participation with such Lender), and all amounts payable by the Company hereunder shall be determined as if such Lender 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 - 64 - 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 Lender under this Agreement. (e) Notwithstanding any other provision in this Agreement, any Lender 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 Section 203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 11.09 Confidentiality. 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 Administrative 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 or in connection with other business now or hereafter existing or contemplated with the Company or any Subsidiary; 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 Administrative 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; (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; and (I) to any nationally recognized rating agency or similar organization that requires access to information about a Lender's or its Affiliates' investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates. 11.10 Set-off. In addition to any rights and remedies of the Lenders provided by law, if an Event of Default exists or the Loans have been accelerated, each Lender 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 Lender to or for the credit or the account of the Company against any and all Obligations now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Company and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 11.11 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 - 65 - 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 Administrative Agent or the Lenders or any other person to the Company 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 the Company 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 Company, 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 the Company, 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) To the extent the interest rate laws of the State of Texas are applicable to this Agreement and unless changed in accordance with law, on each day the applicable interest rate ceiling is the "weekly ceiling" as defined in Chapter 303 of the Texas Finance Code for such day. Lenders may from time to time, as to current and future balances, implement any other ceiling under the Texas Finance Code by notice to the Company, if and to the extent permitted by the Texas Finance Code. (c) The provisions of Chapter 346 of the Texas Finance Code (regulating certain revolving credit accounts and revolving tri-party accounts) are specifically declared by the parties hereto not to be applicable to this Agreement or any of the other Loan Documents or the transactions contemplated hereby. 11.12 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 11.12 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 the Company - 66 - 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. 11.13 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 Administrative Agent, the Issuing Bank, Bank of America or the Arranger under the Loan Documents, the Company hereby irrevocably authorizes Bank of America, after giving reasonable prior notice to the Company, to debit any deposit account of the Company with Bank of America 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 Bank of America'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. 11.14 Notification of Addresses, Lending Offices, Etc. Each Lender shall notify the Administrative Agent in writing of any changes in the address to which notices to the Lender 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 Administrative Agent shall reasonably request. 11.15 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. 11.16 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. 11.17 No Third Parties Benefitted. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Lenders, the Administrative 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. 11.18 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 LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE - 67 - LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, AND CONSENT TO THE SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING 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 LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. 11.19 WAIVER OF JURY TRIAL. THE COMPANY, THE LENDERS 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 LENDERS 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. 11.20 Assignment. Those Lenders who are parties to the Existing Credit Agreement hereby assign to the Lenders who are signatories hereto the indebtedness owed to them under the Existing Credit Agreement in such amounts so that on the effective date of this Agreement all Lenders who are signatories hereto have Commitments and hold Loans in the Pro Rata Shares that are set forth on SCHEDULE 2.01 hereto. 11.21 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Lenders and the Administrative 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. [SIGNATURES BEGIN ON THE FOLLOWING PAGE] - 68 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. GIANT INDUSTRIES, INC. By: /s/ Mark B. Cox ------------------------ Name: Mark B. Cox Title: VP, Treasurer and Financial Officer [THIS IS A SIGNATURE PAGE TO THE GIANT INDUSTRIES, INC. CREDIT AGREEMENT] BANK OF AMERICA, N.A., as Administrative Agent, as Letter of Credit Issuing Bank and as a Lender By: /s/ Claire M. Liu ------------------------ Claire M. Liu Managing Director [THIS IS A SIGNATURE PAGE TO THE GIANT INDUSTRIES, INC. CREDIT AGREEMENT] UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ Dustin Gaspari ------------------------ Name: Dustin Gaspari Title: Vice President [THIS IS A SIGNATURE PAGE TO THE GIANT INDUSTRIES, INC. CREDIT AGREEMENT] BANK ONE, NA, as a Lender By: /s/ Stephen Luttrell ------------------------ Name: Stephen Luttrell Title: Vice President [THIS IS A SIGNATURE PAGE TO THE GIANT INDUSTRIES, INC. CREDIT AGREEMENT] COMERICA BANK-CALIFORNIA, as a Lender By: /s/ Clifford A. Payson ------------------------ Name: Clifford A. Payson Title: First Vice President [THIS IS A SIGNATURE PAGE TO THE GIANT INDUSTRIES, INC. CREDIT AGREEMENT] SCHEDULE 1.01 PREFERRED ELIGIBLE ACCOUNT OBLIGORS BP, P.L.C. Chevron Texaco Corporation Conoco, Inc. ExxonMobil Corporation Shell Transport & Trading Company, P.L.C. Texaco Trading & Transportation, Inc. SCHEDULE 2.01 COMMITMENTS
Bank Commitment Pro Rata Share ---- ---------- -------------- Bank of America, N.A. $20,000,000 30.76923% Bank One, NA $20,000,000 30.76923% Union Bank of California, N.A. $15,000,000 23.07692% Comerica Bank-California $10,000,000 15.38462% TOTAL: $65,000,000 100.00000000%
SCHEDULE 2.02 PRICING CHART (Expressed in percent per annum)
============================================================== LEVEL LEVEL LEVEL PRICING LEVEL I II III ============================================================== Applicable Margin - Offshore Rate Loans 1.250 1.500 2.000 - ------------------------------------------------------------- Applicable Margin - Base Rate Loans 0.000 0.000 0.000 - ------------------------------------------------------------- Risk Participation Fee 1.250 1.500 2.000 - ------------------------------------------------------------- Commitment Fee 0.500 0.500 0.500 ==============================================================
Level I shall apply if the Company's Leverage Ratio is less than or equal to 3.5:1.0. Level II shall apply if the Company's Leverage Ratio is greater than 3.5:1.0, but less than or equal to 4.5:1.0. Level III shall apply if the Company's Leverage Ratio is greater than 4.5:1.0. Each adjustment of the Applicable Margins, the Risk Participation Fee and the Commitment Fee shall be made by the Administrative Agent and shall be effective as of the earlier of (a) the date upon which the Company delivers a Compliance Certificate to the Administrative Agent pursuant to SECTION 7.02(b) reflecting a changed pricing level (accompanied and supported by the financial statements with respect to which such Compliance Certificate is required to be delivered) and (b) the date upon which the Company is required by SECTION 7.02(b) to deliver such Compliance Certificate; provided, however, that, if a Compliance Certificate is not delivered by the date required in SECTION 7.02(b), then, subject to the other provisions of this Agreement, commencing on the date such Compliance Certificate was required until such Compliance Certificate is delivered, the Applicable Margins, the Risk Participation Fee and the Commitment Fee shall be those indicated for Level III, and from and after the date such Compliance Certificate is thereafter received, the Applicable Margins, the Risk Participation Fee and the Commitment Fee shall be as determined from such Compliance Certificate. SCHEDULE 3.03 EXISTING LETTERS OF CREDIT
Outstanding L/C No. Amount ------- ------ US No. Beneficiary Amount Iss. Exp. Cur. T00000000221969 CITY OF GALLUP, NEW 6,600.00 8/23/99 6/23/02 USD T00000000222564 STATE OF NEW MEXICO 400,000.00 8/23/99 5/04/02 USD T00000007354858 STATE OF NEW MEXICO 776,840.00 8/23/99 6/01/02 USD T00000007405118 NATIONAL UNION FIRE 1,400,000.00 3/20/01 11/01/02 USD T00000003006785 COMMERCIAL FUELING 10,000.00 10/10/01 9/15/02 USD NETWORK Total: $2,592,840.00 =============
SCHEDULE 6.11 UNDISCLOSED LIABILITIES None SCHEDULE 6.16 SUBSIDIARIES AND MINORITY INTERESTS (a) Subsidiaries The following is a wholly-owned Subsidiary of the Company: Giant Industries Arizona, Inc., an Arizona corporation The following are wholly-owned Subsidiaries of Giant Industries Arizona, Inc.: Ciniza Production Company, a New Mexico corporation San Juan Refining Company, a New Mexico corporation Giant Four Corners, Inc., an Arizona corporation Phoenix Fuel Co., Inc., an Arizona corporation De Guelle Oil Company, a Colorado corporation Giant Mid-Continent, Inc., an Arizona corporation Giant Stop-N-Go of New Mexico, a New Mexico corporation Giant Pipeline Company, a New Mexico corporation Giant Southwest Refining LLC, an Arizona limited liability company The following is a Subsidiary of Giant Four Corners, Inc.: Navajo Convenient Stores Co., LLC, a New Mexico limited liability company - 66-2/3% owned by Giant Four Corners, Inc., remaining interest owned by Navajo Convenient Stores Employee Trust (b) Equity Investments None SCHEDULE 8.01 PERMITTED LIENS Miscellaneous Liens, value not exceeding $1,500,000 Various Thriftway Marketing Corp., securing capitalized lease obligations of Giant Four Corners, Inc. presently in the aggregate amount of $7,102,832 (Such obligation is Permitted Indebtedness and listed as Item 3 to SCHEDULE 8.05). Capitalized Service Station Leases

SCHEDULE 8.04 PERMITTED LOANS AND INVESTMENTS 1. $5,000,000 Loan by Giant Industries, Inc. to James E. Acridge due March 28, 2003. SCHEDULE 8.05 CERTAIN PERMITTED INDEBTEDNESS 1. Giant Industries, Inc. & Giant Industries Arizona, Inc. Permitted Indebtedness pursuant to SECTION 8.05(C):
DESCRIPTION BALANCE Miscellaneous $ 500,000.00 (estimates) -------------------------- TOTAL $ 500,000.00 ==============
2. Phoenix Fuel Co., Inc.: Permitted Indebtedness Permitted Indebtedness pursuant to SECTION 8.05(C) (balances shown below are as of November 30, 2001):
DESCRIPTION BALANCE David G. & Judith G. Scott $ 71,811.61 Note Chevron $ 97,349.94 Supplier Note Chrysler Credit Corporation $ 9,772.27 Capital Lease CIT Equipment Financing $ 2,412.65 Capital Lease Naumann Hobbs $ 11,131.71 (Capital Lease) -------------- $ 192,478.18 ==============
3. Obligations of Giant Four Corners, Inc., under the Master Lease and Option Agreement executed pursuant to, and in the form attached as EXHIBIT B to, the Definitive Agreement dated April 18, 1997 by and between Giant Four Corners, Inc. as "Buyer" and Thriftway Marketing Corp. and Clayton Investment Company collectively as "Seller" and the Associated Purchase and Sale Agreements to such Definitive Agreement, not to exceed $7,102,832 in the aggregate, such obligations to be guaranteed by Giant Industries Arizona, Inc. SCHEDULE 8.08 CERTAIN CONTINGENT OBLIGATIONS This Schedule hereby incorporates by reference all Contingent Obligations contained in Form 10-Q for the quarter ended September 30, 2001, Note 8 (Commitments and Contingencies), filed by the Company with the Securities and Exchange Commission, except that the lawsuit by the State of New Mexico therein described is no longer pending against the Company. 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, Inc., as Issuer and all Subsidiaries, as Guarantors of the $150,000,000 9% Senior Subordinated Notes Due 2007, Indenture dated as of August 26, 1997. 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 [NAME OF GUARANTOR] 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, N.A., as Administrative Agent Administrative Agent's Payment office: Bank of America ABA No.: 111000012 Acct. No.: 1292000883 Ref: Giant Industries, Inc. Bank of America, N.A. 901 Main Street Dallas, Texas 75282--3714 Attention: Ben Cosgrove Telephone: (214) 209-9254 Facsimile: (214) 209-9439 BANK OF AMERICA, N.A., as Issuing Bank Address for Notices: 231 South LaSalle Street Chicago, Illinois 60697 Attention: Riyaz Kaka Telephone: (312) 923-5924 Facsimile: (312) 987-6828 With a copy to: Bank of America, N.A. Three Allen Center 333 Clay Street, Suite 4550 Attention: Claire Liu/Pamela Rodgers Houston, Texas 77002-4103 Telephone: (713) 651-4855 Facsimile: (713) 651-4841 BANK OF AMERICA, N.A., as a Lender Domestic and Eurodollar Lending Office: Bank of America, N.A. 901 Main Street Dallas, Texas 75282-3714 Attention: Ben Cosgrove Telephone: (214) 209-9254 Facsimile: (214) 290-9439 Address for Notices (other than Borrowing Notices and Notices of Conversion/ Continuation): Bank of America, N.A. Three Allen Center 333 Clay Street, Suite 4550 Houston, Texas 77002-4103 Attention: Claire Liu Telephone: (713) 651-4855 Facsimile: (713) 651-4841 UNION BANK OF CALIFORNIA, N.A., as a Lender Domestic and Eurodollar Lending Office: Union Bank of California, N.A. 1980 Saturn St. Monterey Park, CA 91754 Attention: Commercial Loan Operations ABA # 122-000-496 Acct. # 070-196431 Ref.: Giant Industries Address for Notices: Energy Capital Services 500 North Akard Dallas, Texas 75201 Dustin Gaspari Telephone: (214) 922-4204 Facsimile: (214) 922-4209 BANK ONE, N.A., as a Lender Domestic and Eurodollar Lending Office: Bank One, NA 201 N. Central, 9th Floor Phoenix, AZ 85004 Attention: Gloria Thomas Telephone: (602) 221-4751 Facsimile: (602) 221-1903 Address for Notices (other than Borrowing Notices and Notices of Conversion/ Continuation): Bank One, NA 201 N. Central, 21st Floor Phoenix, AZ 85004 Attention: Stephen Luttrell, VP Telephone: (602) 221-2394 Facsimile: (602) 221-1502 COMERICA BANK-CALIFORNIA Domestic and Eurodollar Lending Office: Comerica Bank-California 400 E. Van Buren, Suite 900 Phoenix, Arizona 85004 Attention: Cathy Cota Telephone: (602) 417-1120 Facsimile: (602) 261-7864 ABA # 121137522 Acct. # 48-21585-90010 Ref.: Giant Industries With a copy to: Comerica Bank-California 400 E. Van Buren, Suite 900 Phoenix, Arizona 85004 Attention: Cliff Payson Telephone: (602) 417-1119 Facsimile: (602) 261-7881 Address for Notices (other than Borrowing Notices and Notices of Conversion): Comerica Bank-California 400 E. Van Buren, Suite 900 Phoenix, Arizona 85004 Attention: Cliff Payson Telephone: (602) 417-1119 Facsimile: (602) 261-7881 EX-10.21 7 p66366ex10-21.txt EX-10.21 Exhibit 10.21 FOURTH AMENDED AND RESTATED PROMISSORY NOTE James E. Acridge Date of Original Note: September 17, 1998 Current Principal Amount: $5,000,000.00 Current Interest Rate: Prime plus 3.0% Effective Date of This Amendment and Restatement: March 28, 2001 For value received, JAMES E. ACRIDGE ("Borrower"), promises to pay to GIANT INDUSTRIES, INC., a Delaware corporation ("Giant"), or order, in lawful money of the United States of America, the principal amount of five million dollars ($5,000,000.00) (the "Principal Amount"), together with interest on the unpaid Principal Amount accrued from and after the effective date hereof, until paid in full. The annual interest rate on this Fourth Amended and Restated Promissory Note (this "Note") is the Prime Rate from time to time as published in the Western Edition of The Wall Street Journal on March 27, 2001, plus three percent (3.0%), from March 28, 2001 through September 27, 2001; the Prime Rate as published in the Western Edition of The Wall Street Journal on September 27, 2001, plus three percent (3.0%), from September 28, 2001 through March 27, 2002; the Prime Rate as published in the Western Edition of The Wall Street Journal on March 27, 2002, plus three percent (3.0%), from March 28, 2002 through September 27, 2002; and the Prime Rate as published in the Western Edition of The Wall Street Journal on September 27, 2002, plus three percent (3.0%), from September 28, 2002 until paid in full. Interest will accrue on the total unpaid Principal Amount from the effective date hereof until March 28, 2003 (the "Extended Maturity Date"), at which time all outstanding principal and interest shall be fully due and payable. Borrower will pay Giant at Giant's corporate offices, 23733 North Scottsdale Road, Scottsdale, Arizona, 85255, or at such other place as Giant may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. The annual interest rate for this Note is computed on the basis of a 365-day year; that is, by applying the ratio of the annual interest rate over a year of 365 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Borrower will be in default if any of the following happens (each a "Default"): (a) Borrower fails to make any payment when due; (b) Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note; (c) a receiver is appointed for any part of Borrower's property, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws; (d) Borrower defaults under that certain Second Amended and Restated Loan Agreement of even date herewith between Borrower and Giant; (e) either Pinnacle Rodeo, L.L.C., an Arizona limited liability company ("Rodeo") or Pinnacle Rawhide, L.L.C., an Arizona limited liability company ("Rawhide") fails to comply with, or perform when due, any term, obligation, covenant, or condition contained in any agreement with any third parties, including any promissory notes due by Rodeo or Rawhide to Western Town, L.L.C., an Arizona limited liability company, or Hirsch Investment Co., LLC, an Arizona limited liability company (the "Hirsch Notes"), or any other creditor of Rodeo or Rawhide; (f) Borrower fails to comply with, or perform when due, any 2 term, obligation, covenant or condition contained in the Pledge and Security Agreement, dated effective March 10, 2000, by and among Borrower, Rodeo, and Giant, as modified by the First Amendment to Pledge and Security Agreement, dated as of March 9, 2001, by and among Borrower, Rodeo and Giant, or contained in the Pledge and Security Agreement dated effective as of March 28, 2001, by Borrower in favor of Giant; or (g) the sale or transfer of any portion of the real property owned by Rawhide, which real property is described as: The Northwest Quarter of Section 14, Township 4 North, Range 4 East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona; EXCEPT THEREFROM THE NORTH 55 FEET; AND, EXCEPT THE EAST 40 FEET; AND, EXCEPT THE WEST 55 FEET; AND EXCEPT THE SOUTH 40 FEET. Upon Default, Giant may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount. Upon Default, including failure to pay upon final maturity, Giant, at its option, may also, if permitted under applicable law, increase the interest rate on this Note by an additional three percent (3.0%). The interest rate will not exceed the maximum rate permitted by applicable law. Giant may hire or pay someone else to help collect this Note if Borrower does not pay, and Borrower also will pay Giant that amount, if reasonable. This includes, subject to any limits under applicable law, Giant's reasonable attorneys' fees and Giant's reasonable legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. 3 This Note has been delivered to Giant and accepted by Giant in the State of Arizona. If there is a lawsuit, Borrower agrees upon Giant's request to submit to the jurisdiction of the courts of Maricopa County, the State of Arizona. This Note shall be governed by and construed in accordance with the laws of the State of Arizona. Giant may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower, to the extent allowed by law, waives presentment, demand for payment, protest, and notice of any kind. Borrower agrees to an effective rate of interest that is the rate specified in this Note plus any additional rate resulting from any other charges in the nature of interest paid or to be paid in connection with this Note. This Note has been issued pursuant to an initial Loan Agreement dated September 17, 1998, followed by various amendments, concluding in an Second Amended and Restated Loan Agreement, of even date herewith, among Borrower, Giant, and Rodeo, the provisions of which are incorporated herein by reference. Borrower acknowledges that he has thoroughly read and reviewed the terms and provisions of this Note and is familiar with the same, that the terms and provisions contained herein are clearly understood by him and have been fully and unconditionally consented to by him, and that Borrower's execution of this Note is done freely, voluntarily, with full knowledge and without duress, and that in executing this Note, Borrower is relying on no other representations either written or oral, express or implied, made to Borrower by any other party hereto, and that the consideration received by Borrower hereunder has been actual and adequate. Borrower further acknowledges that he has been advised, and has been given the reasonable opportunity, to seek independent legal advice with respect to the subject matter of this Note, and 4 Borrower hereby represents to Giant that he has either sought and obtained such independent legal advice or that he hereby waives the right to obtain such advice. PRIOR TO SIGNING THIS NOTE, BORROWER HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS NOTE. BORROWER: /s/ James E. Acridge -------------------------- James E. Acridge 5 EX-21.1 8 p66366ex21-1.txt EX-21.1 EXHIBIT 21.1 SUBSIDIARIES OF GIANT INDUSTRIES, INC. (a Delaware corporation)
Jurisdiction of Names Under Which Subsidiary Incorporation Company Does Business - ---------- --------------- --------------------- Giant Industries Arizona, Inc. Arizona Giant Refining Company Ciniza Pipe Line Company Giant Transportation Giant Service Stations Giant Travel Center TransWest Tank Lines - Giant Four Corners, Inc.* Arizona - Navajo Convenient Stores Co., LLC** New Mexico - Giant Mid-Continent, Inc.* Arizona - Phoenix Fuel Co., Inc.* Arizona Phoenix Fuel Company Mesa Fuel Company Tucson Fuel Company Firebird Fuel Company PFC Lubricants Company - DeGuelle Oil Company* Colorado - Ciniza Production Company* New Mexico - Giant Stop-N-Go of New Mexico, Inc.* New Mexico - San Juan Refining Company* New Mexico - Giant Pipeline Company* New Mexico - Giant Yorktown, Inc. Delaware
- ---------- *A wholly-owned subsidiary of Giant Industries Arizona, Inc. **Giant Four Corners, Inc. has a 66 2/3% interest in this entity. 1 EX-23.1 9 p66366ex23-1.txt EX-23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Nos. 33-35357, 333-80577, and 333-59502 of Giant Industries, Inc., each on Form S-8, of our report dated March 29, 2002, appearing in this Annual Report on Form 10-K of Giant Industries, Inc. for the year ended December 31, 2001. DELOITTE & TOUCHE LLP Phoenix, Arizona March 29, 2002 1 -----END PRIVACY-ENHANCED MESSAGE-----


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2001

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period to .


Delaware		86-0642718
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


PART I
	Items 1. and 2. Business and Properties.
	Item 3. Legal Proceedings.
	Item 4. Submission of Matters to a Vote of Security Holders.
PART II
	Item 5. Market For the Registrant’s Common Equity and Related Stockholder Matters
	Item 6. Selected Financial Data.
FINANCIAL AND OPERATING HIGHLIGHTS
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS’ REPORT
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF EARNINGS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
PART IV
	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
INDEPENDENT AUDITORS’ REPORT
INDEX TO EXHIBITS
EX-2.3
EX-3.21
EX-3.22
EX-10.1
EX-10.21
EX-21.1
EX-23.1



			Year Ended December 31,

			2001			2000			1999			1998			1997

Feedstock throughput:(1)
	Crude oil			27,000			29,600			31,900			32,500			33,700
	NGLs and oxygenates			6,200			5,800			6,500			5,700			6,500

		Total		33,200			35,400			38,400			38,200			40,200

Crude oil throughput (as a % of total)				82	%		84	%		83	%		85	%		84	%
Rated crude oil capacity utilized				73	%		80	%		87	%		88	%		92	%
Refinery margin ($/bbl)			$	9.69		$	7.63		$	6.89		$	4.83		$	6.39
Products:(1)
	Gasoline			21,400			22,500			23,800			23,800			24,800
	Diesel fuel			8,600			9,600			10,700			11,400			11,000
	Jet fuel			—			—			—			—			800
	Other			3,200			3,300			3,900			3,000			3,600

		Total		33,200			35,400			38,400			38,200			40,200

High Value Products (as a % of total):
	Gasoline			65	%		64	%		62	%		62	%		62	%
	Diesel fuel			26	%		27	%		28	%		30	%		27	%
	Jet fuel			—			—			—			—			2	%

		Total		91	%		91	%		90	%		92	%		91	%


Quarter Ended	High		Low

December 31, 2001		9.3000		7.8000
September 30, 2001		10.9000		7.0700
June 30, 2001		11.4000		7.1000
March 31, 2001		8.9500		6.6000
December 31, 2000		7.4375		5.1250
September 30, 2000		8.0000		5.1875
June 30, 2000		9.6875		7.6250
March 31, 2000		10.5000		7.6250


Title of each class		Name of each exchange on which registered

Common Stock, $.01 par value		New York Stock Exchange


Name	Age		Position	Executive Officer Since

Fredric L. Holliger		54	Chairman of the Board and Chief Executive Officer		October 1989
Morgan Gust		54	President		August 1990
S. Leland Gould		45	Executive Vice President, Director of Retail Operations		March 2002
Jack W. Keller		57	President of the Company’s Phoenix Fuel Strategic Business Unit		February 1999
Miguel A. Foegal		49	Executive Vice President of the Company’s Retail Group Strategic Business Unit		May 2000
Carl D. Shook		63	Executive Vice President of the Company’s Refining Group Strategic Business Unit		February 2000
C. Leroy Crow		51	Executive Vice President of the Company’s Refining Group Strategic Business Unit		February 2000
Kim H. Bullerdick		48	Vice President, General Counsel, and Secretary		February 1999
Mark B. Cox		43	Vice President, Treasurer, Chief Financial Officer, and Assistant Secretary		February 1999
Gary R. Dalke		49	Vice President, Controller, Chief Accounting Officer, and Assistant Secretary		February 1999


Item 5.	*Market For the Registrant’s Common Equity and Related Stockholder Matters*



	Payments Due

													All Remaining
Contractual Obligations	Total		2002		2003		2004		2005		2006		Years

Long-Term Debt	$	250,091,000	$	45,000	$	100,029,000	$	17,000	$	—	$	—	$	150,000,000
Capital Lease Obligations		6,703,000		—		—		—		—		—		6,703,000
Operating Leases		19,408,000		4,606,000		3,414,000		2,577,000		1,711,000		1,096,000		6,004,000

Total Contractual Cash Obligations	$	276,202,000	$	4,651,000	$	103,443,000	$	2,594,000	$	1,711,000	$	1,096,000	$	162,707,000



	Amount of Commitment Expiration

													All Remaining
Other Commercial Commitments	Total		2002		2003		2004		2005		2006		Years

Lines of Credit (including Standby Letters of Credit)	$	65,000,000	$	—	$	65,000,000	$	—	$	—	$	—	$	—
Standby Letters of Credit		4,258,000		4,258,000		—		—		—		—		—

Total Commercial Commitments	$	65,000,000	$	4,258,000	$	65,000,000	$	—	$	—	$	—	$	—



	Material Related Party Transactions

Transaction	2001			2000		1999

Purchase of Jomax Real Property(1)	$	5,000,000			N/A		N/A
Purchase of Jomax Rights(2)	$	600,000			N/A		N/A
Purchase of Artwork for Corporate Headquarters(3)	$	162,550		$	450,000		N/A
Purchase of Stock(4)	$	3,520,000		$	896,887	$	4,950,000
Principal Amount of Loan Receivable at the end of each year(5)	$	5,000,000		$	5,000,000	$	5,000,000
Interest Income on Loan(5)	$	537,499		$	538,954	$	527,805
Interest Receivable at 12/31(5)	$	409,344		$	809,893	$	270,939
Other Receivables(6)	$	88,338		$	119,573	$	0
Other Amounts Classified as Compensation(7)	$	696,204			N/A		N/A
Other (Receipts) Payments(8)	$	(39,440	)	$	23,153	$	518,095



			December 31,

			2001			2000


			(In thousands, except share
			and per share data)
ASSETS
Current assets:
	Cash and cash equivalents		$	26,326		$	26,618
	Receivables:
		Trade, less allowance for doubtful accounts of $540 and $356		37,181			69,215
		Income tax refunds		1,497			741
		Other		4,852			5,591

				43,530			75,547

	Inventories			58,729			56,607
	Prepaid expenses and other			3,661			3,659
	Deferred income taxes			3,735			2,753

		Total current assets		135,981			165,184

Property, plant and equipment				525,345			508,384
	Less accumulated depreciation and amortization			(201,823	)		(192,234	)

				323,522			316,150

Goodwill, less accumulated amortization of $5,361 and $4,292				19,815			20,806
Note and interest receivable from a related party, less allowance for doubtful account of $5,409 and $0 (Note 6)				—			5,810
Other assets				27,856			20,615

			$	507,174		$	528,565

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt		$	45		$	213
	Accounts payable			42,255			66,461
	Accrued expenses			36,537			44,016

		Total current liabilities		78,837			110,690

Long-term debt, net of current portion				256,749			258,009
Deferred income taxes				32,772			27,621
Other liabilities and deferred income				2,406			4,542
Commitments and contingencies (Notes 3, 6, 10, 11, 13, 14, 15, 16 and 18)
Stockholders’ equity:
	Preferred stock, par value $.01 per share, 10,000,000 shares authorized, none issued
	Common stock, par value $.01 per share, 50,000,000 shares authorized, 12,305,859 and 12,282,688 shares issued			123			122
	Additional paid-in capital			73,589			73,099
	Retained earnings			99,152			87,262

				172,864			160,483
	Less common stock in treasury — at cost, 3,751,980 and 3,334,680 shares			(36,454	)		(32,780	)

		Total stockholders’ equity		136,410			127,703

			$	507,174		$	528,565



	Common Stock

							Additional						Treasury Stock					Total
	Shares			Par			paid-in			Retained								stockholders’
	issued			value			capital			earnings			Shares		Cost			equity


	(In thousands, except number of shares)
Balances, January 1, 1999		12,232,367		$	122		$	72,699		$	69,391			1,393,600	$	(14,510	)	$	127,702
Purchase of treasury stock		—			—			—			—			569,100		(6,113	)		(6,113	)
Stock options exercised		120,857			1			1,069			—			—		—			1,070
Shares cancelled on net exercise of stock options		(87,036	)		(1	)		(778	)		(196	)		—		—			(975	)
Net earnings		—			—			—			10,778			—		—			10,778

Balances, December 31, 1999		12,266,188			122			72,990			79,973			1,962,700		(20,623	)		132,462
Purchase of treasury stock		—			—			—			—			1,371,980		(12,157	)		(12,157	)
Stock options exercised		16,500			—			109			—			—		—			109
Net earnings		—			—			—			7,289			—		—			7,289

Balances, December 31, 2000		12,282,688			122			73,099			87,262			3,334,680		(32,780	)		127,703
Purchase of treasury stock		—			—			—			—			417,300		(3,674	)		(3,674	)
Stock options exercised		126,601			2			1,105			—			—		—			1,107
Shares cancelled on net exercise of stock options		(103,430	)		(1	)		(615	)		(491	)		—		—			(1,107	)
Net earnings		—			—			—			12,381			—		—			12,381

Balances, December 31, 2001		12,305,859		$	123		$	73,589		$	99,152			3,751,980	$	(36,454	)	$	136,410


Buildings and improvements			7 – 30 years
Machinery and equipment			7 – 24 years
Pipelines			30 years
Furniture and fixtures			2 – 15 years
Vehicles			3 – 7 years



				As of and for the Year Ended December 31, 2001

				Refining		Retail		Phoenix					Reconciling
				Group		Group		Fuel		Other			Items			Consolidated


				(In thousands)
Customer net revenues:
	Finished products			$	257,636	$	228,533	$	284,430	$	—		$	—		$	770,599
	Merchandise and lubricants				—		144,531		24,555		—			—			169,086
	Other				9,373		17,315		2,062		244			—			28,994

		Total			267,009		390,379		311,047		244			—			968,679

Intersegment net revenues:
	Finished products				166,546		—		80,125		—			(246,671	)		—
	Other				16,671		—		—		—			(16,671	)		—

		Total			183,217		—		80,125		—			(263,342	)		—

			Total net revenues	$	450,226	$	390,379	$	391,172	$	244		$	(263,342	)	$	968,679

Operating income (loss)				$	66,148	$	5,214	$	4,731	$	(21,927	)	$	(11,621	)	$	42,545
Interest expense																	(24,098	)
Interest income																	1,661

Earnings before income taxes																$	20,108

Depreciation and amortization				$	16,463	$	12,709	$	2,696	$	2,007		$	—		$	33,875
Capital expenditures				$	13,310	$	41,337	$	985	$	1,424		$	—		$	57,056
Total assets				$	228,403	$	165,176	$	65,539	$	48,056		$	—		$	507,174



		Year Ended December 31,

		2001			2000			1999			1998			1997


		(In thousands, except percentages, per share and operating data)
Financial Statement Data
Net Revenues		$	968,679		$	1,074,362		$	782,683		$	642,504		$	657,278
Operating Income			42,545			33,759			37,397			19,907			41,106
Net Earnings (Loss)			12,381			7,289			10,778			(2,217	)		15,294
Earnings (Loss) Per Common Share — Basic		$	1.40		$	0.79		$	1.01		$	(0.20	)	$	1.38
Earnings (Loss) Per Common Share — Diluted		$	1.39		$	0.79		$	1.01		$	(0.20	)	$	1.37
Weighted Average Common Shares Outstanding — Basic			8,871			9,214			10,679			10,951			11,051
Weighted Average Common Shares Outstanding — Diluted			8,885			9,223			10,719			10,951			11,175
Dividends Paid Per Common Share		$	—		$	—		$	—		$	0.20		$	0.20
Working Capital		$	57,144		$	54,494		$	49,396		$	89,104		$	111,725
Total Assets			507,174			528,565			546,799			527,414			535,371
Long-Term Debt			256,749			258,009			258,272			282,484			275,557
Stockholders’ Equity			136,410			127,703			132,462			127,702			133,467
Long-Term Debt as a Percentage of Total Capitalization			65.3	%		66.9	%		66.1	%		68.9	%		67.4	%
Book Value Per Common Share		$	15.95		$	14.27		$	12.86		$	11.78		$	12.14
Return on Average Stockholders’ Equity			9.4	%		5.6	%		8.3	%		—			12.0	%
Operating Data(1)
Refining Group:
	Rated Crude Oil Capacity Utilized		73	%		80	%		87	%		88	%		92	%
	Refinery Sourced Sales Barrels (Bbls/ Day)		32,025			34,287			37,368			37,898			39,037
	Average Crude Oil Costs ($/ Bbl)	$	25.00		$	29.26		$	17.64		$	14.29		$	20.60
	Refinery Margin ($/ Bbl)	$	9.69		$	7.63		$	6.89		$	4.83		$	6.39
Retail Group:
	Service Stations:
	Fuel Gallons Sold (In Thousands)		187,152			208,125			211,873			184,375			125,219
	Product Margin ($/ Gallon)	$	0.170		$	0.168		$	0.179		$	0.206		$	0.213
	Merchandise Sold ($ In Thousands)	$	138,403		$	131,825		$	111,603		$	95,496		$	67,601
	Merchandise Margin		28	%		28	%		28	%		30	%		30	%
	Number of Outlets at Year End		150			179			172			166			148



		Year Ended December 31,

		2001			2000			1999			1998			1997


		(In thousands, except percentages, per share and operating data)
Travel Center:
	Fuel Gallons Sold (In Thousands)		24,964			26,698			27,991			24,950			19,434
	Product Margin ($/ Gallon)	$	0.103		$	0.104		$	0.111		$	0.111		$	0.111
	Merchandise Sold ($ In Thousands)	$	6,128		$	6,719		$	7,291		$	7,331		$	7,382
	Merchandise Margin		44	%		46	%		45	%		45	%		44	%
	Number of Outlets at Year End		1			1			1			1			1
	Retail Fuel Volumes Sold as a % of Refinery Sourced Sales Barrels		43	%		45	%		42	%		36	%		24	%
Phoenix Fuel:
	Fuel Gallons Sold (In Thousands)		394,158			424,290			351,949			314,763			172,121
	Product Margin ($/ Gallon)	$	0.050		$	0.052		$	0.064		$	0.067		$	0.075
	Lubricant Sales ($ In Thousands)	$	22,347		$	24,210		$	22,067		$	22,517		$	12,923
	Lubricant Margin		17	%		16	%		15	%		14	%		14	%



		Year Ended December 31,

		2001			2000			1999


		(In thousands, except per share data)
Refining Group Operating Data:
	Crude Oil/ NGL Throughput (BPD)		33,167			35,359			38,360
	Refinery Sourced Sales Barrels (BPD)		32,025			34,287			37,368
	Average Crude Oil Costs ($/ Bbl)	$	25.00		$	29.26		$	17.64
	Refining Margins ($/ Bbl)	$	9.69		$	7.63		$	6.89
Retail Group Operating Data:
	Fuel Gallons Sold (000’s)		212,116			234,823			239,864
	Fuel Margins ($/gal)	$	0.1618		$	0.1603		$	0.1717
	Merchandise Sales ($in 000’s)	$	144,531		$	138,544		$	118,894
	Merchandise Margins		28.7	%		29.0	%		28.9	%
	Number of Operating Units at End of Period		151			180			173
Phoenix Fuel Operating Data:
	Fuel Gallons Sold (000’s)		394,158			424,290			351,949
	Fuel Margins ($/gal)	$	0.0498		$	0.0524		$	0.0644
	Lubricant Sales ($in 000’s)	$	22,347		$	24,210		$	22,067
	Lubricant Margins		16.6	%		16.4	%		15.2	%


	*New Developments*



		December 31, 2001									December 31, 2000

		Assets			Liabilities			Total			Assets			Liabilities			Total


		(In thousands)
Nondeductible accruals for uncollectible receivables		$	156		$	—		$	156		$	70		$	—		$	70
Insurance accruals			672			—			672			627			—			627
Insurance settlements			(94	)		—			(94	)		902			—			902
Contribution carryover			897			—			897			—			—			—
Other reserves			1,009			—			1,009			1,246			—			1,246
Inventory costs capitalized for income tax purposes			(211	)		—			(211	)		(92	)		—			(92	)
Nondeductible accrual for lower of cost or market adjustment to inventory			1,306			—			1,306			—			—			—

	Total current		3,735			—			3,735			2,753			—			2,753

Other nondeductible accruals			1,101			(98	)		1,003			980			(195	)		785
Accelerated plant costs			—			(1,660	)		(1,660	)		—			(135	)		(135	)
Deferred lease payments			—			—			—			645			—			645
Accelerated depreciation			—			(41,575	)		(41,575	)		—			(42,734	)		(42,734	)
Other			1,978			(877	)		1,101			—			(665	)		(665	)
Tax credit carryforwards			8,359			—			8,359			14,483			—			14,483

	Total noncurrent		11,438			(44,210	)		(32,772	)		16,108			(43,729	)		(27,621	)

Total		$	15,173		$	(44,210	)	$	(29,037	)	$	18,861		$	(43,729	)	$	(24,868	)


					Weighted Average
Options Outstanding At		Shares			Exercise Price

January 1, 1999			431,408		$	8.80
	Granted		100,000			15.25
	Exercised		(120,857	)		8.86

December 31, 1999			410,551			10.36
	Exercised		(16,500	)		6.61
	Forfeited		(15,000	)		14.88
	Expired		(5,000	)		10.50

December 31, 2000			374,051			10.34
	Granted		177,500			9.95
	Exercised		(126,601	)		8.74
	Expired		(26,000	)		10.63

December 31, 2001			398,950		$	10.65

Options exercisable at December 31:
	2001		280,613		$	10.95
	2000		298,251			10.07
	1999		252,285			9.80



Options Outstanding						Options Exercisable

				Weighted
				Average				Weighted
Range of		Number		Remaining		Number		Average
Exercise Prices		Outstanding		Contractual Life		Exercisable		Exercise Price

	$5.25		17,900		0.3 Years		17,900	$	5.25
	7.75		47,750		1.3 Years		47,750		7.75
	12.00 to 18.50		100,000		6.1 Years		100,000		15.25
	8.88		55,800		7.1 Years		55,800		8.88
	9.95		177,500		9.4 Years		59,163		9.95

			398,950		6.9 Years		280,613	$	10.95


	Land, building,
	machinery and
	equipment leases

	(In thousands)
2002	$	4,606,000
2003		3,414,000
2004		2,577,000
2005		1,711,000
2006		1,096,000
2007 – 2024		6,004,000

Total minimum payments required	$	19,408,000



	Year Ended December 31, 2001


	Quarter

	First		Second		Third		Fourth


	(In thousands, except per share data)
Net revenues	$	251,212	$	281,158	$	241,228	$	195,081
Cost of products sold		200,502		209,917		181,834		146,261
Gross margin		50,710		71,241		59,394		48,820
Operating expenses		28,848		28,736		27,957		28,719
Depreciation and amortization		8,113		8,139		8,608		9,015
Selling, general and administrative expenses		6,583		8,755		7,659		4,867
Loss on the disposal/write-down of assets		139		343		1,301		4,429
Allowance for related party note and interest receivable		—		—		—		5,409
Net earnings (loss)		950		11,953		5,135		(5,657	)
Net earnings (loss) per common share — basic	$	0.11	$	1.33	$	0.57	$	(0.66	)
Net earnings (loss) per common share — assuming dilution	$	0.11	$	1.33	$	0.57	$	(0.66	)



	Year Ended December 31, 2000


	Quarter

	First			Second		Third		Fourth


	(In thousands, except per share data)
Net revenues	$	225,134		$	266,066	$	301,213	$	281,949
Cost of products sold		178,017			210,630		240,873		229,481
Gross margin		47,117			55,436		60,340		52,468
Operating expenses		29,430			29,375		30,429		33,416
Depreciation and amortization		8,305			8,370		8,650		8,254
Selling, general and administrative expenses		6,402			6,396		7,202		5,373
Net earnings (loss)		(1,632	)		3,281		5,015		625
Net earnings (loss) per common share — basic	$	(0.17	)	$	0.36	$	0.55	$	0.07
Net earnings (loss) per common share — assuming dilution	$	(0.17	)	$	0.36	$	0.55	$	0.07


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*


Independent Auditors’ Report on Schedule			72
Schedule II — Valuation and Qualifying Accounts			73


Exhibit No.		Description

	10.2	Giant Industries, Inc. 1998 Stock Incentive Plan. Incorporated by reference to Appendix H to the Joint Proxy Statement/ Prospectus included in the Company’s Registration Statement on Form S-4 under the Securities Act of 1933 as filed May 4, 1998, File No. 333-51785.
	10.3	1989 Stock Incentive Plan of the Company. Incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No. 1-10398.
	10.4	Amendment No. 1 dated August 14, 1996, to 1989 Stock Incentive Plan. Incorporated by reference to Exhibit 10 to the Company’s Report on Form 10-Q for the quarter ended September 30, 1996, File No. 1-10398.
	10.5	ESOP Substitute Excess Deferred Compensation Benefit Plan. Incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, File No. 1-10398.
	10.32	Employment Agreement dated as of December 11, 1997, between James E. Acridge and the Company. Incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-10398.
	10.33	Employment Agreement dated as of December 11, 1997, between Fredric L. Holliger and the Company. Incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-10398.
	10.34	Employment Agreement dated as of December 11, 1997, between Morgan Gust and the Company. Incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-10398.



/s/ FREDRIC L. HOLLIGER Fredric L. Holliger	Chairman of the Board, Chief Executive Officer and Director	March 29, 2002

/s/ MARK B. COX Mark B. Cox	Vice President, Treasurer, Chief Financial Officer and Assistant Secretary	March 29, 2002

/s/ GARY R. DALKE Gary R. Dalke	Vice President, Controller, Chief Accounting Officer and Assistant Secretary	March 29, 2002

/s/ ANTHONY J. BERNITSKY Anthony J. Bernitsky	Director	March 29, 2002

/s/ RICHARD T. KALEN, JR. Richard T. Kalen, Jr.	Director	March 29, 2002

/s/ GEORGE M. RAPPORT George M. Rapport	Director	March 29, 2002

James E. Acridge	Director	March 29, 2002


	Balance at		Charged
	beginning		to costs					Balance at
	of period		and expenses		Deduction(a)			end of period


	(In thousands)
Year ended December 31, 2001:
Allowance for doubtful accounts	$	356	$	602	$	(418	)	$	540

Year ended December 31, 2000:
Allowance for doubtful accounts	$	591	$	244	$	(479	)	$	356

Year ended December 31, 1999:
Allowance for doubtful accounts	$	460	$	501	$	(370	)	$	591


(a)	Deductions are specific trade accounts determined to be uncollectible.


Exhibit
No.		Description

	2.1	Definitive Agreement dated April 18, 1997, by and between Giant Four Corners, Inc., as “Buyer”, and Thriftway Marketing Corp. and Clayton Investment Company, collectively, as “Seller”. Incorporated by reference to Exhibit 2.1 to the Company’s Report on Form 8-K for the period May 28, 1997, File No. 1-10398.
	2.2	Stock Purchase Agreement dated April 30, 1997, by and among Phoenix Fuel Co., Inc., (the “Company”), J.W. Wilhoit, as Trustee of the Wilhoit Trust Agreement Dated 12/26/74, Katherine C. Lahowetz, as Trustee of the Theresa Ann Wilhoit Grantor Retained Annuity Trust Dated 4/4/97, Katherine C. Lahowetz, and Katherine C. Lahowetz, as Custodian for the Benefit of Emily Lahowetz, a minor (collectively, the “Shareholders”) and Giant Industries Arizona, Inc., (the “Purchaser”). Incorporated by reference to Exhibit 2.1 to the Company’s Report on Form 8-K for the period June 3, 1997, File No. 1-10398.
	2.3*	Asset Purchase Agreement dated February 8, 2002, by and among, BP Corporation North America Inc., BP Products North America Inc., and Giant Industries, Inc.
	3.1	Restated Certificate of Incorporation of Giant Industries, Inc., a Delaware corporation. Incorporated by reference to Exhibit 3.1 to Amendment No. 3.
	3.2	Bylaws of Giant Industries, Inc., a Delaware corporation, as amended September 9, 1999. Incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, File No. 1-10398.
	3.3	Articles of Incorporation of Giant Industries Arizona, Inc., an Arizona corporation (“Giant Arizona”) formerly Giant Acquisition Corp. Incorporated by reference to Exhibit 2.1, Annex V to Form S-1.
	3.4	Bylaws of Giant Arizona. Incorporated by reference to Exhibit 2.1, Annex VI to Form S-1.
	3.5	Articles of Incorporation of Ciniza Production Company. Incorporated by reference to Exhibit 3.7 to Form S-3.
	3.6	Bylaws of Ciniza Production Company. Incorporated by reference to Exhibit 3.8 to Form S-3.
	3.7	Articles of Incorporation of Giant Stop-N-Go of New Mexico, Inc. Incorporated by reference to Exhibit 3.9 to Form S-3.
	3.8	Bylaws of Giant Stop-N-Go of New Mexico, Inc. Incorporated by reference to Exhibit 3.10 to Form S-3.
	3.9	Articles of Incorporation of Giant Four Corners, Inc. Incorporated by reference to Exhibit 3.11 to Form S-3.
	3.10	Bylaws of Giant Four Corners, Inc. Incorporated by reference to Exhibit 3.12 to Form S-3.
	3.11	Articles of Incorporation of Giant Mid-Continent, Inc. Incorporated by reference to Exhibit 3.13 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-10398.